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Changing the Conversation: Cost Estimates for Wind Energy Need Additional Context

The cost of wind energy is continually misrepresented when it is claimed that “the cost of wind energy in Minnesota — even without tax subsidies — now appears lower than electricity produced from both natural gas and coal.” (Star Tribune).

These assertions are void of much-needed context – mainly, that wind energy cannot support an electricity system on its own and needs backup generation. If we want to compare the cost of different power sources, it is necessary to also consider the value they offer to the grid. If energy sources like wind and solar cost X amount but need other energy sources on standby that cost Y amount, then the true cost is not really X, is it?

To put it another way, if you were a fisherman and needed to be on the water every day to do your job, would a sailboat be your best bet? Sure, the up-front costs may be less than a powerboat – but the sailboat relies on the wind to run and won’t always get the job done. You would need to pay for a powerboat to act as backup for when the wind wasn’t blowing – and this is exactly why wind energy is and always will be an extra cost to ratepayers.

Wind turbines need the wind to blow to generate electricity. This statement seems intuitive but needs to be restated in light of the widespread misunderstanding about how wind energy works and the limitations inherent with the technology. When there’s no wind, we need other power sources to provide us with electricity, sources that could have been used in the first place.

This means that we pay for the cost of wind energy AND the cost backup generation (usually natural gas), known as “load-balancing.” The cost to provide this generation is very expensive and hardly ever mentioned by renewable energy advocates. Not attributing this cost to wind energy, however, highly underestimates the true cost of wind energy.

Based on our new report, Doubling Down on Failure: How a 50 Percent by 2030 Renewable Energy Standard Would Cost Minnesota $80.2 Billion, we found that if Minnesota went to a 50 percent renewable energy mandate, the cost of load balancing for wind energy would be an extra $35.97 per megawatt hour (MWh). According to information submitted by utility companies to the Federal Energy Regulatory Commission (FERC), this cost alone is higher than the price of electricity at Xcel’s coal plant Sherco, which was $31.24 per MWh in 2016.

We have to be more honest in our approach to estimating the cost of energy technologies in Minnesota and elsewhere. Electricity is a vital part of our daily lives. Getting this conversation wrong could present unwelcomed consequences to those with the least ability to correct for them – mainly, low-income households who won’t be able to afford higher electric bills.

Below provides you with the missing context not found within the analysis in the Star Tribune article above, explaining why wind energy is not the cheapest source of electricity and how it provides little to no value to our electrical system.

The Cost of Wind Energy Goes Beyond Its Levelized Cost of Energy

People who claim that wind energy is one of the cheapest sources of electricity rely heavily on what is known as the Levelized Cost of Energy (LCOE), which, according to the Energy Information Administration (EIA), represents:

the average revenue per unit of electricity generated that would be required to recover the costs of building and operating a generating plant during an assumed financial life and duty cycle.

If one stopped reading here, it would seem fair to compare LCOE estimates from different technologies, as many people do repeatedly (similar to the article above). However, further investigation into LCOE estimates shows that it is not only incorrect to compare LCOE’s from dispatchable generation resources (coal, natural gas, nuclear, and hydroelectric) to intermittent resources (wind and solar), it is incredibly disingenuous.

The EIA continues, saying:

Because load must be continuously balanced, generating units with the capability to vary output to follow demand (dispatchable technologies) generally have more value to a system than less flexible units (nondispatchable technologies) such as those using intermittent resources to operate [wind and solar]. The LCOE values for dispatchable and non-dispatchable technologies are listed separately in the tables because comparing them must be done carefully.

Emphasis Added

What this means is that because coal, natural gas, nuclear, and hydroelectric power plants are able to generate electricity at all times of the day, these sources provide more value to an electrical system compared to wind and solar farms, which may be producing no electricity when we need it most, or too much electricity when it’s not needed at all.

And here is where the fallacy lies – claims that wind energy is the cheapest energy source are based on cost estimates that are not meant to be compared as apples to apples. As long as wind energy relies on the wind to generate electricity, this will not change.

The common rebuttal on behalf of renewable energy advocates is often a cry for increased usage of battery storage – which, according to them, will help mitigate wind energy’s intermittency problem – but the technology simply isn’t there. Not only are batteries for electricity storage incredibly expensive, they also do not provide enough power to replace generation coming from coal and nuclear plants (and are nowhere near being able to).

Assertions that wind energy is the cheapest energy source need to be factual, and in order to do that, any analysis wishing to seek the truth about the least expensive energy sources needs to consider all the factors which may cause electricity costs to increase.

This includes load balancing for intermittent resources, increases in property taxes, necessary transmission line additions to accommodate wind energy coming from remote locations, and the additional profits that utility companies receive when building new power plants.

When these factors are all considered, wind energy is far from being the least expensive source of electricity.

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