What's the True Cost of Wind Power?

Turbines of a wind park are seen near Cernavoda, southeast Romania, May 8, 2014. Bogdan Criste/Reuters

Editor's note: The author of this piece, Randy Simmons, is the Charles G. Koch professor of political economy at Utah State University. He's also a senior fellow at the Koch- and ExxonMobil-funded Property and Environment Research Center. These ties to the oil industry weren't originally disclosed in this piece.





This represents a waste of resources that could be better spent by taxpayers themselves. Even the supposed environmental gains of relying more on wind power are dubious because of its unreliability – it doesn't always blow – meaning a stable backup power source must always be online to take over during periods of calm.



Many government agencies are in the wind business these days. GAO

Where the subsidies go



Iberdrola Renewables alone, a unit of a Spanish utility, has collected $2.2 billion in federal grants and allocated tax credits over the past 15 years. That's equivalent to about 6.7% of the parent company's 2014 revenue of $33 billion (in current US dollars).

President Obama's proposed 2016 budget would permanently extend the biggest federal subsidy for wind power, the Production Tax Credit (PTC), ensuring that large foreign companies continue to reap most of the taxpayer-funded benefits for wind. The PTC is a federal subsidy that pays wind farm owners $23 per megawatt-hour through the first ten years of a turbine's operation. The credit expired at the end of 2013, but Congress extended it so that all projects under construction by the end of 2014 are eligible.


I explained in December why Congress shouldn't revive the PTC, which expired at the end of 2014. In this article, I'm adding up the true cost of wind power in the US, including the impact of the PTC and other subsidies and mandates. It's part of a study I'm doing of other energy sources including solar, natural gas, and coal to determine how much each one actually cost us when all factors are considered.


As Warren Buffett has said, there wouldn't be a wind industry without the PTC. UCS, DOE, AWEA

Tallying the true costs of wind



Many estimates, however, don't include costs related to the inherent unreliability of wind power and government subsidies and mandates. Since we can't ensure the wind always blows, or how strongly, coal and natural gas plants must be kept on as backup to compensate when it's calm. This is known as baseload cycling, and its cost ranges from $2 to $23 per megawatt-hour.

This also reduces the environmental friendliness of wind power. Because a coal-fired or natural gas power plant must be kept online in case there's no wind, two plants are running to do the job of one. These plants create carbon emissions, reducing the environmental benefits of wind. The amount by which emissions reductions are offset by baseload cycling ranges from 20% to 50%, according to a modeling study by two professors at Carnegie Mellon University.

While the backup plants are necessary to ensure the grid's reliability, their ability to operate is threatened by wind subsidies. The federal dollars encourage wind farm owners to produce power even when prices are low, flooding the market with cheap electricity. That pushes prices down even further and makes it harder for more reliable producers, such as nuclear plants, that don't get hefty subsidies to stay in business.



Lost in transmission

Another factor often overlooked is the extra cost of transmission. Many of America's wind-rich areas are remote and the turbines are often planted in open fields, far from major cities. That means new transmission lines must be built to carry electricity to consumers. The cost of building new transmission lines ranges from $15 to $27 per megawatt-hour.


Although transmission infrastructure may be considered a fixed cost that will reduce future transmission costs for wind power, these costs will likely remain important. Today's wind farms are built in areas with prime wind resources. If we continue to subsidize wind power, producers will eventually expand to sub-prime locations that may be even further from population centers. This would feed demand for additional transmission projects to transport electricity from remote wind farms to cities.

The final bill comes to…


That includes the impact of state mandates, which end up increasing the cost of electricity on consumer power bills. California is one of the most aggressive in pushing so-called Renewable Portfolio Standards (RPS), requiring the state to consume 33% of its electricity from renewables by 2020. Overall electricity prices in states with RPS are 38% higher than those without, according to the Institute for Energy Research, a non-profit research group that promotes free markets.

The best estimate available for the total cost of wind power is $149 per megawatt-hour, taken from Giberson's 2013 report.


Blowing in the wind







Randy Simmons is professor of political economy at Utah State University. Megan Hansen, a Strata policy analyst, co-authored this article, which first appeared on The Conversation. Full disclosure: Randy Simmons receives funding from the U.S. Department of Energy (grant has been completed and there is no current funding) and Strata, a 501 (c)3 non-profit organization. Megan Hansen, a Strata policy analyst, co-authored this article.


Newsweek has published a response to this article which can be read here.

Correction: This article has been updated with a corrected figure for wind power's current share of US electricity generation. It also clarifies the range of cost estimates from Lazard.