Via World Changing, this great tidbit noted by the Dept. of Energy’s Green Power Network:
November 2005 – Utility customers participating in green pricing programs that offer some form of protection from fossil-fuel price changes are finding that their green power premiums are shrinking or even turning negative. For example, as of November 1, Colorado customers participating in Xcel Energy’s Windsource program are paying 0.66¢/kWh less for wind energy than for “regular” electricity because of an increase in the utility’s energy cost adjustment (ECA). Since the ECA announcement, Xcel has sold out of its remaining available wind energy supply and has established a waiting list for new program signups.
(Go to original article for links to all the individual utilities and their programmes)
In Oklahoma, OG&E Electric Services customers purchasing the OG&E Wind Power product now pay 0.13¢/kWh less for wind energy than for traditional electricity and customers of Edmond Electric’s pure&simple wind power program now pay 0.33¢/kWh less. Both utilities adjust their fuel charge monthly. Finally, in September, Austin Energy announced an increase in its fuel charge, which will bring the rate for its most recent GreenChoice product offering to near parity with the standard electric rate.
The great advantage of wind is that its cost of production is VERY predictable. You need to spend a significant chunk of money upfront, but after this, the production costs are very low and extremely predictable (technical maintenance, replacement of some part after a number of years, full stop).
You cost over the long term thus depends on the financing terms you can get to cover that initial investment and “spread” it over a number of years. Typically, it is possible today to get 15-year financing for that upfront investment.
With current prices for turbines and ancillary equipement (about $1m for 1MW as a rule of thumb, a bit more currently because of the ongoing boom in demand in the USA), and depending on the wind available at your site, your initial investment will cost about 3-4 c/kWh in debt repayment. Add to that approx. 0.5c/kWh in operatiing costs (increasing over the years to 1c/kWh), and you get power that will cost you 3.5-5c/kWhwith absolute certainty over the next 15 years, and much less after that (turbines are considered to have at least a 20-year life).
Coal-fired plants generate 2-3c/kWh power in today’s conditions, but they are sensitive to coal prices (which doubled in the past year), and they could (and should) be hit by carbon taxes which will increase their price.
continued below …
Natural gas-fired plants, the great new thing of the industry in the late 90s, used to have 3c/kWh costs as well, but that was predicated on 3$/mbtu gas. With natural gas currently at 14$/mbtu, and not currently expected to go below 7$/mbtu in the next 5 years, gas-fired plants are currently providing 6-8c/kWh power.
As I explained in an earlier diary, gas-fired plants usually being the marginal producers, they effectively set the level of wholesale prices for electricity, which have thus increased, slowly bringing retail prices up with them.
Until recently, the expectation of long term wholesale electricity prices arouns 3c/kWh made wind power uncompetitive, thus requiring a support mechanism, the PTC, to make it possible for investords and lenders to put long term money in that sector. And the 1.8c/kWh for 10 years provided by that taw mechanism have been enough (when available, which it was with irregularity in recent years) for the industry to be financed and to develop. Despite current high prices, banks are not yet willing to bet on such prices remaining high for 15 years, and thus still requite the support of the PTC to provide finance, and it would still kill the industry to do without it for now. (Disclaimer – yes, I work in banking and I finance wind farms, so this may sound self-interested, but (i) I don’t work in the USA and (ii) it’s still true). But eventually it may become unnecessary – basically as soon as utilities decide that they are willing to take that risk and sign fixed price purchase agreements with wind farms at high enough prices – like 5c/kWh – prices which, being fixed, will end up being very cheap for the utilities if the alternative is 8c/kWh gas-fired.
The gist of all this is that there is no rational reason today not to promote wind power today – it will be the most economic source of power in the long term – it already is in the short term.
And I have an additional bit of good news. The International Energy Agency, hardly a loony green outfit, has just published a new report (Variability of Wind Power and Other Renewables (pdf), which basically says that the impact of the intermittent nature of wind power on grids has been overestimated and can be managed reasonably well with well-known technical solutions.
That means that investing in wind power will NOT require additional investment in gas-fired or coal-fired standby capacity to cover times of low production – these can easily be managed by the grid.
As the issue of birds inevitable pops up each time I write about wind power, I will refer you to previous discussions of this topic:
Wind Power – Impacts on Wildlife and Government Responsibilities for Regulating Development and Protecting Wildlife (pdf) from the GAO.
This diary summarises a few scientific studies and quotes the Royal Society for the Protection of Birds on the topic:
Wind power: birds, landscapes and availability (I)Other discussions on birds, with various sources:
http://www.dailykos.com/…
http://www.dailykos.com/…
http://www.dailykos.com/…
http://www.dailykos.com/…The conclusion is that, while the wind farm in Altamont, Ca has killed a number of raptors, and care should be taken in all cases to site windfarms away from migratory pathes and other potentially hazardous locations for birds, the overall impact of wind farms on bird is extremely low.
Overall, wind power is cheap, reliable, and mostly harmless. These things cannot all be said of all the alternatives, so wind deserves to be promoted a lot more than it currently is – and it will actually be profitable!
My wife and I are trying to switch our power provider to a company that uses almost exclusively wind and small hydroelectric. They say it will cost slightly more, but the person who recommended them says that his bill actually went down. If you live in NYC, here is the info you need to look into switching to Green power:
https:/www.conedsolutions.com/CES_Enroll
http://www.poweryourway.com might also give you more info on the subject.
What you need to make sure of is that your utility’s plan reflects actual production costs of wind power, and not just acts as a surcharge to their normal retail price. In that second case, you would lose out and they keep all the benefit of lower wind power prices, while charging you the high fuel-based power prices plus the surcharge.
If our bills stay the same or go down, and it encourages Green energy, in some ways they don’t need to pass on all the savings. Since it is a deregulated, competative market, it is in their best interest to keep the prices down to attract more customers. But you are right that we need to watch that.
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I travel a lot and sometimes to rural areas of Kansas. The site below probably best describes a wind farm and the enormity of the project. As I have seen one flat bed 18-wheeler carrying just one prop.
http://www.kirbomedia.com/windmills.htm
From the story you excerpt: “Austin Energy announced an increase in its fuel charge, which will bring the rate for its most recent GreenChoice product offering to near parity with the standard electric rate.” [bf mine]
Green Choice (which also includes a little electric generation from solar and methane, but is by far, mostly wind power) was first offered several years ago. Part of the offer was that customers who signed up – agreeing to pay a higher fuel charge in order to support green power sources – would have that fuel charge locked in for 10 years.
As natural gas prices have risen, the Green Choice fuel charge when first signing up (that is what the excerpt is referring to) has risen to stay a little ahead of it. But those of us who signed up years ago are now paying significantly less. I now pay $0.17 per kwh on the fuel charge part of my bill at my locked-in rate, while those not on the Green Choice program are paying $0.27. With the latest hike, I’ll be saving even more.
I’m way beyond “near parity” and well into saving each month.
I wonder if they were referring, in a slightly imprecise turn of phrase, to the price increases of the “normal” rate calculation, which now make that rate higher than the GreenChoice one.
Obvioulsy, as this is your utility, you know better, but this above is how I had interpreted that text.
I don’t know if this makes it clearer, but –
I signed up when this was first offered. At the time, the “regular” fuel charge was $0.010kwh, and I agreed to pay $0.017kwh – but I’m locked in at $0.017 for ten years. Now the regular rate of $0.02796kwh has surpassed my locked-in Green Choice rate.
As the regular charge has risen over the years, they periodically revise the Green Choice rate upwards for those who are signing up to keep it slightly more than the going regular rate. But it doesn’t rise for those of us who are already on this program.
Last month when I checked (for a comment over at EuroTrib, btw), someone who signs up now will pay $0.035kwh on their fuel charge – or still a little more than the regular charge now.
The current “regular” fuel charge has been in effect since Jan 2004. They are promising a hike of 8-13% beginning next January, which would raise the fuel charge to $0.032 – $0.0334 – or very close to the current new sign-up rate.
What will be interesting to see is if they will again revise the new sign-up rate higher when the new fuel charge goes into effect. I suspect they will, because I think we are now paying the upfront costs you describe on our new windmills near Abilene. (We’ve had wind power in our mix for a while, but are still getting more.) And note that our electric rates are significantly lower than those of the large Texas cities with privately owned utilities. The investment in windmills is probably contributing to that, and moreso in the future, I think.
But even if they do raise the Green Choice rate, it will still be a good deal over the long term, as it has been for me, I think. That’s what I keep telling folks – look for a lock in – if you can get it, jump on it. (I often cite you as a source for where natural gas prices are heading.)
Short version – Austinites who sign up for Green Choice now – before they raise the regular fuel charges and (probably) the Green Choice charge – will be paying only very slightly more that everyone else after next Jan. (Sorry for previous long-windedness. Conciseness is obviously not my forte.)
I’ve been happily using this option for a couple years (OG&E, one of the two major Oklahoma power companies, allows individual costumers to use wind power for all, or part, of their energy). But as Jerome notes, only recently has it actually lowered my energy bills. A nice bonus!