Fact check: Sorgo's Holly wildly exaggerates cost of wind power
S. Michael Holly, the chairman of Sorgo Fuels & Chemicals, Inc., has a column on Energy Trends Insider claiming that wind power's costs in the U.S. are six times higher than accepted by authoritative sources. Mr. Holly's analysis contains a number of major errors which, taken together, account for his wild exaggeration.
Mr. Holly claims to be perplexed how wind energy’s $30-40/MWh costs in the U.S. can be so much lower than the claimed $100/MWh cost in other countries, yet the main reason is simple: the U.S. has world-class wind energy resources that make a typical U.S. wind turbine roughly 50% more productive than one in most other countries. In addition, the U.S. enjoys the cost reductions provided by abundant low-cost land and a wind energy manufacturing sector that produces more than 70% of a wind turbine’s value domestically, keeping transport costs low. Thanks to continuing technological advances as well as the creation of a domestic wind turbine manufacturing industry, the cost of wind energy in the U.S. has fallen by more than 40% over the last four years.
While U.S. wind energy does receive the federal production tax credit, the cumulative incentives provided to wind energy are a small fraction of the amount given to fossil and nuclear energy competitors. According to the Congressional Research Service, “For more than half a century, federal energy tax policy focused almost exclusively on increasing domestic oil and gas reserves and production.” A report by DBL Investors also found that in “inflation-adjusted dollars, nuclear spending averaged $3.3 billion over the first 15 years of subsidy life, and O&G subsidies averaged $1.8 billion, while renewables averaged less than $0.4 billion.” Even by the Nuclear Energy Institute’s own count, fossil and nuclear subsidies are many times larger than the total amount given to all renewables over the last 60 years. Similarly, the accelerated depreciation that Mr. Holly cites is available to nearly every energy source, and to most industries outside the energy sector as well.
Regarding the cost of reliably integrating wind energy onto the grid, Mr. Holly uses out-of-date estimates when more recent real-world data are available. Data from the Texas grid operator confirm that the additional power system reserves needed for obtaining almost 10% of its electricity from wind energy account for about 50 cents per megawatt-hour (MWh), which works out to about six cents out of a typical Texas household’s $140 monthly electric bill. In contrast, other data indicate that the cost of reliably accommodating instantaneous outages at other power plants is forty times higher, at around $2.50 per monthly bill. Thus, wind energy’s integration costs are far lower than those of conventional generators, completely undermining Mr. Holly’s argument. Similarly, the Midwest grid operator has said on numerous occasions that it has been able to reliably integrate 10,000 MW of wind generation without any discernible increase in its need for reserve generation. A study by utilities in Nebraska calculated that the whole region could reliably obtain 40% of its electricity from wind energy at an additional reserve cost of around 80 cents per monthly bill.
In reality, it is far more costly to integrate the unexpected and instantaneous failures of large fossil and nuclear power plants than to accommodate the gradual and predictable changes in wind energy output. All power plants fail from time to time and must work in concert to keep the power system reliable, so all power plants are always backed up by all other power plants through the use of flexible operating reserves. Grid operators use these reserves to accommodate all changes in supply and demand, including the constant fluctuations in electricity demand as well as changes in wind output. As demonstrated above, the fast-acting reserves for conventional power plant failures are far more expensive than the slow-acting reserves for which wind energy modestly increases the total system need, completely contradicting Mr. Holly’s argument.
Mr. Holly’s attempt to add a “backup cost” for wind is based on a simple failure to understand that adding wind energy always reduces the need for capacity on the power system, and never increases it. While wind energy can slightly increase the use of flexible reserves, that flexible capacity is already present on the power system to deal with far larger fluctuations in demand and failures at conventional power plants. Mr. Holly also apparently fails to understand that flexible resources are not dedicated to wind energy, but rather provide services to the whole power system. The grid operator doesn’t care what one wind plant is doing, or even what all wind plants are doing, but rather it only cares about the aggregate supply and demand of electricity. Changes in wind output are often counteracted by opposite changes in demand or in output deviations at conventional power plants, so trying to balance out changes in wind output is often counterproductive. As an analogy, it would be highly inefficient and counterproductive to have a dedicated resource accommodating fluctuations in the electricity demand at your house, as nearly all of those changes are canceled out anyway by other changes on the aggregate grid.
Regarding the cost of transmission, a recent study by the independent grid operator PJM found that the grid upgrades needed to accommodate 20% wind energy would have a very reasonable cost, accounting for only 6-8% of the value provided by wind energy. Regardless, other studies by independent grid operators have confirmed that these grid upgrades would more than pay for themselves by providing other benefits, such as improved electric reliability, reduced electricity prices, more competitive electricity markets, and higher efficiency of electricity transmission relative to today’s congested electric grid. Thus, these grid upgrades should be scored as a benefit of wind, not a cost.
Finally, Mr. Holly repeats the tired fossil fuel-industry myth that wind energy’s pollution and fuel use savings are significantly reduced by negative impacts on the efficiency of fossil-fired power plants. He picked a bad time to do so, as in the last month, two studies, one by a federal energy research laboratory and the other by the independent grid operator PJM, have used real-world hourly power plant emissions data to confirm that wind energy produces the expected emissions reductions. Specifically, the government study found that increased emissions due to cycling of fossil fuel plants offset only 0.2% of wind energy’s carbon emissions benefit, so that wind energy produces 99.8% of the expected emissions savings, for a total savings of 1190 pounds of CO2/MWh of wind.
Like similar attempts by the fossil fuel industry to attack wind energy (see responses here and here), Mr. Holly’s effort fails on all points. There is a reason 74 utilities bought wind energy last year and why wind energy has accounted for more than 35% of newly installed generating capacity over the last 5 years. Every day, more and more utilities are realizing that a stable, low-cost, fixed-price energy source with no emissions that can be reliably integrated onto the power system is a good deal for their customers.
1. Based on a calculated wind integration cost of $0.50 per MWh of wind energy, which equals $.046 per MWh of total load served in ERCOT at 9.2% wind energy use (http://www.uwig.org/slcforework/Ahlstrom-Session1.pdf), based on reserve data presented by David Maggio, ERCOT (http://variablegen.org/wp-content/uploads/2012/12/Maggio-Reserve_Calculation_Methodology_Discussion.pdf), multiplied by the 1.262 MWh used per month by the average Texas household.
2. $2/MWh of total load served (http://www.eipconline.com/uploads/Phase_1_Report_Final_12-23-2011.pdf, page 61), multiplied by the 1.262 MWh used per month by the average Texas household.
Photo credit: First Wind - Milford Project, Utah
Independent grid operator study confirms wind power's economic, environmental value, October 29, 2013
Fact check: WSJ editorial obscures renewable energy success, October 17, 2013
Fact check: Fossil-funded think tank strikes out on cost of wind, October 15, 2013
WSJ's six myths about renewables: More good news, September 26, 2013
Boosting renewable energy to 25% of electricity supply in Western U.S. would cut pollution, save consumers billions, September 24, 2013
Fact check: Wind power benefits consumers and environment, in Germany and U.S., September 20, 2013
Correcting fossil fuel industry misinformation about Germany's success with renewable energy, September 10, 2013
Fact check: Correcting math errors leads back to original finding: Wind power is affordable, reliable, August 20, 2013
Citing low costs, Xcel Energy plans 'significant increase' in wind purchases, July 11, 2013
Fact check: Exelon's faulty math (and logic) on wind's consumer benefits, June 11, 2013
Mid-American Energy announces $1.9-billion investment in additional wind generation capacity, May 8, 2013
Georgia Power to acquire 250 MW of wind; utility underscores strategy of portfolio diversity, April 29, 2013
New study answers columnist's questions, confirms wind energy's environmental benefits, April 19, 2013
Fact check: Sen. Alexander's claims about wind energy unfounded, March 27, 2013
Fact check: WSJ goes astray on California's integration of wind, February 28, 2013
Fact check: Pacific Research Institute report by Benjamin Zycher filled with inaccuracies, January 28, 2013
Despite flaws, DOE collaborative report shows more wind and transmission saves ratepayers money, January 23, 2013
Fact check: LA Times has faulty analysis on costs of integrating renewables, December 13, 2012
Lesser misstates facts at Heritage-Exelon anti-wind briefing, November 30, 2012
Fact check: Exelon-funded report inflates wind integration costs, November 2, 2012
Alabama Power 'doubles down' on wind, October 9, 2012
Facts about negative wholesale electricity prices and the Production Tax Credit, September 10, 2012
WINDPOWER 2012 Update: Transmission for wind in western U.S.: Lower cost, lower variability, June 5, 2012
Fact check: Elliott off target on wind and cost savings, June 4, 2012
New study: Wind power can save Midwestern consumers between $3 billion and $9.5 billion annually by 2020, May 23, 2012
Fact check: Lomborg lacking on wind's economics, emissions reductions, March 23, 2012
Get Email Updates
Did you know?
American wind is one of the most affordable forms of newly built electricity generation. It costs less than new coal or nuclear energy and competes with natural gas in wind-rich regions.Tweet this
Private investment totaling $25 billion drove a record-setting year for new wind installations in 2012.Tweet this
The U.S. wind fleet installed at the end of 2012 will avoid 98.9 million metric tons of carbon dioxide this year - 4.4 percent of power sector emissions.Tweet this
Driving today costs over 15 cents/mi for gas, while running an electric car on wind power costs less than 3 cents/mi, saving a typical electric car driver over $1,400/year.Tweet this
The U.S. wind industry supported 80,000 jobs in 2012. A full 25,000 of those jobs were in manufacturing.Tweet this
Grid operators in America and worldwide already rely on wind power to keep the lights on since wind power can be predicted 4 to 24 hours in advance.Tweet this
Nearly 70 percent of every U.S. wind turbine is now American-made, up from less than 25 percent prior to 2005.Tweet this
The U.S. wind energy industry could support 500,000 jobs, according to the Department of Energy's 20 percent Wind Energy by 2030 study.Tweet this
Top states for installed new wind capacity in 2012: Texas (1,826 MW); California (1,656 MW); Kansas (1,441 MW); Oklahoma (1,127 MW); and Illinois (823 MW).Tweet this
The Southeast has become a wind manufacturing hub, with more than 105 plants supplying components to the industry.Tweet this
- Tweet this
42 percent of new U.S. electric generating capacity came from wind in 2012, making it the top source of new capacity.Tweet this
Generating electricity from wind does not require water – saving 37.7 billion gallons a year, or enough water bottles to stretch to Saturn and back.Tweet this
Grid operators in America and worldwide already rely on wind power to keep the lights on, since wind power can be predicted 4 to 24 hours in advance.Tweet this
- Tweet this
Over 45,000 wind turbines across the U.S. can now produce enough electricity to power the equivalent of all the homes in CO, IA, MD, MI, NV, and OH combined.Tweet this
- Tweet this