Wind power costs in U.S. are six times higher than claimed  

Author:  Holly, S. Michael

Many U.S. special interests are misrepresenting wind power costs, including the wind industry, environmental groups, utility monopolies, independent system operators, educational and research institutions, and even federal and state governments. On September 24, Bill Ritter, the current director of the Center for the New Energy Economy at Colorado State University and former Governor of Colorado, wrote in the Wall Street Journal that “Long-term contracts for wind energy are being signed by utilities in several states in the range of 3 cents per kWh over 20 years” (1). Xcel Energy, the nation’s leading wind-generating electric utility, declares “wind power is simply the cheapest resource” (2).

Before the overproduction of turbines led to recent dumping, developers were offering utilities (in the lowest-cost wind areas of the U.S.) bid prices of about four cents (3). But the price of electricity from windmills outside the U.S. has been about 10 cents (in the form of feed-in tariffs), with capital costs accounting for about 93 percent of total costs. The six cent difference in the U.S. can be explained by tax write-offs targeted to big companies and the rich that cover half to two-thirds of the capital costs of windmills, according to the wind developer web site Windustry (4). Michael Mendelsohn of the National Renewable Energy Laboratory explains that the federal production tax credit (PTC) and federal accelerated depreciation (MACRS) are worth about 30 percent and 20 to 25 percent of the capital costs of windmills, respectively.

The PTC is worth 2.2 cents after taxes or 3.7 cents before taxes at a 40 percent marginal tax rate (5). After compensating investors with a financing charge worth about 0.7 cents, the tax credit is worth about three cents to developers. A few years ago, wind developers were allowed to replace the PTC with an equivalent Investment Tax Credit (ITC) that directly reimbursed 30 percent of windmill costs over the first couple years. Many states also offer accelerated depreciation that mirrors MACRS. Since Bolinger found combined federal and state accelerated depreciation provided tax savings over six years comparable to the PTC for 10 years (6), accelerated depreciation can also be considered to be worth about three cents or 30 percent of windmill costs.

Even though wind power has been subsidized from 10 to three or four cents, electricity rates have been increasing significantly in regions with the highest wind penetration levels (five to 10 percent), due to extra transmission and integration costs (that have often not been accurately reported by utilities).

The Lawrence Berkeley National Laboratory has found capital costs for transmission lines are triple those of other generation sources due to the lower capacity factors of wind at about 30 percent compared to about 90 percent for base-load plants (7). Transmission costs are also driven higher by the need to locate windmills further from load centers. Typically, ratepayers must pay extra transmission costs of about two cents more for wind power (e.g., three cents compared to one cent or even less for base-load generation).

Moreover, states have misrepresented the extra indirect costs of integrating the intermittent output from wind into the grid...... 

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