Large Wind Projects Seeing All-Time Low Costs

March, 2001

LARGE WIND PROJECTS SEEING ALL-TIME LOW COSTS

Electricity from large new wind farms proposed in the Western United States will be generated at record-low costs, establishing wind energy as a source of electricity that can play a significant role in stabilizing electricity prices while offsetting pollution associated with conventional electricity generation.

Electricity from the 300-MW Stateline wind farm being developed along the Washington-Oregon border will cost less than 2.5 cents per kWh, a record-breaking low, according to the American Wind Energy Association (AWEA). (The cost of electricity from the Stateline project and other cost numbers mentioned in this article will include the federal wind energy production tax credit (PTC) unless otherwise stated. The PTC can reduce the cost of wind-generated electricity by about 0.7 cents/kWh over the lifetime of a wind plant.) Previous industry records were set at large wind farms in Texas, Iowa and Minnesota where energy is being generated at about 3 cents per kWh. The cost of wind energy remains predictable over the life of the plant, and even at about 6-8 cents per kWh at smaller wind farms in less windy locations compares favorably today to that of natural gas-generated power in certain markets.

"Our nation's abundant winds can provide a low-cost, clean energy solution to the current energy crisis," said AWEA executive director Randall Swisher. "Wind energy can help power American homes and businesses while providing a buffer against spikes in the price of natural gas and other fuels used to produce electricity in conventional power plants."

In back-to-back announcements, some utilities and regulators have signaled that they agree. The Bonneville Power Administration (BPA), a federal power marketing agency in the Pacific Northwest that sells power to local utilities, announced Feb. 21 that it wants over 1,000 megawatts (MW) of wind energy and wants it fast to alleviate the regional power shortage (see Wind Energy Weekly #934, February 23). BPA has also signed up as one of the purchasers of electricity to be generated from the Stateline Project. In Colorado, the Public Utilities Commission ruled Feb. 23 that Xcel, formerly Public Service of Colorado, should include a proposed wind farm in its plan to meet growing electricity demand (see Wind Energy Weekly #935, March 2). Xcel was seeking approval to proceed with some 1,900 MW of power from natural gas, and had rejected a 162-MW wind farm proposal by Enron Wind Corp. The PUC, ruling on economic grounds alone, found that the wind farm would help lower costs to the consumer. The trend toward lower costs confirms forecasts issued in the early 1990s by Pacific Gas & Electric and the Electric Power Research Institute (EPRI) that wind could ultimately become the least expensive electricity generation source. The levelized cost of energy, that is, the cost in current dollars of all capital, fuel, and operating and maintenance expenses associated with the plant over its lifetime, divided by the estimated output in kWh over the lifetime of the plant ranges from 3.8 cents to 6 cents per kWh for conventional combustion turbines (these figures do not reflect the recent spikes in the cost of natural gas) according to the California Energy Commission and the Energy Information Agency. The levelized cost of wind energy ranges from 3 cents to 6 cents per kWh today (not including the federal PTC), clearly in a competitive range with conventional power generation. The cost of wind energy varies with average wind speed and the size of a wind farm. Since the energy that the wind contains is a function of the cube of its speed, small differences in average winds from site to site mean large differences in production and, therefore, in cost. Larger wind farms provide economies of scale. What's more, wind energy's low environmental impacts can help hold down the overall costs of meeting clean air and water standards, and of curbing emissions of greenhouse gases. A single 1-MW wind turbine displaces, among others, 4.65 million pounds (2,317 short tons) of carbon dioxide, the leading greenhouse gas associated with global warming; 24,000 pounds (12 short tons) of sulfur dioxide, the lead agent causing acid rain; and 15,900 pounds (7.95 tons) of nitrogen oxides, a lead agent in the formation of smog, every year from the average US electricity generation mix. A 1-MW wind turbine powers the equivalent of 300 average U.S. households. "By tapping its vast wind resources, America can boost its electricity supply by 10-20% without additional air pollution or emissions of global warming gases, and at the same time get affordable insurance against volatile energy prices," said Swisher. "Some utilities are beginning to do the numbers and realize that wind energy is smart business." For more information on wind energy's costs, see AWEA's Fact Sheet on Comparative Costs of Wind and Other Energy Sources, available on AWEA's Web site at http://www.awea.org/pubs/factsheets.html .