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by Jerome a Paris
Via World Changing, this great tidbit noted by the Dept. of Energy's Green Power Network:
(Go to original article for links to all the individual utilities and their programmes)
The great advantage of wind is that its cost of production is VERY predictable. You need to spend a significant chunk of money upfront, but after this, the production costs are very low and extremely predictable (technical maintenance, replacement of some part after a number of years, full stop). You cost over the long term thus depends on the financing terms you can get to cover that initial investment and "spread" it over a number of years. Typically, it is possible today to get 15-year financing for that upfront investment. With current prices for turbines and ancillary equipement (about $1m for 1MW as a rule of thumb, a bit more currently because of the ongoing boom in demand in the USA), and depending on the wind available at your site, your initial investment will cost about 3-4 c/kWh in debt repayment. Add to that approx. 0.5c/kWh in operatiing costs (increasing over the years to 1c/kWh), and you get power that will cost you 3.5-5c/kWhwith absolute certainty over the next 15 years, and much less after that (turbines are considered to have at least a 20-year life). Coal-fired plants generate 2-3c/kWh power in today's conditions, but they are sensitive to coal prices (which doubled in the past year), and they could (and should) be hit by carbon taxes which will increase their price. continued below ...
Natural gas-fired plants, the great new thing of the industry in the late 90s, used to have 3c/kWh costs as well, but that was predicated on 3$/mbtu gas. With natural gas currently at 14$/mbtu, and not currently expected to go below 7$/mbtu in the next 5 years, gas-fired plants are currently providing 6-8c/kWh power.
As I explained in an earlier diary, gas-fired plants usually being the marginal producers, they effectively set the level of wholesale prices for electricity, which have thus increased, slowly bringing retail prices up with them. Until recently, the expectation of long term wholesale electricity prices arouns 3c/kWh made wind power uncompetitive, thus requiring a support mechanism, the PTC, to make it possible for investords and lenders to put long term money in that sector. And the 1.8c/kWh for 10 years provided by that taw mechanism have been enough (when available, which it was with irregularity in recent years) for the industry to be financed and to develop. Despite current high prices, banks are not yet willing to bet on such prices remaining high for 15 years, and thus still requite the support of the PTC to provide finance, and it would still kill the industry to do without it for now. (Disclaimer - yes, I work in banking and I finance wind farms, so this may sound self-interested, but (i) I don't work in the USA and (ii) it's still true). But eventually it may become unnecessary - basically as soon as utilities decide that they are willing to take that risk and sign fixed price purchase agreements with wind farms at high enough prices - like 5c/kWh - prices which, being fixed, will end up being very cheap for the utilities if the alternative is 8c/kWh gas-fired. The gist of all this is that there is no rational reason today not to promote wind power today - it will be the most economic source of power in the long term - it already is in the short term. And I have an additional bit of good news. The International Energy Agency, hardly a loony green outfit, has just published a new report (Variability of Wind Power and Other Renewables (pdf), which basically says that the impact of the intermittent nature of wind power on grids has been overestimated and can be managed reasonably well with well-known technical solutions. That means that investing in wind power will NOT require additional investment in gas-fired or coal-fired standby capacity to cover times of low production - these can easily be managed by the grid. As the issue of birds inevitable pops up each time I write about wind power, I will refer you to previous discussions of this topic:
Overall, wind power is cheap, reliable, and mostly harmless. These things cannot all be said of all the alternatives, so wind deserves to be promoted a lot more than it currently is - and it will actually be profitable!
Wind power now CHEAPER for US retail consumers | 10 comments (10 topical, 0 editorial, 0 hidden)
Wind power now CHEAPER for US retail consumers | 10 comments (10 topical, 0 editorial, 0 hidden)
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