Wind energy cost on par with natural gas in US, new study proves
- 31 March 2014
NEW YORK: New research from top American universities has found that when total costs include environmental impacts, US wind energy costs virtually the same as natural gas.
‘Visualizing the Production Tax Credit for Wind Energy’, a collaborative study from the University of California and Syracuse University, examines price differentials between American wind energy and natural gas, when long-term factors such as the future costs of carbon dioxide emissions are accounted for.
By looking at the two rival energies’ costs in a holistic manner, the academics hope to contribute to informed debate around the subsidy for wind energy, the Production Tax Credit (PTC), which expired in December 2013 but which President Obama would like to extend permanently over the next 10 years.
The subsidy is politically controversial, and since its introduction in 1992 has only ever been extended on a year-by-year basis. Notably, successive governments have allowed it to expire five times in 14 years.
LONG TERMS COSTS
The research project supplements data from the US Department of Energy on the current lifetime ‘levelized’ cost of electricity from a new wind farm and from an advanced combined cycle gas plant, with three additional factors which are not currently accounted for:
- future costs of carbon dioxide emissions are added to the price of gas
- the cost of supply intermittency is added to the price of wind
- the cost of correcting natural gas price volatility is added to the price of gas.
When the figures have been adjusted to reflect the above three conditions, the new average levelized cost of electricity for wind is 9.2 cents per kilowatt-hour (kWh) – only fractionally higher than natural gas’s 8.85 cents per kWh.
The researchers also add that they have been conservative in chosing their future estimates, with Berkeley’s Greg Linden admitting: “The result is even more favorable for wind if you consider some of the larger possible values for carbon emissions.”
Jason Dedrick, associate professor at Syracuse University’s School of Information Studies, explained: “The true cost of electricity from wind power and natural gas are effectively indistinguishable, yet because the cost of carbon emissions is not included in the market price of gas, wind has not been a competitive form of energy use in most of the United States, without government pricing support.”
Furthermore the findings of the report highlight that there is significant variation across the US, which led the researchers to conclude that in states where the price difference between wind and gas power is less than 1.6 cents per kWh, the PTC wind credit would have an impact.
“Since the levelized value of the PTC happens to be very close to the average estimated cost of carbon from a natural gas plant, a long-term extension of the PTC would have a similar effect to a carbon tax in terms of the relative price of electricity from wind and gas,” Dr. Dedrick said.
By Alana Ryan