Robert Michaels, a Senior Fellow at the fossil fuel industry-funded Institute for Energy Research (IER), is testifying today at a House hearing on the wind energy Production Tax Credit (PTC) where AWEA’s Rob Gramlich is also testifying. A summary of the nine points Michaels makes in his testimony is posted on IER’s website. Below, we re-post the nine points verbatim and present the facts showing that Dr. Michaels strikes out on each of his attacks.
1. Myth: The emergence of Renewable Portfolio Standards (RPS) rather than the PTC has been responsible for the growth of wind power.
Fact: The Production Tax Credit plays a critical role in the growth of clean, domestic wind power. One need look no further than the abrupt drop-off in wind installations that occurred earlier this year after the PTC briefly lapsed at the end of 2012. Previous lapses in the PTC have also been followed by drastic drops in wind installations, as shown in the chart below. State RPSs are important for promoting wind energy’s growth. However, a strong counterfactual to the claim that RPSs and not the PTC are responsible for wind’s energy’s growth is the stubborn fact that Iowa and Texas have each exceeded their RPS requirements by about 5,000 MW, and other states that do not have RPSs have seen thousands of megawatts of wind installations. In addition, Dr. Michaels’s claim that 70 GW of additional wind capacity will be installed to comply with state RPSs is strongly contradicted by analysis released last week showing that state RPSs will only drive 28 GW of new wind energy demand, well below the amount necessary to maintain the U.S.’s wind energy manufacturing base of 550 facilities in 44 states.
2. Myth: Wind power is by nature intermittent and can only be integrated into a regional grid if other generation is instantly available to compensate for wind’s variability.
Fact: Large amounts of wind energy are being integrated reliably today. Changes in wind output occur slowly and predictably, in contrast to the abrupt failures of conventional power plants that are the largest driver of integration costs. Last year, wind energy reliably provided more than 20% of the electricity in Iowa and South Dakota, and more than 10% of the electricity in nine states. At times, wind energy has reliably provided more than 55% of the electricity on the main utility system in Colorado, and 35% on the main grid in Texas.
Electric utility system operators reliably and efficiently integrate wind and solar energy using the same tools they have used for more than a century to accommodate large swings in electricity demand as well as abrupt failures at conventional power plants. Dozens of studies have demonstrated that wind and solar energy add only slightly to total power system variability, and that most changes in wind and solar output are canceled out by much larger opposite changes in supply and demand. System operators in the Midwest and Texas have each been able to integrate more than 10,000 megawatts of wind energy with only very small increases in their need for operating reserves. Data from the Texas grid operator indicates that the additional cost of reserves for obtaining almost 10% of its electricity from wind energy accounts for about six cents out of a typical household’s $140 monthly electric bill. In contrast, data indicate that the cost of maintaining the reserves needed 24/7/365 to reliably accommodate instantaneous outages at conventional power plants is forty times higher, at around $2.50 per monthly bill.
3. Myth: The PTC complicates market operation because it allows large wind producing corporations to bid power into the grid at negative prices and still profit.
Fact: The PTC has no impact on electricity market prices, except for extremely rare and isolated instances that are on the decline. The PTC is only reflected in market prices when wind energy sets the market price for electricity, which almost never happens. For that to occur requires that all fossil-fired power plants on the grid have already been turned off, as they are more expensive because of their higher fuel cost and therefore set the market price. That can only occur on very isolated parts of the grid where there are few or no other sources of electricity, so even when it does occur, there is typically no harm to other power plant owners.
Market data from Texas, which has the largest share of negative price occurrences, indicate that negative electricity prices are exceedingly rare in Texas and getting rarer. Negative prices accounted for less than 1% of day-ahead market price points and around 2% of real-time market price points in ERCOT in 2011, based on a sample of over 1 billion real-time market price points and almost 5 million day-ahead price points in the ERCOT market analyzed by Ventyx, a firm that compiles and analyzes electricity market data. Most importantly, those instances are confined to the Western part of Texas and therefore have no impact on the 95% of Texas power plants located outside of that region.
Regardless, instances of negative prices in Texas are down 60% for the first part of this year relative the same period last year, and are expected to approach zero by the end of this year, thanks to the use of more efficient grid operating practices and the completion of long-needed grid upgrades. Planned grid upgrades in the Midwest are expected to greatly reduce or eliminate negative price occurrences in the near future, by similarly allowing more low-cost energy to reach the consumers who want it. Regardless, these rare and isolated instances don't harm consumers.
What is true is that wind energy drives consumers’ electricity prices down by displacing output from more expensive power plants, which are almost always the least efficient fossil-fired power plants. This massive benefit for consumers and the environment is why the public overwhelmingly supports greater use of wind energy, and we are not at all apologetic about displacing higher-cost sources of energy.
Some are attempting to confuse the public by conflating this large and widespread benefit of wind energy, which is due to wind’s zero fuel cost and occurs regardless of whether a wind project is receiving the production tax credit, with the exceedingly rare and localized instances of negative prices.
4. Myth: The “zero emissions” associated with a kilowatt-hour of wind power are generally far from zero. They must be netted against emissions from plants that must operate to maintain reliability in the face of wind’s intermittency.
Fact: New comprehensive peer-reviewed analysis of real-world data confirms that wind energy produces 99.8% of the emissions savings expected of a zero emissions resource. The study, which was released last week, examined real-world hourly emissions from every power plant in the Western U.S., taking into account how wind energy caused conventional power plants to change their output. The results show that even with wind and solar power providing 33% of the electricity, the negative impact of more frequently changing the output of fossil-fired power plants was “negligible.” The study found that one megawatt-hour of wind energy, the amount produced by a typical wind turbine approximately every 90 minutes, saves 1190 pounds of carbon dioxide pollution on average, equivalent to the amount produced by a cross-country drive in a fuel-efficient car. The negative impact on the efficiency of fossil-fired power plants reduced those carbon dioxide savings by only 2.4 pounds, the amount produced by a typical drive to the grocery store. Even the non-peer-reviewed report from fossil fuel industry firm Bentek, the only evidence cited by Dr. Michaels, was contradicted by a report Bentek released a year later that found that in most regions wind energy’s emissions reductions are as large as or larger than expected.
Dr. Michaels’s claim that wind’s emissions savings are significantly reduced by the impacts associated with building and installing wind turbines is also debunked by a comprehensive literature review of all peer-reviewed studies on the lifecycle emissions impacts of different energy sources. That review found that wind energy’s lifecycle emissions impacts are a few percent of those of fossil fuel energy sources, and that wind turbines repay the energy invested in their construction in a matter of weeks or months.
5. Myth: In 2012 wind capacity increased by more than any other type of generation. Wind may once have been an “infant industry” but it is no longer so.
Fact: Wind’s energy costs continue to rapidly decline. The cost of wind energy has dropped by 43% in the last four years, but the PTC is still needed to prevent us from relying too heavily on any single fuel source. These cost declines have occurred thanks to technological innovation as well as the creation of a domestic manufacturing industry that now builds over 70 percent of wind turbine value in the United States. The relatively stable policy environment provided by the extension of the PTC for a few years was instrumental in enabling turbine manufacturers and hundreds of component suppliers to invest in manufacturing facilities here in the U.S.
6. Myth: The per MWh subsidy in real terms associated with the PTC has roughly doubled between 1992 and 2010.
Fact: Policy support for wind energy has been much smaller and shorter-lived than support for other energy sources. 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.
In fact, the only basis for Dr. Michaels’s misleading claim that the PTC has increased in value (in reality, the inflation-adjusted value of the PTC has not changed at all) is that the cost of wind energy has fallen so precipitously over the last two decades. While Michaels may try to pretend wind energy’s cost reductions are a bad thing, we strongly disagree.
7. Myth: Adding wind generating capacity with unpredictable and uncontrollable output threatens power grid reliability. In most regions the wind is more likely to blow when the power it generates is least valuable.
Fact: Wind energy makes the power system more reliable, reduces energy costs for consumers, and protects the environment. In contrast to the abrupt failures at conventional power plants, changes in wind output occur slowly and predictably. This was compellingly illustrated in February 2011, when nearly 100 conventional power plants failed in Texas causing rolling blackouts, while wind energy earned accolades from the grid operator for helping to keep the lights on by producing as expected. NERC, the entity responsible for maintaining grid reliability in North America, has noted that modern wind plants provide essential grid reliability services as well as or better than conventional power plants.
Wind energy is highly valuable. Every amount of wind energy, regardless of when it is produced, offsets an equivalent amount of energy from the most expensive and least efficient power plant. Contrary to the outright false claim in Dr. Michaels’s testimony, no “Regional grids often operate under ‘must take’ rules that prohibit the operator from refusing an offer of wind power except in extraordinary situations.” Grid operators choose to use wind energy to displace more expensive sources of energy, but that is a purely market-based decision based on the economic fact that wind energy has no fuel cost. If necessary, grid operators can and do rapidly reduce wind plants’ output, taking advantage of the fact that wind plants can reduce their output much faster than any conventional power plant.
8. Myth: The per-MWh capital costs of wind exceed all-in costs of modern gas-fired plants by over 30 percent.
Fact: Real-world data verified by third-party experts confirms that wind energy is affordable. Wall Street investment firm Lazard recently released its assessment of the levelized costs of different electricity sources, and found wind energy to be very affordable. This is confirmed by public data on real wind energy contracts. Even if Dr. Michaels were correct that wind energy is slightly more expensive than natural gas power at today’s extremely low natural gas prices, that doesn’t mean that wind energy is bad for consumers. Wind energy is extremely valuable for diversifying our energy mix and protecting consumers from fluctuations in fuel prices, much like a fixed rate mortgage protects homeowners from interest rate spikes.
Utilities understand that wind energy is a good deal for their customers. At least 74 utilities bought or owned wind power in 2012, up 50% from a year ago. Southern Company recently made its third wind energy purchase, explaining that wind energy reduces its customers’ electric bills. Similarly, Oklahoma Gas and Electric estimates that a single wind project will save Arkansas customers $46 million. Finally, the Colorado Public Utilities Commission found that a single wind purchase by Xcel Energy “will save ratepayers $100 million” while providing the opportunity to “lock in a price for 25 years.”
9. A tax that forces consumers to buy needlessly expensive power when cheaper (and clean) power is available inflicts harm on their budgets, while benefitting the interests that lobby for taxpayer subsidies.
Fact: Wind energy reduces consumers’ electric bills by displacing more expensive sources of energy and protecting consumers from volatility in fossil fuel prices. Analysis released in May found that doubling the use of wind energy in the Mid-Atlantic and Great Lakes states would save consumers $6.9 billion per year on net, while also reducing carbon pollution by 50 million tons per year. Wind energy is the lowest cost zero emission energy source available today. Finally, it is worth pointing out that Dr. Michaels’s testimony is on behalf of an organization that receives large amounts of funding from fossil fuel interests that benefit from large taxpayer subsidies.
Photo credit: First Wind (Power County, Idaho)
 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://www.uwig.org/San_Diego2012/Maggio-Reserve_Calculation_Methodology_Discussion.pdf), multiplied by the 1.262 MWh used per month by the average Texas household (http://www.eia.gov/electricity/sales_revenue_price/pdf/table5_a.pdf)
 $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
 http://www.georgiapower.com/about-us/media-resources/newsroom.cshtml, April 22, 2013 press release
 Colorado Public Utilities Commission, Decision No C11”1291