A continuation of the previous blog post, this is part 2…
Part I yesterday established that wind electricity erodes the market share and utilization rates of our base-load fleet….
Does wind electricity save some fuel? Yes. But that is all that it saves, while its cost impacts to electricity consumers extend beyond the direct costs of wind energy. It lowers the capacity factors of base-load generators which raises those generators’ per MWh breakeven price point to the extent those base-load generators have fixed costs….
It can be argued that wind requires us to depend more on natural gas generation long term, but also increases the cost of electricity from that natural gas generation. Wind also increases the system-wide average cost of electricity unless wind energy’s full cost is less than the sum of the cost of the fuel it saves plus the incremental costs it imposes on the base-load capable fleet.
Even more difficult to quantify–but potentially more important–is the artificial suppression effect production-subsidized wind has on wholesale electricity market clearing prices. For our dispatchable fleet of generators, price suppression can easily lead to gross margin evaporation. If such market conditions persist without capacity market or private PPA support, the owners/operators of important, previously-low-cost-electricity generators will make decisions not to reinvest in emissions compliance equipment, but instead shutter or retire.
The U.S. coal fired fleet faces such a circumstance now with Federal EPA MACT and MATS regulation compliance deadlines this spring. Many units that were competitive and profitable market participants will retire in May. The lost capacity from these retiring units will need to be replaced by new dispatchable units that have both higher fixed and variable operating costs….
Firm vs. Intermittent Generating Resources: A Caveat on Wind Electricity’s Indirect Costs (Part II) – Master Resource.