Some Common Misconceptions about Wind Power

[kristopher]

An open access document from:
Ed DeMeo, RECS, Inc.
Brian Parsons, National Renewable Energy Laboratory
Presented May 22, 2003, to the All States Wind Summit, Austin, Texas


1. Wind plants are controlled by nature and not by utility operators. Hence
they can’t be relied on; 100% backup from dispatchable generation is
required.

Responses:

True, wind plants are not dispatchable in the conventional sense.
However, electricity demand is also not controlled by utility operators.
The utility system is designed to accommodate fluctuating loads, and
additional incremental variability imposed by adding amounts of wind up
to at least 10% to 15% of system generating capacity is small and has not
been costly – as discussed further in the next item.

No power plant is 100% reliable. During an outage, backup is provided
by the entire interconnected utility system. The system operating strategy
strives to make best use of all elements of the overall system, taking into
account the operating characteristics of each generating unit and
planning for contingencies such as plant or transmission line outages.
Wind’s need for support of this type from the rest of the system will differ
in degree from that required by conventional plants, but not in kind. Wind
simply needs to be integrated into the overall system operating strategy.

Wind’s ability to support growth in utility loads will in general be less as a
percentage of nameplate rating than that of conventional dispatchable
plants. All power plants can be characterized by an effective load
carrying capability that is a fraction of the rated power output. Its
magnitude depends on a statistical evaluation of contributions made by
the plant to overall system needs during the entire year. Contributions
during periods of high system load are most important. In general, the
fraction for typical fossil-fueled plants ranges from about 70% to about
90%. For a wind plant, the range is typically 20% to 40%. Hence a wind
plant generally can’t be relied on to serve as much load growth as a
conventional plant of the same rating, but its effective load carrying
capability is not negligible. Historically the Mid-Continent Area Power
Pool and recently The PJM RTO have recognized this in their system
reliability calculations and rules by incorporating a simplified, historic-
performance-based calculation to assign reliability ratings to wind power
plants.

Many wind plants are being installed to reduce fuel consumption by and
emissions from conventional power plants. In fact, this is the primary
value of wind power today. When the wind blows, the conventional plants
can be turned down, thus reducing fuel combustion and emissions. In
these cases, wind is only providing energy, so the issue of load carrying
capability is moot. The existing conventional plants provide system
reliability, and there is no cost associated with additional backup for
system reliability. The only incremental costs are those associated with
minute-to-minute and day-to-day operation, generally referred to as
ancillary services costs.

2. Since wind is not dispatchable, the ancillary services required to
accommodate its variability will make wind energy uneconomical.

Responses:

Wind’s variability does increase the day-to-day and minute-to-minute
operating costs of a utility system because the wind variations do affect
the operation of other plants. But investigations by utility engineers show
these costs to be relatively small – less than about 2 mills/kWh at
penetrations under 5%, and possibly rising to 5 mills at 20% penetration.

The biggest “reserve” in the integrated utility system is called first
contingency or n-1 reserve. The grid is designed to withstand the loss of
the single largest element (big generator or transmission line tripping off).
Until a single wind plant approaches the level of the first contingency loss,
incremental operating costs are likely to increase only slowly as wind
penetration increases.

3. If wind energy displaces energy from existing coal plants, then rates will go
up.

Responses:

Rates for electricity from wind plants being installed today are comparable
to wholesale electric power prices of 2.0 to 3.0¢/kWh. Estimates for
energy from a new wind plant slated for North Dakota are below
2.5¢/kWh. The incremental cost of wind power, if any, will be negligible
when distributed among all customers. Several studies looking at the rate
impacts of wind have considered the costs of various renewable portfolio
standard percentages from 5% to 10%, and average residential bill
impacts are predicted at 5-25¢/month. In fact, some studies predict the
accompanying decrease in demand for conventional fuels will reduce fuel
prices enough to fully compensate for slightly higher costs for
renewables. Many of these studies are several years old, and wind
plants continue to be installed at lower and lower prices, so any price
increment derived by assuming low (and stable) conventional fuel prices
is shrinking.


4. Yes, but wind needs a production tax credit (PTC) of 1.8¢/kWh over 10
years (about a penny over 30 years) to achieve these economics.

Responses:

That’s true, but the tax credit for wind only compensates for subsidies
provided for conventional energy technologies that are paid in our tax and
health-care bills – not in our energy bills. These hidden costs have been
estimated at levels comparable to the value of the PTC.

Examples: public-health costs for treatment of respiratory diseases;
nuclear accident liability limitation; nuclear waste management; oil and
gas depletion allowances; maintenance of oil access by the USDOD.

5. New natural gas power plants will provide cheaper energy than wind
plants.

Responses:

This is not likely at today’s gas prices, and these prices are rising with
time. At $3/MBTU, the fuel cost alone is 2.5 to 3¢/kWh, and capital and
O&M costs add a comparable amount. And gas prices have spiked to
over $10/MBTU in the past three years. Betting on low gas prices over
the foreseeable future is highly risky, while energy costs from wind plants
will be relatively stable over time.

Gas price volatility is not going away. Planned power plant construction
countrywide is nearly 100% gas fired and the success of these plans is
heavily dependent on natural gas production meeting growing demand.
The economics of these plants are based on low gas prices into the
future. Witness the CA power crisis and the impact of price volatility on
the general health of our economy.

6. The production tax credit and accelerated depreciation are helpful only to
big, out-of-state developers. The economic benefits aren’t local, and rural
electric cooperatives and municipal utilities can’t receive the same
benefits.

Responses:

It’s true that only entities that pay federal taxes can use the tax credits to
reduce their tax liability. But those tax credits result in lower wind energy
costs for the benefit of all electricity customers. However, if local entities
assume equity positions in wind plants, then they can receive the tax-
credit benefits. Whether or not the wind-plant equity is locally held, wind
plants result in jobs for the local community and the need for local
services—both during construction and during operation. And to the
extent debt financing comes from local sources, debt-service payments
stay within the local community.

In some cases, a number of farmers have joined together in a cooperative
arrangement to build and own a wind plant. In aggregate, they can have
enough tax liability to make full use of the tax credits.

In other cases, an external entity with a tax appetite can hold majority
ownership – even as much as 99% – for 10 years while the tax credits
apply, with the remainder of ownership vested in the cooperative. After
the initial 10-year period, the ownership portions can be shifted so that
the cooperative becomes the majority owner. In this way, the cooperative
is the major owner in the long run, the external entity gets its return on
investment over 10 years with the aid of the tax credits, and the overall
cost of energy from the plant over its operating lifetime is lower than it
would have been if the cooperative were the sole owner.

7. In many rural areas, local load growth is small, so export of wind energy is
the only option. But often no transmission capacity is available.

Responses:

It’s true that transmission availability is often the major factor limiting wind
development. However, a community wishing to do so could provide a
substantial portion of its local energy needs from wind and then cut back
on imports from the transmission and distribution grid. In some cases,
this would violate terms of the contract with the wholesale supplier, but in
other cases it would not.

The transmission problem is often driven by historic methods of
evaluating and allocating the power-carrying capability of the wires.
Historic use rights are often fully committed in an administrative sense.
Electrically, there is often actual capability that goes unused much of the
year. Changes in evaluation and allocation rules associated with
transmission reform are expected to allow further generation expansion
without requiring additional wires.

8. Large, utility-grade wind turbines can’t be installed on the distribution grid
without expensive upgrades and power-quality issues.

Response:

In situations with weak distribution grids (long lines with thin wires and
few customers—maybe even single-phase), this is often true. However,
in many cases, wind generation can be connected to the distribution
system in amounts up to about the rating of the nearest substation
transformer. One study of a rural mid-western county estimated that
several tens of MW of turbines could be installed on the local distribution
grid with a minimum of upgrade expense and minimal power-quality
impacts.


9. All-source requirements imposed by the regional G&T wholesaler preclude
wind installations by distribution co-ops.

Responses:

In some cases, this is true without modification of current contracts.
Sometimes an exception can be granted, and G&T’s can be responsive to
the distribution co-op’s desires. After all, the distribution co-ops are their
customers and often part owners as well.

Some G&T’s (e.g., Tri-State and BPA) allow distribution co-ops to
generate a portion of their electricity locally from renewables without
penalty. However, rules for backup energy in the event the local
generator doesn’t deliver may need to be modified to avoid substantial
demand charges.

In most cases, the major barrier to wind plant additions by a distribution
co-op is the absence of experience with generation of any kind.

10. Small projects that might be suitable for co-ops or small municipal utilities
are uneconomic.

Responses:

Small projects generally have a higher cost per MW than larger wind
plants. However, the incremental costs on customers’ bills are likely to be
small. The energy premium for a small project is unlikely to exceed 50%.
If the project provides a small portion of the community’s needs—say
2%—then the premium is reduced to about 1% if distributed among all
customers. Most folks don’t lose sleep over a 1% impact.

The real value of small projects stems from utilities and communities
obtaining experience with and learning about the technology and its
positive environmental and economic impacts.

Some communities have succeeded in covering the premiums for energy
from a small project by offering a green-priced product to their ratepayers
or green tags to a broader customer base.

11. Wind turbines kill birds and thus have serious environmental impacts.

Responses:

Bird kills have caused serious concern at only one location in the U.S.:
Altamont Pass in California. This is one of the first areas in the country to
see significant wind development. Over the past decade, the wind
community has learned a great deal about siting wind plants in ways that
avoid locations that might pose problems for birds. Modern wind
installations are simply not raising avian concerns.

One to two bird kills per turbine per year is at the high end of the range
observed in U.S. wind installations. The majority of deaths are common
species. Compared to bird deaths resulting from other manmade
structures, highway traffic, and housecats, bird kills by wind plants are
numerically insignificant and are not expected to impact bird populations.
Of course, deaths of endangered species are of greater concern, but
again the only location with a suggestion of this problem is Altamont. And
even in that case, experts disagree on the severity of the problem.

Environmental impacts are relative. All energy technologies have some
negative environmental impacts. Society makes tradeoffs when making
power plant choices. Wind plants may result in some bird fatalities or
other unwanted impacts on wildlife and their habitats. Coal plants cause
premature human deaths from respiratory problems. Maintaining open
channels for free flow of oil causes military deaths. Society needs to
choose from these alternatives, and it cannot assess a single energy
technology in isolation.

12. Many people say they’d be willing to pay more for clean, renewable energy,
but when the time comes to sign up for a green product, only a few actually
do this.

Responses:

Green pricing is a relatively new thing, and early customer percentages
are not out of line with new offerings of other products. Successful green-
pricing programs demonstrate concrete actions—not just vague
promises—and seek a minimal premium. If folks are asked to pay too
much—say, a premium of 50% or 100%—then unless they are fanatical
supporters of clean energy, they shy away because they know that the
clean energy benefits will be shared by all—even the free riders. Also,
people in general need multiple exposures to something new before they
decide to buy.

Willingness to pay doesn’t necessarily mean costs should be covered
through a green-priced product offering. If most people in a community
say they’d be willing to pay a premium for clean energy, then the
justification exists for a rate-based project whose premium, if any, would
be shared by all. In most cases, the premium would be truly negligible.
In this case, there is no need to conduct the effort or incur the marketing
costs associated with a green pricing program.

[physioex]

1. I pay a premium on my bills to purchase wind power.....

There isn't much difference in my bill at 100% of purchase it is like $10/month.

[kristopher]

2. That is one of the best ways to support renewable energy deployment.

Thanks for putting your money up to solve a problem.