The Economics of Wind Eneregy
Today, wind energy is the only form of renewable energy that is truly competitive with fossil fuels. The cost of wind energy has been declining steadily for 25 years.
In fact, long-term forecasts from the early 1990’s by Pacific Gas & Electric (the California utility) concluded that wind would ultimately become America’s least expensive source of energy. The cost of energy produced from wind turbines is now competitive with mainstream power technologies, such as coal and hydro and is now less expensive than gas or nuclear. The American Wind Energy Association (AWEA) has estimated the cost of wind energy from today’s generation of turbines is 5 cents per kilowatt-hour (kWh), not including the Federal Production Tax Credit (PTC). The PTC (1.9 cents per kWh, adjusted for inflation) applies to the first 10 years of any eligible new wind energy turbine’s operation.
The Declining Costs of Wind Energy
The following table compares the costs of the major energy sources of electricity with wind energy.
| Fuel Costs | cents/kWh in 1996) |
|
Coal Gas Hydro Biomass Nuclear Wind (without PTC) Wind (with PTC) |
3.3 - 5.5 3.9 - 6.0 5.0 - 11.3 5.8 - 11.6 11 - 14.5 4.0 - 6.0 3.5 - 5.5 |
According to the Department of Energy, the mix of America’s energy production is as follows; coal (51 percent), natural gas (18 percent) and nuclear (20 percent). However, most new electric energy plants constructed in the last 15 years are natural gas fired. But, the cost of natural gas has increased steadily since 1996, when it averaged less than $2 per thousand cubic feet (to today’s cost of approximately $7 per thousand cubic feet) so that the cost of natural gas fired electric energy generation is unpredictable. As an example, in January 2003, when natural gas costs reached $15 per thousand cubic feet in some markets, the cost of natural gas generated power was as 20 cents per kWh in those same markets.
In contrast to natural gas, the cost of wind energy has continued to decline. In fact, the cost of wind energy has dropped by approximately 15% with each doubling of installed capacity worldwide, and capacity doubled three times during the 1990s. Wind energy today costs only about one-sixth as it did in the 1980’s and its cost is expected to further decline by another 25% by 2010.
It's not surprising that wind energy is the fastest growing source of electricity generation in America and the world given the direct economic benefits mentioned above. But, if indirect environmental costs were factored in, wind energy's competitiveness would increase even further because of its low environmental impact. Wind energy produces no emissions, but less obviously, wind energy is also free of the additional environmental costs resulting from mining or drilling, processing and shipping other “fuels”. Coal, which provides half of America’s electric energy as mentioned above, has been linked to illness, acid rain and mercury pollution, and releases greenhouse gases and therefore may contribute to global warming. Although natural gas is less polluting than coal, it also releases greenhouse gases that also may affect our world’s climate. The use of wind energy on the other hand does not pollute our air or water and, unlike nuclear power, requires no hazardous waste storage. An increasingly important economic and strategic benefit of wind energy is its contribution in reducing our dependence upon of imported energy from less secure regions across the globe.
