The AWEA Blog: Into the Wind


Is wind power holding electricity costs down?

Posted: 2012-01-03 Michael Goggin, AWEA Manager-Transmission Policy

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 25%.  For the top 10 states in wind generation (with wind providing between 5% and 15% of electricity), electricity prices increased an average of only 11%, or less than half 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


1 response

  1. Dave Bradley January 6, 2012 10:08AM
    Pretty cheesy article. Yes, wind CAN hold down electricity prices, especially if it displaces natural gas and even more importantly, fuel oil based electricity. This is done via the Merit Order Effect; in Western New York, we shaved $31 million in excess, rentier profits from the two companies in this area that own big coal burners. See http://www.wagengineering.blogspot.com/2011/06/merit-order-effect-in-wny_06.html for the details. A better indication of excessive electricity prices is whether the state uses the "old fashioned" regulated monopoly route (lowest cost) or the "competitive" marginal price auction system (most expensive). In addition, those states with the highest coal and/or old depreciated nukes (Michigan, Indiana, Ohio, Wyoming) have the cheapest electricity. For the time being, natural gas is cheap, but that will not last, and natural gas prices will once again spike big time. Wind, in general, displaces gas, and that is good. In spot market price systems, wind can force prices down by taking away the excessive profits that can accrue to nuke and coal burner owners when ever gas has to be used, especially inefficient peaker units. The unsubsidized coast of wind (taking out the tax avoidance incentives that can drop the real price of wind sourced electricity down to the subsidized, pollution based electricity prices) is between 6 to 15 c/kw-hr, mostly depending on the wind resource. A lot of that is higher than it should be due to the whacked out way we subsidize wind power in this country. If we had Feed-In Laws, the cost to make wind sourced electricity could drop by 20% due to the lower financing costs that go with Feed-In Tariff arrangements. With FITs, the US would be the world leader in wind, and over 1 million people could be directly employed in the wind biz - it could be as big or bigger than the auto industry (with suppliers). Maybe AWEA should comprehend the special quantum leap in crazy that now afflicts the Republican Party, and especially the House. They will not respond to logic, and are immune to it. And saying that the MACRS, PTC, ITC and Section 1603 "legal bribes" will be helpful to the country (well, they are better than nothing...) does not help matters - the Teahadist wing of the Republicans are TRYING to make things worse, in the hopes that the public will then not notice who is actually making things worse and instead vote out Obama, who at least is trying to make things better. As to cheap electricity, in many states (NY, NJ, New England, California), the cost of transmitting the electricity is greater than the average price paid to generators. For me, last month my generated electricity cost was 3.83 c/kw-hr, but the transmission cost/expenses were 7.63 c/kw-hr plus taxes. So, at least where I live, cutting back out the executive perk pig-outs for the grid operator monopoly would be a better tactic towards achieving lower total delivered electricity prices. DB

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