Utilities adding wind to their power supply mix

A total of 8,203 megawatts of new wind projects were brought online in 2016, bringing total installed wind capacity in the U.S. to over 82 GW. Electric utilities procure wind power through long-term power purchase agreements (PPAs) or through direct ownership. The top utilities in terms of wind power capacity on their system (both wind energy PPAs and utility-owned projects) at the end of 2016 included:

  • Xcel Energy, with 6,686 megawatts (MW) on its system
  • MidAmerican Energy with 6,405 MW on its system, including the largest amount of utility-owned wind projects (5,080 MW)
  • Tennessee Valley Authority with the largest amount of wind power on its system for a public utility (1,571 MW)
  • Basin Electric as the top rural electric cooperative utility with wind capacity on its system (1,169 MW)

Over 1,000 MW of wind capacity added in 2016 are directly owned by utilities, bringing utility ownership to 15% of all U.S. installed wind capacity.

The multiple benefits of wind power for utilities

Wind power has become a major player in the reduction of greenhouse gas pollution from power generation. Some of the many ways wind power can directly benefit electric utilities include:

  • Reduced Environmental Risk: Wind power produces no carbon dioxide or air pollutant emissions, requires no water, mining, drilling or transportation of fuel, and generates no radioactive or other hazardous or polluting waste.
  • Price Hedge: Wind power lowers the portfolio volatility of electric utility power supplies, yielding benefits for future price risk and mitigating the impacts of fossil fuel price volatility.
  • Stable Pricing: Wind turbine prices have decreased to the lowest levels in nearly a decade, leading to falling total project installed costs as well.   Wind power in good wind resource areas is now very cost-competitive with any other new generating plant.
  • Good for the Bottom Line: Wind projects have very short construction periods and can be deployed quickly with positive impacts on generation planning and cash flows. In the case of wind ownership, additional rate base and tax-related benefits accrue to the utility as well.

Still other reasons include:

  • Regulatory Treatment –wind power is viewed very favorably by utility regulators and other stakeholders in regulatory proceedings
  • Economic Development / Jobs– wind projects contribute directly to economic development and job creation where projects are located
  • Customer Satisfaction / Green Pricing options – customer awareness and interest in wind power are increasing and many customers are demanding “green” options from their utilities for their use

Wind power’s variable nature

The variable nature of wind output is addressed by utilities in the same way they address variability in generation and demand (load), which is to maintain sufficient flexible resources to match changing generation and load. While wind energy output is also variable, most systems have available generation and demand response programs that are flexible enough to accommodate the added variability. At higher wind penetration levels, additional resources may be needed. Many states generate more than 10% of their electricity from wind power, while Iowa generates over 36% of its electricity from wind and South Dakota and Kansas generate roughly 30% from wind.

Numerous wind integration studies (some investigating up to 40% and 50% wind penetration) and experience in the U.S. as well as in Europe, indicate that integrating larger amounts of wind power into electric system operations is possible with only modest adjustments in operating protocols. State-of-the-art wind forecasting techniques allow utilities and grid operators to anticipate and plan for increases or decreases in wind plant output. With wind forecasting, changes in aggregate wind energy output are factored into grid operations much like system-wide load demand – both change over a matter of hours (not a matter of seconds, such as when fossil or nuclear plants trip off line). Learn more about wind integration and reliability.

Cost to integrate wind power

At wind penetration levels of up to 20% of electricity generated, experience shows that system operating cost increases arising from added wind variability and uncertainty amount to about 10% or less of the wholesale value of the wind energy. Detailed power system modeling studies have looked at scenarios in which wind provides 10 to 40% of the electricity in various regions of the country, including Xcel’s Colorado and Minnesota systems and the Arizona Public Service system, and found that wind integration costs are typically less than $5 per megawatt-hour – a very reasonable and manageable price when added to the low cost of wind energy itself. Read the detailed results of these studies.

Key benefits that utilities are realizing with wind power

As described in the U.S. Department of Energy’s “20% Wind Energy by 2030” report, utilities have found that wind power typically reduces the need for generating electricity from natural-gas-fired power plants, significantly reducing fuel expenditures and operating costs for utilities and ultimately lowering rates for their customers. These reduced fuel costs far exceed the incremental costs of adding wind power to their systems over time, including wind integration costs.

The conclusion from the 20% report has been repeatedly affirmed for utility operations across the country. Late in 2012, the Alabama Public Service Commission wrote about Alabama Power’s purchase of wind power that “…the delivered price of energy from the wind facility is expected to be lower than the cost the Company would incur to produce that energy from its own resource, … with the resulting energy savings flowing directly to the Company’s customers.”  In a July 2013 EarthTechling article, Xcel Energy said, “Wind prices are extremely competitive right now, offering lower costs than other possible resources, like natural gas plants.” Thus, increased wind power actually saves utilities money, and helps keep electric rates low at a time when other forces are causing rates to increase.