Is wind power holding electricity costs down?

Is wind power holding electricity costs down?

I found the conclusion of the article by Brennan Louw on renewable energy and electricity costs intriguing, and decided to look a bit deeper into the data myself. Looking at the Department of Energy data for all 50 states, there is very strong evidence to suggest that wind is helping to hold electricity costs down.  Here is what the data show:

For the 30 states with the least installed wind capacity and the District of Columbia, a group for which wind only accounted for 0.3% of electricity produced in 2010, electric rates increased by an average of 26.74% between 2005 and 2010.  For the 20 states that produced the largest share of their electricity from wind (ranging from 2% to 15.4%) in 2010, consumer electricity prices increased an average of only 15.72%. 

When one looks at the top wind states, the difference is even more striking.  For the 40 states with least wind installed and DC, prices rose by an average of 34.10%.  For the top 10 states in wind generation (with wind providing between 5.1% and 15.4% of electricity), electricity prices increased an average of only 10.94%, or one-third as much as in the 40 low wind use states. 

Methodology: Top 20 wind rankings for 2010 taken from Table 2 here: http://eetd.lbl.gov/ea/emp/reports/lbnl-4820e.pdf . DOE EIA (Energy Information Administration) electricity price data from Electric Power Annual: http://www.eia.gov/electricity/data.cfm#sales. The calculation of the average electric price changes for each group (top wind states versus other states) was weighted by the total megawatt-hours (MWh) of electricity consumed in each state in 2010, since not doing that would give smaller states a disproportionate impact on the average change for each group. However, not weighting for electric demand still results in a meaningful difference: a 20.00% price increase for the top 20 wind states and a 27.68% increase for the other 30 states and DC, or an 18% increase for the top 10 wind states and a 26.3% jump for the 40 other states plus DC.

Caveat: There are many factors that influence the price of electricity, so this isn't necessarily proof that more wind will automatically lead to lower prices, although others have found a causal connection for how wind drives electricity prices down: http://blogs.wsj.com/environmentalcapital/2009/08/10/blown-away-wind-power-makes-electricity-cheaper-in-texas/. What is clear is that the data stands in strong opposition to those who have tried to make unsupported claims that wind energy will drive up electricity prices.

Related articles:

Renewable energy adoption and the increasing cost of electricity in the U.S., December 20, 2011
Fact check: Politico op-ed gets it wrong on wind costs, December 19, 2011
Fact check: Kavulla off target on wind's cost, December 12, 2011
Wind power increasingly competitive and productive, new reports find, November 10, 2011
National lab report: Wind turbine prices drop as designs improve, U.S. supply chain develops, November 1, 2011
Xcel Energy: More wind, less cost, October 31, 2011
Citing lower costs, Mich. utility slashes renewable energy surcharge, September 8, 2011
Mythbusting fact: Wind power is not expensive, June 27, 2011
Unconventional wisdom: Wind power is not expensive, April 4, 2011
Mythbusting fact: wind's costs are competitive, October 29, 2010
20% Wind Energy by 2030 Fact Sheet


Michael Goggin is Vice President at Grid Strategies LLC, a DC-area consulting firm working on grid and markets issues for clean energy clients including AWEA. He was previously head of Research at AWEA.

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