Wind Energy Pricing Update for Summer 2013

By Vernon Trollinger, September 9, 2013, Energy Efficiency, Green, News

windfarmWind power as a clean and renewable technology has come a long way since wind was first widely harnessed in the Midwest to generate electricity in the 1930’s. At the end of 2000, the U.S. wind energy capacity was just over 2,500 megawatts (MW). As of 2012, it has grown to 60,007 MW. Wind is also variable, as it can’t be relied upon alone for meeting base load, and it can’t be called upon to work as a “peaker” generator to cover peak demand at the moment it’s needed. However, wind works when it is part of a mix of electricity generation systems. That all said, let’s touch on a few basic facts about modern wind power.

Breezy Facts

Two things make a successful wind farm: efficient turbines and the geographical location. Let’s say that you’ve read a news article about a new wind farm being built in your area that uses four 100 megawatt (MW) wind turbines. Sounds like it should kick out 400 MW, right? Actually, that estimate doesn’t take into account the average wind speed in the area and how well the wind turbines will use it to generate electricity. This is known as the “capacity factor”.  Because the wind (like the sun for solar energy) are highly variable, the capacity factors have a bigger impact on the turbine’s output . Even though all four turbines have a nameplate rating of 100 MW each, the local wind speeds may lower the capacity factor. That could mean that they put out 38% of their total possible output or 152 MW total.

wind_speed_map_mdThe wind isn’t the same all over the country. In west Texas, parts of the high plains, and along parts of the coast, wind speeds tend to be faster and more constant compared to other parts of the country (see map). As a result, the “installed capacity” isn’t likely to reflect the actual amount of electricity being generated.

Pennsylvania has twenty-four operating wind farms with a total installed capacity of over 1,340 megawatts (MW)

New York has an installed nameplate capacity of 1,638 MW.

•Texas has an installed nameplate capacity of 12,212 MW.

•Total US wind capacity in 2012 was 60,007 MW.

Technology can help compensate to an extent. Larger capacity turbines with longer, lighter blades, and low-friction drive trains are able to pull more energy out of areas with marginal wind speeds and improve the capacity factor.

Getting Wired

Wind farms also tend to be set up in distant, wind-swept areas that are far away from where the electricity is needed. It’s often high up on a mountain, tucked away in cornfields, or out in barren hill country. Transmission lines then take the power to the rest of the grid. Unfortunately, many transmission lines have limited capacity and can become congested from having to transmit too much electricity. Since wind energy can’t be turned on and off, electricity from wind turbines that can’t be transmitted is instead “curtailed” or stopped. In 2012, that added up to about 715 MW of wind power capacity or just under 1%.

One of the chief problem areas is Texas where wind power electricity from the western part of the state must pass through a tranmission bottleneck in the easten part of the state. But that’s going to change soon. The new Competitive Renewable Energy Zones (CREZ) line , a $6.9 billion transmission project running from Amarillo and to San Antonio, is expected to carry 18.5 GW of wind generated electricity to the state’s crowded eastern cities.

In another part of the country, the Midwest Independent System Operator (MISO) approved 17 new transmission projects to remove bottlenecks and constraints. MISO estimates these will deliver 41 million MWh of wind energy.

Nationwide, wind energy on the grid could theoretically triple if all potential projects were approved and begun.

Offshore Development

The biggest recent news is the auctioning of two leases by the Federal Bureau of Ocean Energy Management (BOEM) to permit the building of two off-shore wind turbine sites. Deepwater Wind purchased the first offshore sites in the United States which are slated to support 200 wind turbines and generate 30 MW. The sites are located 10.6 miles south of Rhode Island and will be too far away to been seen from shore. Construction is due to begin in 2017.

In addition, Virginia’s Department of Mines, Minerals and Energy (DMME) requested a research lease from BOEM to design and build a grid-connected 12-megawatt (MW) offshore wind test facility on the Virginia coast. BOEM is also evaluating a 127 square mile area proposed by the Long Island – New York City Offshore Wind Project that would generate 350 to 700 megawatts of power for Long Island and New York City.

Offshore wind farms do pose advantages and challenges. While locating turbines farther offshore also adds transmission costs, the actual distance away is far less than land-based wind farms, and in the cases of New York and New England, they are far more convenient. The challenge lies in the expense from increasing the time to reach them to bring maintenance workers and replacement equipment. Much like offshore oil platforms, offshore wind farms may also require on-site staff housed on a residential platform to provide timely repairs and maintenance, both of which would add to the cost.

What’s in the Wind

Over the past year, wind power made up about 43% of all new electric generation capacity representing $25 billion in new investment. According to the DOE’s 2012 Wind Technologies Market Report, “Wind was, for the first time, the largest resource added in terms of gross capacity, despite persistently low natural gas prices.” Both wind energy production and manufacturing has set records in 2012. Wind power makes 4% of the total US electrical supply, and three states rely on it for 20% or more of their supply.

Needless to say, the price for wind energy is getting lower. Wind projects have been able to offer utilities puchase contracts for as low as 4¢/kWh ($40/mWh) during 2011 and 2012. This makes it competitive on the wholesale market with other types of generation. Even adding in the $0.022 Production Tax Credit (PTC) , raising the price to $0.062 per kWh, that is still a competitive price even in the face of cheap natural gas.

The problem is that the PTC is scheduled to expire at the end of 2013. That means that wind farm developers are hurrying to begin projects in 2013 in order to take advantage of the PTC when they file taxes in 2014. The 2012 Wind Technologies Market Report (v) cites forecasts of wind additions in 2013 to be between 2,000 and 5,000 MW, while 2014 may see between 6,000 and 9,000 MW. No one, however, is venturing any serious guesses about pricing and further expansion once the PTC expires. The price of wind may rise by $23/mWh (2.3¢/kWh) in 2015. In that case, then the need to solve transmission problems for wind projects will certainly have more impact—especially on the home electric bill.

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