BigWind is NOT Cheaper than Coal: Obama ignores facts

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Wind advocates frequently argue that wind power has competitive prices. Recently, PolitiFact even granted a rating of “True”—its highest rating—to President Obama’s claim that “in Texas, wind power is already cheaper than dirty fossil fuels.” Let’s ignore for a moment that the word “dirty” could be ascribed to nearly any industrial process, including the process used to mine materials for and manufacture wind turbines. On the question of wind power being cheaper than coal, Obama’s statement could easily have received a rating of “mostly false” under Politifact’s rating system because, as Politifact defines that rating, “[t]he statement contains some element of truth but ignores critical facts that would give a different impression.”

Obama’s statement and Politifact’s ruling both ignore three critical facts that would give a different impression:

1.) the cost of unreliable (intermittent) sources of electricity like wind cannot be compared directly against the cost of reliable sources like coal (also called “dispatchable” sources by industry insiders),

2.) intermittent wind power actually imposes costs on dispatchable sources by robbing them of production without replacing their generating capacity (which is critically important to grid reliability), and

3.) the evidence shows that the all-in cost of wind power, including the costs imposed on reliable power plants—as opposed to subsidized prices wind producers receive—is significantly higher than the cost of electricity from existing nuclear, hydroelectric, coal, and natural gas plants.

In short, the idea that wind power is cheaper than coal power falls somewhere between a meaningless statement and a myth.

Intermittent Resources Like Wind Are a Separate, Lower Class of Electricity Generation

Wind turbines only generate electricity when the wind is blowing, and it is a fact of life that the wind is an inherently unreliable source of energy. Wind power’s intermittency is a well-known limitation and a significant drawback, especially because the large-scale battery storage required to make wind a reliable resource isn’t commercially viable.

Nevertheless, wind advocates breeze through the fundamental problems of intermittent, unreliable energy and attempt to sell the idea of a wind-fueled future on the fiction that wind power can compete head-to-head with reliable sources of power like coal, nuclear power, or natural gas. In fact, the Politifact piece specifically mentions the argument that “wind-generated electricity can’t (or shouldn’t) be price-compared to electricity generated by fossil fuels or nuclear sources.” However, it appears that critical point did not sway Politifact, given the “true” rating it assigned Obama’s comment. We should note that the argument was put forth by the co-author of a groundbreaking IER study on the cost of electricity, Tom Stacy, who was involved in a lengthy email conversation with the Politifact author attempting to convince him such a comparison (of wind to coal) is bogus.

IER is not alone on this point. The Energy Information Administration (EIA)—a fair referee in this arena—has issued the same warning for years. EIA actually separates dispatchable and non-dispatchable resources in its LCOE calculations and warns that “caution should be used when comparing them to one another.” In essence, dispatchable plants “whose output can be varied to follow demand” (e.g., coal, natural gas, nuclear, etc.) are more valuable than wind turbines “whose operation is tied to the availability of an intermittent resource.”[1]

Because wind cannot dispatch power in response to demand, the electricity it produces is less valuable, and its cost should not be compared directly against dispatchable resources like coal, nuclear power, or natural gas without serious caveats or significant adjustments to factor in the cost of battery storage.

Wind Power Imposes Costs on Reliable Power Plants

Last year, IER released a report on the levelized cost of electricity (LCOE) from existing generation resources, a first-ever look at the LCOE of the existing sources on the grid as opposed to new resources. Crucially, the report also introduced the concept of the “imposed costs” created by intermittent resources. The report went one step further and estimated those costs under modeled scenarios to find that one megawatt-hour of wind production imposes a cost of $29 on dispatchable generation from natural gas plants.

The concept of imposed costs is not intuitive, so here’s an example. Suppose a power grid consists of only combined cycle natural gas plants that are allowed to operate freely and satisfy the second-by-second electricity demand on the system. Then, even though the system has enough dispatchable capacity from the natural gas fleet to meet demand, we decide to introduce new, intermittent power from wind turbines.

The natural gas fleet is still needed for those frequent times when wind output is low or zero,[2] but it has to back down to accommodate the intermittent wind generation. In other words, its production is crowded out by the intermittent wind generation. Lower production from the same capital-intense facility is the source of “imposed costs”—wind generation significantly raises the LCOE of the dispatchable resources on the system. By decreasing a reliable power plant’s run time without also reducing its fixed costs, wind power makes it more expensive to generate electricity from existing and new dispatchable resources. [3]

The phenomenon is shown graphically below. New wind production causes the natural gas fleet’s capacity factor to drop from 87 percent to below 60 percent. The imposed cost of wind power in this scenario is nearly $30/MWh, a cost that should be attributed to wind.

LCOE Chart 2
Source: http://instituteforenergyresearch.org/wp-content/uploads/2015/06/ier_lcoe_2015.pdf

Analysis of the Full Levelized Cost of Electricity Shows Wind is Not Cheap

The summary table of our LCOE report shows that, when the imposed costs of intermittent resources are taken into account, the LCOE of wind is not competitive with other new sources—especially combined cycle natural gas—and is nowhere near competitive with existing coal, nuclear, hydro, and natural gas resources.

LCOE-Chart
Source: http://instituteforenergyresearch.org/analysis/wind-lobbyists-critique-of-ier-study-fails-on-all-fronts/

By accounting for imposed costs and adding them to the LCOE for wind power, IER’s report allows for more accurate comparisons between dispatchable and non-dispatchable sources.[4] Under a true apples-to-apples comparison, new wind resources are nearly three times more expensive than existing coal resources.

The article also overemphasizes the importance of wholesale prices for wind power. Wholesale prices don’t take into account the lifetime costs of building and operating a generation resource, nor do they factor in the multiple subsidies that wind producers receive (e.g., federal wind PTC, accelerated depreciation rules, federal loan guarantees, Renewable Energy Certificates, state and local utility property tax rebates).

Conclusion

PolitiFact’s assessment of wind power’s affordability ignores critical facts that would give readers a different impression. By its own standards, we rate Politifact’s conclusion regarding Obama’s statement “mostly false.”…

Source: News Flash: Wind Power is Not Cheaper than Coal – IER

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BigWind is subsidized >52x more than fossil fuels. Fair????

The next time someone tells you they support BigWind subsidies because fossil fuels receive them, too, remember this information. BigWind loves to tell the public that they only want what is fair- an equal opportunity. Is BigWind really being treated, equally? Is it fair when BigWind is being subsidized over 52 times more than the more conventional fossil fuels on a unit of production basis? It seems to us, that our tax dollars are subsidizing failure, not success, since BigWind produces less than 5% of our nation’s electricity…

At the request of Congress, the Energy Information Administration (EIA), an independent agency of the U.S. Department of Energy, evaluated the amount of subsidies that the federal government provides energy producers for fiscal year 2013, updating a study that it did for fiscal year 2010.[i] Over a 3-year period, from fiscal year 2010 through fiscal year 2013, total federal electricity-related subsidies increased from $11.7 billion to $16.1 billion, an increase of 38 percent over the 3-year period. The largest increases in federal energy subsidies were in electricity-related renewable energy, which increased 54 percent over the 3-year period, from $8.6 billion to $13.2 billion. Fossil fuel subsidies declined by 15 percent, from $4.0 billion to $3.4 billion. Total federal energy subsidies declined 23 percent, from $38 billion to $29 billion due to the expiration of tax incentives for biofuels, the depletion of stimulus funds, and a decrease in energy assistance funds

On a per dollar basis, government policies have led to solar generation being subsidized by over 345 times more than coal and oil and natural gas electricity production, and wind is being subsidized over 52 times more than the more conventional fossil fuels on a unit of production basis.

Over the 3-year period, electricity-related renewable subsidies increased, while conservation, end-use, and biofuels subsidies declined:

  • Renewable electricity-related subsidies increased by 54 percent from $8.6 billion to $13.2 billion. Electricity-related renewables saw the largest increase in federal benefits. Of the $13.2 billion in fiscal year 2013, $8.6 billion (65 percent) was related to the Obama administration’s economic stimulus law.
  • Solar led the various renewables with almost a 5-fold increase in subsidy (both electricity-related and non-electricity related) from $1.1 billion to $5.3 billion and led electricity sector subsidies on a unit of production basis.
  • Wind subsidies increased by 9 percent from $5.4 billion to $5.9 billion
  • Subsidies for biofuels declined by 74 percent, from $7 billion to $1.8 billion.
  • Conservation and end-use subsidies declined by half from $15.6 billion to $7.9 billion. Conservation subsidies declined from $7.1 billion to just under $2 billion (72 percent). End-use subsidies declined from $8.5 billion to just under $6 billion (30 percent).

Over the 3-year period, fossil fuel and nuclear subsidies declined:

  • Federal subsidies for coal declined by almost 3 percent from $1,116 million to $1,085 million.
  • Federal subsidies for oil and natural gas declined 20 percent from $2,918 million to $2,346 million.
  • Federal subsidies for nuclear energy declined 12 percent from $1,893 million to $1,660 million….

EIA Report: Subsidies Continue to Roll In For Wind and Solar – IER.