New England Ratepayers Association

Advocacy for Ratepayers Across New England

Wind power not competitive with conventional sources

It has been recently reported that Massachusetts’ utilities National Grid, Northeast Utilities and ad agency for viva viagra Unitil have negotiated power purchase agreements (PPAs) for 565MW of electricity capacity from existing and proposed wind-farms in New Hampshire and Maine that would provide electricity at wholesale rates of approximately eight cents per kilowatt-hour.

These agreements were lauded by the Boston Globe, going as far as claiming that “wind power is now competitive with conventional sources”. Eight cents per KWh is cheap for wind, especially when you consider that Cape Wind currently has PPAs with NSTAR and National Grid for 18.7 and 20.5 cents per kilowatt-hour (not including 3.5% annual escalators).

However, the average wholesale cost of electricity in New England for 2012 was less than four cents per KWh according to the New England Independent System Operator (ISO-NE). Furthermore, the 8 cents/KWh rate doesn’t reflect the buy kamagra online cheap costs of transmission upgrades necessary to integrate these projects into New England’s electricity grid. At the request of all six New England Governors, ISO-NE conducted a study which concluded “the cost of interconnecting 2,000MW to 12,000 MW of wind power would be between $1.6 billion and $25 billion in transmission upgrades”.

Another problem with speciously declaring wind can compete with conventional power sources is the simple fact that wind has a number of hidden costs that aren’t reflected in the wholesale price. Wind generally receives one of two tax subsidies: (1) a $22 per MWh inflation-adjusted production tax credit (PTC) over the wind’s initial ten years of operation or (2) a 30 percent investment tax credit (ITC) against capital expenditures. While these tax credits aren’t necessarily reflected in rates, they are borne by taxpayers as a means to subsidize ratepayers—or robbing Peter to pay Paul, except in this case Peter is Paul.

A 2012 study completed by the American Tradition Institute estimates the cost of onshore wind electricity to be somewhere between 15-19 cents per kilowatt-hour. According to the report, wind’s principal benefit is to supply energy rather than capacity, which means that part of the cost of wind has to include the expense of maintaining and operating other generation to offset the intermittent nature of onshore wind farms. The existing wind farms in Maine operate less than 25% of the time. Basically, when it comes to wind and other intermittent resources like solar, ratepayers are paying for 100% of the wind PLUS 75% of the capacity in the form of backup generation.

Since natural gas is New England’s preferred generating source most utilized on “spinning reserve” to support wind generation, we must include not only the implicit subsidy (PTC or ITC) when calculating the true cost of wind power, but also: the cost of keeping natural gas plants running; the extra fuel that plants are forced to consume as a result of running less efficiently; and the additional costs of transmission and transmission losses, which, because of geographic (remote) location, exceeds those of conventional power plants—which tend to be located in more densely populated areas.

The Boston Globe used statistics provided by the United States Department of Energy’s Energy Information Association (EIA) to compare the 8 cent wind PPA to other forms of electricity generation. The data provided by the Globe is based on EIA’s 2018 national levelized cost estimates for new generation sources. One problem with using the 2018 EIA data is that it completely ignores actual generation costs from existing plants like Seabrook Nuclear Station, which receives the clearing price for its electricity (less than four cents per KWh in 2012) and doesn’t require the expense of a secondary source of generation to pass onto ratepayers.

Any argument that the proposed PPAs with National Grid, Northeast Utilities and Unitil will “save” ratepayers money is ridiculous and natural kamagra pills is really a lesser-of-two evils scenario. While 8 cents is significantly better for ratepayers than the egregious Cape Wind PPAs, which begin at 18.7 and 20.5 cents per KWh, it is still twice the wholesale average cost for electricity—not to mention the fact that many utilities and competitive suppliers offer retail rates below 8 cents per hour.

What we should be asking is why legislators throughout the region change which form of renewable energy is preferable without letting previous legislation mature and be evaluated. Instead they succumb to talking points aimed at satisfying a select political class of energy generators and the bureaucrats who stand to benefit from their policies. Ratepayers would be better served by demanding that their elected representatives consider policies that will actually lower costs—not raise them. Just think about it—if wind and solar were so efficient and cost-effective—why would they need subsidies and mandates? Electricity suppliers would be knocking down their doors to buy cheaper electricity—instead ratepayers are forced to prop up industries that cannot thrive on their own.

Marc Brown is the Executive Director of the New England Ratepayers Association, a nonprofit dedicated to protecting ratepayers.

(A version of this column originally appeared in the Connecticut Mirror.)

Updated: November 29, 2016 — 9:25 am

3 Comments

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  1. Hello Marc,

    Read your article. I’m trying to figure out why you keep insisting that renewable energy is not the way to go based on their elevated costs due to subsidies.Please read the article included.It reports currently that the fossil fuel industry gets subsidies for over 775 billion dollars a year internationally, with the U.S. being one of the biggest players involved.

    http://priceofoil.org/fossil-fuel-subsidies/international/

    In New England we are about to embark on a commitment to a massive fossil fuel infrastructure of epic proportions. Who do you think is going to ultimately pay for it?, that’s right the rate and taxpayer.Who is going to subsidize the ongoing use of fossil fuels once it’s installed?, right again the rate and taxpayer.All of the New England governors have already signed onto a plan to have all electrical ratepayers pay for the GAS infrastructure. Why are the electrical ratepayers paying for the gas infrastructure, because there are more of them .I ask you specifically,is that really fair?

    The way I see it, investing in re-newables today would far outweigh investing in the fossil fuel infrastructure. Think about ,once the note is payed off on the renewable sector the SOURCE of the energy is “free” whether it’s solar, wind,geo-thermal,tidal etc. Of course there are costs associated with maintenance and generic cialis prices upgrades ,but that would out perform paying for future fuel costs any day of the week!

    Did you witness the economy in New England this past winter, it was stagnant to say the least. Because of the elevated cost of energy(high fuel costs) people didn’t have the extra money to put back into the economy.This is only going to get worse as gas companies build their infrastructure and jack up our energy costs.

    I feel as many do that you and your organization are doing a real disservice to our energy future by not endorsing renewable energies. You really need to please look at the bigger picture here. The Europeans are leaps and bounds ahead of us when it comes to the re-newables.It’s mandated in Europe when installing a new heating system into a house that it MUST be a certain efficiency rating. We still allow anyone here in the U.S. to install whatever they want.

    Even though Europe has 1/2 the coast line of the United Stated, their current offshore wind power capacity right now is over 7000 MW and growing. Why can’t we do that here?! We currently have “0” offshore wind farms and that’s the real tragedy here.It has taken 13 years for Capewind to get the go ahead and build, yet they allow a gas power plant in Salem ,MA a year to get the OK. Shameful.

    Regards,

    Jeff Brooks

    1. Mr. Brooks,

      Thank you for your comments. NERA is generally opposed to all subsidies, although I would argue that some of the items listed as subsidies in the linked report are not subsidies (depreciation of assets, LIHEAP), but either tax breaks afforded all businesses or in the case of LIHEAP a federal welfare program that reimburses oil and natural gas companies for providing free or discounted gas/oil to low-income recipients ($1.7 billion to natural gas in US).

      According to the US DOE EIA data(http://www.eia.gov/analysis/requests/subsidy/) in 2010 (most recent data available) solar led all electrical subsidies per megawatt hour at $775.64, followed by wind at $56.29, geothermal at $12.85, nuclear at $3.14, hydro at $.82, then coal and synthroid online natural gas at $.64. Not a lot of bang for the buck in wind and solar. Additionally, NERA also does not support ratepayers picking up the tab for pipeline expansion–that needs to come from LDCs and NG electricity generators.

      As for Europe and offshore wind, I would argue that their problems provide us with a clear example of what not to do. In Germany, rising costs from feed-in tariffs aimed at expanding wind and solar projects have led to increased energy poverty and a declining GDP. Manufacturers along the North Sea have experienced costly interruptions to their electricity supply caused by the intermittent nature of wind and the transmission difficulties associated with integrating intermittent resources. Spain is a mess–with its government is being sued for cutting unsustainable solar subsidies and an unemployment rate of 25%.

      Only the most ardent of wind supporters would think that Cape Wind is a good deal. $2.6 billion (or more) price tag for approximately 170 megawatts of useful power at 20 cents per kilowatt-hour (plus 3% annual escalators). You could get 2600 MW of natural gas or roughly 2200 MW of large-scale hydro for the same price tag at 1/3 (or less) the cost to ratepayers.

      As for the fuel cost argument–electricity suppliers will buy power from the cheapest source they can, but without heavy subsidies and RPS-driven PPAs, wind and solar can’t come close to competing with traditional power sources–even with the cost of fuel as an added expense.

  2. The argument against solar above relies on cherry picked numbers. 2010 subsidies for solar were in the midst of a federal stimulus program, and suck subsidies are not necessary to sustain vigorous solar growth as we move forward.

    Also Germany has a lower unemployment rate than the US and their GDP, while stagnant, is fine because their population is declining. So they don’t really need to increase GDP to achieve more per capita wealth.

    Finally your original article mentions the cost of connecting “2,000MW to 12,000 MW” of wind power. Who ever said we need 12,000 MW of wind power? With the growth of distributed generation to reach at least 2000MW, and the continued decline in power demand, a better number for wind would be 1800 to 4000MW in new transmission, and much of that transmission capacity could be timeshared with other generators, i.e. hydro and gas fired peaking plants.

    Why don’t you go ahead and do the calculation — with 2Gw of power lines what is the levelized cost of transmission per kwh? Let’s see your actual numbers, so we can compare!

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