Building a new wind farm is getting cheaper and cheaper, according to an annual study that documents the cost of new power generation.
New wind power costs between $30 and $60 dollars per megawatt hour, not counting a federal tax subsidy. It’s cheaper than solar, gas and coal. Add in the federal helping hand and the cost of new wind falls to between $14 and $52, according to the most recent Levelized Cost of Energy Analysis, an annual report of what different energy sources cost to develop from Lazard, a financial firm.
And Wyoming is on the cheap end of the range, said Robert Godby, director of the Center for Energy Economics and Public Policy at the University of Wyoming.
The quality of the wind has a big impact on that cost, and Wyoming wind is that good, he said.
Places where the wind doesn’t blow as often or as hard as Casper and Rawlins won’t reap that low cost over the lifetime of the wind farm, or beat out the next cheapest generations source, he said.
So what does this mean in Wyoming? Well, it explains why the wind industry is booming and one of the reasons power producers keep investing in turbines in the Cowboy State.
Developers Power Company of Wyoming and Viridis Eolia both have significant wind projects proposed in the state. Power Company’s Chokecherry Sierra Madre wind farm is under construction for the first phase of a 1,000 turbine farm near Rawlins. And Rocky Mountain Power, the state’s largest utility, would like to repower their entire wind fleet in the state, as well as bring 1,100 new megawatts online.
“[The report] is further evidence that renewables are by far the cheapest form of new generation that a utility building out here might consider,” Godby said.
The federal tax subsidy that the wind industry receives has been a point of contention in Wyoming, the only state that levies a tax on wind production. The state’s coal sector is the largest in the country, and it’s facing considerable pressure from cheaper fuel sources both traditional and renewable.
For those opposed to the subsidy and supportive of the coal sector, wind gets an unfair deal.
And though wind is cheaper than coal, the tax help is indeed fueling a more rapid wind build out right now in Wyoming. The credit sunsets in 2020, and that deadline has a number of utilities and independent wind developers rushing to grab the tax credits before they’re gone.
If a number of criteria and deadlines are met, they keep the tax credit for another 10 years.
Rocky Mountain Power, a subsidiary of PacifiCorp, has nearly $3 billion on the line to invest in Wyoming wind and transmission before the deadline.
They are arguing that it will lock in long-term cost savings to customers, even though they don’t need the new energy to serve demand right now, Godby said.
Levelized cost is the dollar figure at the bottom of, frankly, a lot of math. But the idea is pretty straightforward.
It determines the break-even point, the dollar amount per hour of power produced that says the investment equals the return.
The report takes the average of the total amount of money a power plant costs to rise from the ground, operate, finance and then decommission, and divides that figure by the total amount of power the farm or plant is expected to produce over its lifetime, whether that is 30 years of wind farm or 50 years of burning coal.
There is an additional cost associated with the fact that the wind doesn’t always blow or the sun doesn’t always shine: It’s only about $5 per megawatt hour, $10 if you’re generous, Godby said.
Wind is simply beating traditional power sources on its own, according to Lazard. Last year, coal would have had a break-even of between $60 and $143 per megawatt hour, if anyone were building new coal plants in the U.S.
A combined cycle natural gas plant’s break-even cost is between $42 and $78 per megawatt hour. Nuclear? It’s skyrocketed by about 35 percent compared to earlier estimates. Its levelized cost is between $112 and $183.
One surprising takeaway from the Lazard numbers shows just how far renewables have surpassed traditional sources on cost.
“In some scenarios the full lifecycle costs of building and operating renewables-based projects have dropped below the operating costs alone of conventional generation technologies such as coal or nuclear,” according to the report.
Repeating its common refrain from earlier years, the report’s authors advise diversity in the energy mix to meet demand. Cost isn’t everything and ways to effectively and economically store power from intermittent sources haven’t fully developed.
“Although alternative energy is increasingly cost-competitive and storage technology holds great promise, alternative energy systems alone will not be capable of meeting the baseload generation needs of a developed economy for the foreseeable future,” the report states. “Therefore, the optimal solution for many regions of the world is to use complementary conventional and alternative energy resources in a diversified generation fleet.”