Cost of Wind vs Fossil Fuels

Wind power costs on the rise?

(From The NW Energy Coalition’s Energy Matters Update, Vol. 5, No. 2 - July 22, 2008)
Not nearly as much as coal, gas and nukes

We keep hearing how the costs of new renewable power—especially wind power—are going up. Fact is, the cost of wind power is rising far less than costs for coal, natural gas or nuclear power.

Over the last two years, coal- and natural gas-fueled power prices have risen more than 40%, nuclear power prices more than 70%. Wind power prices, meanwhile, have risen a relatively paltry 13%.

As a result, wind power is now cheaper than gas or nuclear. Conventional (dirtiest) coal’s small price advantage—about eight-tenths of a cent per kilowatt-hour—will soon be erased by regional and/or federal regulations on climate-polluting greenhouse-gas emissions.

In other words, instead of raising energy costs, investing in wind power will actually save money for consumers!

What’s going on?

We’re all feeling the pinch of higher prices for gas, food and other goods and services. And in the past year, the power generation industry has taken several financially crippling hits:

  • Dramatically escalating prices for fossil and nuclear fuels (coal, oil, natural gas and uranium) and for transporting those fuels to power plants.
  • Much higher plant construction costs driven by international competition for basic building materials such as steel, concrete, copper and aluminum.
  • Higher borrowing costs due to the deepening credit crisis.

Add in the shortage of skilled workers and you’ve got a troubled energy sector—particularly for developers, distributors and consumers of traditionally produced power.

Why wind is different

Developers of renewable-energy facilities face construction cost increases as well, but for wind (and solar and many other renewables) the fuel price stays the same: Zero.  Plus, wind-power technology has rapidly evolved. Turbines are much larger, growing from an average of 1.2 megawatts to 1.6 megawatts (a 33% increase in average capacity) in just three years. Today’s typical new turbine has a 2.3-megawatt capacity; 7-megawatt turbines will be available soon.  The newer turbines can wring more electric power out of the wind (especially at lower wind speeds) than older turbines could. The combination of greater output and greater capacity nearly offsets the materials and labor cost increases plaguing traditional resources.

Come to the table

The following table, based on numbers from the Northwest’s largest utility, PacifiCorp, compares the 2006 and 2008 cost estimates for pulverized (traditional) coal, combined-cycle combustion turbine (high-efficiency) natural gas, nuclear and wind power, all expressed in cents per kilowatt-hour.*  (Ten 100-watt light bulbs burning for one hour consume a kilowatt-hour—kWh—of electricity). 

* Kilowatt-hour costs are the average over the life of a power plant and do not reflect the 2-cents-per-kWh federal production tax credit (PTC) for wind. “Fixed” costs include paying off the construction bill, as well as operation and maintenance that must be done whether or not power is produced. “Variable” costs are for fuel, labor, generation-based operation and maintenance, and pollution prevention/mitigation that vary with use. (Grid-integration costs of ½ cent to 1 cent per kWh – which apply in varying degrees to all four energy sources – are not included.)

Clearly, costs have risen for all four resources since 2006. But even without the federal Production Tax Credit, the cost of wind is now much closer to coal, and less than natural gas generation. Add in its value as a carbon-free resource and it’s easy to see why wind is—and should be—most utilities’ preferred generation resource for meeting future power needs.Other fuel-free, low—or zero—carbon resources such as solar, geothermal, wave and biomass will become cost-competitive in time. Until they are, wind (along with bill-reducing energy efficiency, of course) will remain consumers’ best bet for least-cost power.
The NW Energy Coalition is an alliance of more than 100 environmental, civic and human service organizations, progressive utilities and businesses in Oregon, Washington, Idaho, Montana, Alaska and British Columbia. We promote development of renewable energy and energy conservation, consumer protection, low-income energy assistance, and fish and wildlife restoration on the Columbia and Snake rivers.

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