RELIABILITY OF RENEWABLE ENERGY: WIND

RELIABILITY OF RENEWABLE ENERGY: WIND Jordan Lofthouse, BS, Strata Policy Randy T Simmons, PhD, Utah State University Ryan M. Yonk, PhD, Utah State University

The Institute of Political Economy (IPE) at Utah State University seeks to promote a better understanding of the foundations of a free society by conducting research and disseminating findings through publications, classes, seminars, conferences, and lectures. By mentoring students and engaging them in research and writing projects, IPE creates diverse opportunities for students in graduate programs, internships, policy groups, and business.

THE RELIABILITY OF RENEWABLE ENERGY: WIND INTRODUCTION As governments continue to mandate and subsidize the use of wind power for electricity generation, voters and taxpayers must consider the reliability of this energy source. The Institute of Political Economy at Utah State University explored wind power s reliability in terms of its economic, physical, and environmental implications. Wind power is not able to sustain itself in the market without subsidies or mandates, and it cannot consistently meet electricity demands. Because wind is inconsistent, wind-powered electricity generation is dependent on more reliable forms of energy, usually fossil fuels. Therefore, wind power is not a worthwhile investment of tax dollars because it is not a reliable energy source, and the financial investments needed to make it reliable outweigh its limited environmental benefits. ECONOMIC RELIABILITY Wind energy is not economically reliable because it is heavily dependent on the Production Tax Credit (PTC) and other subsidies, as well as state mandates like renewable portfolio standards (RPS). This dependency means that taxpayers are paying for an industry that cannot sustain itself. Because of subsidies and tax credits, the United States has one of the fastest growing wind power markets in the world, expanding by a factor of 22 since 2000. 1 Despite more than two decades of government assistance, only 4.4 percent of total U.S. electricity was generated by wind in 2014. 2 The main driver of wind growth is government policies, not market forces. During President George W. Bush s administration, the U.S. Department of Energy (DOE) set a goal to have 20 percent of the nation s electricity produced by wind by 2030. 3 This federal pressure is accompanied by state implementations of RPS. Twenty-nine states have adopted RPS, which typically mandate that 15 25 percent of total state energy consumption is supplied by renewable energy by 2025. 4 The most influential policy incentive for promoting wind energy production has been the PTC. The PTC was established temporarily in 1992 and provided a credit valued at 2.3 cents per kilowatt-hour for the first 10 years of a renewable energy facility s operation. Over the past two decades, the PTC has expired several times. Each time the PTC has expired, investments in wind energy have plummeted. The government renewed the PTC after each crash, allowing the wind industry to continue receiving government assistance. 5 The credit expired again in 2013, but a provision was added to the American Taxpayer Relief Act in January of that year, which stated that if a project began construction before the year 2014, it would continue to receive the tax credit. 6 When the PTC initially expired in 2013, new wind installations fell by 92 percent. The three previous expirations in 2000, 2002, and 2004 saw similarly dramatic drops. 7 Without the PTC, private investors do not perceive wind energy to be a profitable investment. While speaking of his own investments in wind energy, Warren Buffett noted, [O]n wind energy, we get a tax credit if we build a lot of wind farms. That s the only reason to build them. They don t make sense without the tax credit. 8 While the PTC exists, private investors are able to profit at the taxpayers expense. For fiscal year 2013 alone, wind received nearly $6 billion in electricity production subsidies and support, which comprised almost 40 percent of total subsidies for renewable electricity sources. 9 Through mandates and subsidies, governments are distorting energy markets in favor of wind power. The PTC was originally intended to give the wind industry the kick-start it needed to be self-sufficient. Despite wind energy s 23-year reliance on temporary government assistance, the Obama Administration s proposed 2016 budget would make the PTC permanent. Making the PTC permanent shows that politicians and bureaucrats do not think that the wind industry can sustain itself in the market. Constructing wind installations is often difficult because communities oppose projects that will affect their real estate value. One solution to this problem is

placing wind turbines offshore. Though offshore wind offers a greater capacity of available wind, the cost is prohibitively high in most cases. According to a DOE report, offshore wind would cost $2,400 5,000 per kilowatt-hour, which is at least 24 times as expensive as onshore wind-generating electricity. 10 Reaching the DOE s goal of 20 percent wind energy by 2030 will require high initial investments in both turbines themselves and expanded transmission systems. 11 Such large investments to meet this goal are impractical and would require tens of billions of taxpayer dollars. These costs would be passed on to average Americans in higher tax rates and higher electricity rates. In short, wind energy is not economically reliable because of its heavy dependence on tens of billions of dollars of government assistance. PHYSICAL RELIABILITY Wind is not physically reliable because it is inefficient and inconsistent. On average, wind installations in the United States produce only 30 to 35 percent of their potential energy output. 12 In a United Kingdom study, wind installations operated at less than 20 percent of their potential output for approximately 40 percent of a given year. 13 Wind is often extremely variable in the short term. When looking at energy production within 30 to 90 minute intervals, there are frequently swings of 10 percent in electricity output. Traditional energy sources must compensate for any inconsistency in wind energy to avert a dramatic shortage in energy. 14 Until methods of storing massive amounts of energy are viable on a grid-wide scale, intermittent energy sources like wind cannot replace conventional sources. Compensating for wind s inconsistency with traditional sources of electricity results in higher operation and maintenance costs for conventional power plants. Traditional power plants are not meant to be ramped up and down quickly to compensate for wind's variability. These power plants may burn more fuel, emit more pollution, and require more maintenance due to the added stress from frequent ramping. 15 Traditional energy sources like fossil fuels have specific advantages in electricity production. Electricity producers know the amount of available fuel and can ship it where it is needed before it is converted into electricity. Wind, on the other hand, is not shippable and it is impossible to gauge its exact availability. The electric grid is simply not set up to handle power sources that are so unpredictable. An additional problem of wind energy is the massive areas needed to generate significant amounts of electricity. Consistent wind blowing at the right speed would require an area about the size of Texas to meet the total U.S. electricity demands as of 2005. Because wind is inconsistent, however, this estimate is highly inaccurate. 16 Much more space would be needed. Even though the government is incentivizing and mandating the use of wind, integrating increased wind energy into the U.S. power grid will require billions of dollars in infrastructure upgrades and construction of high-capacity transmission lines. The ability to generate wind energy in the United States is outpacing ability to transmit it to where it is most needed. 17 Average Americans will have to pay for these infrastructure overhauls with higher tax rates and higher electricity rates. Entrepreneurs in the wind industry are already facing the hard reality of the transmission problem. Wind turbines in much of Wyoming could produce 50 percent more electricity than the same turbines in more populated areas such as New York, but large-scale wind energy production in Wyoming is unfeasible because costly transmission infrastructure must first be built. 18 In short, wind energy is not physically reliable because it is not consistent or storable. Intermittent power sources like wind rely on other forms of energy when they cannot meet demand. ENVIRONMENTAL RELIABILITY Wind power is environmentally reliable because it leads to a small net carbon reduction, but environmental benefits are limited. Increasing wind energy capacity will require conventional power plants to operate at lower efficiency levels to supply electricity when wind cannot. Wind power may actually result in more greenhouse gas and pollutant

emissions in some cases due to the inefficiency of repeatedly ramping up backup power plants. 19 Wind power also increases the mortality rates of birds and bats. In North America, wind turbines kill an estimated 214,000 368,000 birds annually. 20 The high speed of wind turbine blades cause rapid air pressure changes that can cause bats' lungs to explode. 21 In 2012 alone, wind turbines killed an estimated 600,000 bats in the United States. 22 These figures are significant because many bat species have low reproduction rates and would be potentially vulnerable to local extinctions in areas of high numbers of wind turbines. 23 ROLE OF NEW TECHNOLOGY Emerging technology seeks to alleviate the variability of wind power. These technologies could store large amounts of electricity, improve long-distance transmission capability, and improve current wind turbine efficiency. These technologies, however, are still being developed and are not likely to be implemented on an industrial scale in the foreseeable future. CONCLUSION Wind is not consistent and cannot be relied upon to generate the electricity demanded by U.S. consumers. To compensate for the variability of wind, grid operators use traditionally reliable energy sources like fossil fuels to supply energy when wind cannot. The ability to generate wind energy is outpacing the ability to transmit it, but long-distance electricity transmission will require extensive upgrades to existing infrastructure. The costs of these upgrades will be passed on to American electricity consumers. The widespread support for wind energy rests largely on the idea that wind will result in a cleaner environment. Wind energy, however, is not as clean as most people assume due to the fact that wind energy requires backup forms of electricity generation. Wind power may actually result in more greenhouse gas and pollutant emissions than conventional power generation due to the inefficiency of repeatedly ramping up backup power plants. Subsidizing wind energy is direct government interference with the U.S. energy marketplace. Government entities that pick winners and losers in the energy industry bind the hands of innovators who want to supply cheaper energy. Wind power is not worth billions of dollars in subsidies and mandates because it is not reliable as an energy source. The financial investments of public money needed to make it reliable outweigh its limited environmental benefits. Markets, not mandates or subsidies, are the best way to determine whether wind power will become reliable or economical within the next few decades. REFERENCES 1 Department of Energy. (2013, August 6). Energy dept. reports: U.S. wind energy production and manufacturing reaches record highs. Retrieved from http://energy.gov/articles/energy-deptreports-us-wind-energy-production-and-manufacturing-reachesrecord-highs 2 Institute for Energy Research. (n.d.). Wind. Retrieved from http://instituteforenergyresearch.org/topics/encyclopedia/wind/ 3 Department of Energy. (2008, July). 20% Wind Energy by 2030: Increasing Wind Energy s Contribution to U.S. Electricity Supply. (p. 1). Retrieved from http://www.nrel.gov/docs/fy08osti/41869.pdf 4 Database for State Incentives for Renewables and Efficiency (DSIRE). (2014). Renewable Portfolio Standards. Retrieved from http://www.dsireusa.org/resources/detailed-summary-maps/ 5 Union of Concerned Scientists. (n.d.) Production tax credit for renewable energy. Retrieved from http://www.ucsusa.org/clean_energy/smart-energy- solutions/increase-renewables/production-tax-creditfor.html#.vday3ntf-de 6 U.S. Department of Energy. (n.d.) Renewable electricity production tax credit (PTC). Retrieved from http://energy.gov/savings/renewable-electricity-production-taxcredit-ptc 7 Power of Wind. (n.d.) Renewable energy production tax credit: Stability drives growth. Retrieved from http://powerofwind.net/powerofwind/ptc2 8 Pfotenhauer, Nancy. (2014, May 12). Big wind s bogus subsidies. Retrieved from http://www.usnews.com/opinion/blogs/nancypfotenhauer/2014/05/12/even-warren-buffet-admits-windenergy-is-a-bad-investment 9 U.S. Energy Information Administration. (2015, March 23). Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2013. Retrieved from http://www.eia.gov/analysis/requests/subsidy/ 10 U.S. Department of Energy. (2008, July). 20% wind energy by 2030: Increasing wind energy s contribution to U.S. electricity supply. (p. 9). Retrieved from

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