Fact check: Charles Koch gets it wrong on wind power's cost

Fact check: Charles Koch gets it wrong on wind power's cost

Billionaire and Koch Industries CEO Charles G. Koch had an op-ed on corporate cronyism in Sunday's edition of the Wall Street Journal.  While the general notion of curbing inappropriate corporate influence in government seems laudable, Mr. Koch, who is in the oil & gas business, apparently could not resist taking a shot at wind power in the form of a wildly inflated statement about its cost.  In fact:

Wind-generated electricity is an especially good deal right now for consumers. Stable federal tax policy in the form of the PTC has helped keep electric rates affordable across the U.S.

For example, Alabama Power, a subsidiary of the Southern Company (a major electric utility), recently saved its customers money by signing a purchase agreement for wind power. As the company stated in a filing before the Alabama Public Utilities Commission, “The delivered price of energy from the wind facility is expected to be lower than the cost the Company would incur to produce that energy from its own resource (i.e. below the Company’s avoided costs), with the resulting energy savings flowing directly to the Company’s customers.”

Similarly, another major utility, Xcel Energy, said a recent contract it signed for electricity from a Colorado wind farm “contains the lowest-cost wind energy we’ve seen, making it competitive with other energy sources … Even though Xcel Energy is ahead of schedule to meet Colorado’s 30 percent renewable energy standard by 2020, we can take advantage of historically low wind prices to give our customers more choice in the energy powering their home and businesses.”

Wind also has unique attributes as a fuel source. Its fuel is free and it is the only source of electricity that can offer 20-30 year fixed prices. This is a great hedge against fossil fuel price volatility. It offers the same peace of mind that a 30-year fixed-rate mortgage (instead of a variable-rate mortgage) offers homeowners.

Wind also helps to lower wholesale electricity prices, which again means savings for consumers.  A recent analysis by Synapse Energy Economics, a respected consulting firm, of the impact of adding wind power to the Midwest Independent System Operator (MISO) utility system in the Great Plains and Upper Midwest put it this way:

“Synapse’s analysis suggests that ongoing wind installations across the MISO grid will continually and inexorably exert downward price pressure on market energy prices. Energy market price reductions will be material and pervasive, ranging initially (2012 – 2018) from $3 to $10/[megawatt-hour, MWh], and continuing to reduce energy market prices by $10 to $49/MWh by 2031, when on the order of 100 [gigawatts, GW] of wind energy could be online in the Midwest region …
“Synapse’s analysis indicates that the effect of introducing greater levels of wind resources into MISO is to generally depress the average annual market price, relative to a baseline case of no additional wind generation beyond the existing 10 GW in place in MISO today. Since wind energy 'fuel' is free, once built, wind power plants displace fossil-fueled generation and lower the price of marginal supply—thus lowering the energy market clearing price.
“These market price declines will lead to reduced overall energy costs. For this coal retirement sensitivity, power supply costs for MISO-region customers could range from $3.9 billion to $7.9 billion per year lower than baseline costs for the 20 GW wind addition, and from $6.1 to $12.2
billion per year lower than baseline costs for the 40 GW addition. These cost savings will exceed the annual costs of transmission improvements needed to integrate this level of wind addition. When including the effects of transmission, the net savings ranges from $3.0 billion to $6.9 billion per year for the 20 GW wind addition scenario, and $3.3 to $9.4 billion per year for the 40 GW wind addition scenario.
“For an average MISO region residential customer using 1,000 kWh per month, this translates to a net savings that would range from $63 to $147 per year in 2020…” [emphasis added]

The bottom line? Wind power is an American success story that is creating affordable electricity and tens of thousands of new American jobs. But we need for Congress to act to extend the federal wind energy Production Tax Credit (PTC) and let wind finish the job.
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