Wind Power Costs Are Not Only Comparable With Coal And Gas, But Actually Cheaper



In order to talk about wind power costs we need to talk about the subject at two different levels.

Initially, we will focus on the technology cost of wind power compared to other energy technologies. This level is important because it is this information that informs government policy decisions in relation to support for renewable energy initiatives.

Secondly, we will examine wind power costs from a consumer perspective, covering issues such as turbine costs, installation and maintenance.

Comparing Wind Power Costs With Other Technologies

The key fact to note at this point is that wind power economics are definitely on the improve. Cheaper wind power is a reality. This has come about because of improved manufacturing technologies as well as greater demand for the the product. In earlier times, wind power could be criticized by opponents because of comparatively higher costs to produce a comparable amount of energy.

In order to make comparative assessments we need to understand the concept of “levelized costs”. This is the method widely used to make comparisons between different technologies. It is usually defined as the net cost of installing a renewable energy system divided by its expected life-time energy output.

However, it is also necessary to address other factors, notably the costs of harmful emissions as well as the increase in fuel costs over time. This applies particularly to gas and coal fired plants.

When that is done, the European Wind Energy Association (EWEA) has data that indicates that in 2010 wind power costs were cheaper than coal and nuclear and, of course, offshore wind.

This is shown in the following table:

MethodCost Euros/Mw-hr
Wind Offshore90
Wind Onshore65
Gas45
Coal70
Nuclear100

Furthermore, the EWEA data was predicted ahead in ten year intervals. This data indicates that both offshore and onshore wind power become cheaper compared with all the other technologies. This is largely due to the increased fuel and emissions costs for coal and gas.

You can read the full article at: EWEA Data

Wind power is capital intensive at the beginning but after that operating & maintenance costs are minimal compared with other technologies.

There is no doubt that wind power is a powerful ally in the fight against global warming. As countries install more turbines and the industry obtains greater efficiencies through technology advances, wind power will find its rightful place as a cost effective and clean source of electricity.

The Consumer Perspective

When it comes to small scale wind power, usually defined as wind turbines with a capacity of less than 100KW, the wind power costs increase on a cost/KW-hr basis. However this can be reduced by available subsidies, usually known as electricity feed laws or more commonly, feed-in tariffs.

What are feed-in tariffs?

These are subsidies paid by electricity suppliers for electricity fed into the grid by turbine owners. These subsidies are often available also for electricity fed in by other other technologies such as solar, biomass and geothermal.

The feed-in tariffs are usually available for set periods of time at an indexed rate.

These tariffs are widely used in about 40 countries around the world.

Feed-in tariffs are undoubtedly the best policy option when it comes to encouraging the development of electricity from renewable energy sources.

Overall, Europe leads the way in the implementation of feed-in tariff policies. This is best illustrated by the following explanation of such tariffs as they apply in the United Kingdom (UK).

Consumers can benefit in three ways from the tariff provisions:

  • A payment for each kw-hr of electricity produced
  • A payment for any excess electricity exported to the grid – and known as the “export tariff”
  • Savings on electricity usage via a reduced utility bill.

Below is a table showing the feed-in tariffs for small wind. Since the UK system is in pence per Kw-hr we have shown columns with the equivalent rates in euros and $US so that our readers can better understand the figures.

ScaleTariff
(p/Kw-hr)*
Tariff
(euro c/Kw-hr
Tariff
(US c/Kw-hr)
Duration
(years)
<1.5 Kw36.242.657.420
>1.5-2.5 Kw2832.944.420
>2.5 – 100 Kw25.329.439.620
>100 – 500 Kw19.723.231.720
>500-1.5 Mw9.911.715.820
>1.5Mw – 5 Mw4.75.57.420

* the tariffs are indexed to the annual rate of inflation.

This policy works well in encouraging the growth of renewable energies.

It should be noted, however, that governments even in places like Germany (a leader in the provision of feed-in tariffs) play around with the tariff laws and introduce cuts and lessen the stability of the already proven systems.

A classic case of government mishandling is highlighted by recent events in the UK where the government wanted to change the laws governing the systems they had already established. Their actions caused a great uproar and resulted in the case going to the High Court where the judges, in a unaminous decision, ruled that the government's proposed actions were unlawful. Despite that ruling, the government is currently trying to pursue a further appeal.

Read more about this fascinating story here: UK Govt Fiasco

But we are not particularly picking on the UK government, governments everywhere are prone to lacking the vision and having the intestinal fortitude to carry through with their good intentions. Instead, they are unduly swayed by political motives and dissenting voices.

What about tax credits?

The USA stands out from the crowd when it comes to consumer subsidies for wind turbines - and not in a good way.

Why? Because of the “production tax credit”. This Federal subsidy has had a stop-start history with the Federal Government establishing it for short periods only. This has resulted in a lot of uncertainty in the wind industry.

However, the problem goes deeper than that.

The production tax credit (PTC) is actually bad policy for the following reasons:

  • The PTC favors corporations and utilities with a tax burden, enabling them to take advantage of the credits
  • The “stop-start” or “boom-bust” cycle is inevitable when the PTC is approved for only short periods at a time.
  • The PTC system lacks transparency and so encourages duplicity.
  • The PTC makes it very difficult for individual home-owners to reap any benefit

One has to wonder why the USA doesn't take some valuable lessons from those countries, particularly in Europe, who have instituted feed-in tariffs. These tariffs have great significance for reducing wind power costs in the best way.

There are encouraging signs that the USA is moving towards feed-in tariffs with draft Federal legislation and individual states introducing such tariffs. However, there is a long way to go. With the current tax credit legislation expiring at the end of 2012 and Congress yet to make any decision on its extension, the situation is precariously poised for the industry.

From a consumer perspective, feed-in laws are the way to go. They enable consumers to get a true handle on wind power costs.

Only then will consumers get really behind the renewable energy movement.

Return From Wind Power Costs to Home Page

Return From Wind Power Costs To Wind Power