Cost of Wind vs. Fossil Fuels
When comparing the cost of wind vs. fossil fuels its important to consider fuel costs, integration costs, operating costs, and the cost of tax incentives. Wind energy is cost-competitive with fossil fuels, especially coal. In Montana, wind energy is less expensive than coal for NorthWestern Energy–the state’s largest utility. The graph below from the Montana Public Service Commission, compares the costs of various resources in NorthWestern’s portfolio. Judith Gap wind facility is about $47.00/Megawatt-hour (or 4.7 cents/kilowatt-hour) and Colstrip Unit 4 is $68.00/Megawatt-hour or (6.8 cents/kilowatt hour).
Nationally, the Energy Information Administration’s (EIA) 2012 National Energy Outlook predicts that the percentage of renewable energy generation in the United States is going to increase due to reduced costs of renewable technologies. At the same time, the EIA predicts that the percentage of U.S. electricity from coal-fired generation will decrease due to a 1.4 percent increase in minemouth costs as coal companies have to move into reserves that are more costly to mine.
Also according to the EIA, the total cost of wind energy without federal tax and other financial incentives is about 9.7 cents/kilowatt-hour. The total cost of conventional coal without federal tax and other financial incentives is about 9.4 cents/kilowatt-hour.
Why are Wind Costs are Decreasing?
There are integration costs associated with intermittent renewable energy but unlike fossil fuels, wind (and solar and many other renewables) the fuel price stays the same: Zero. Plus, wind-power technology has rapidly evolved. Turbines are much larger, growing from an average of 1.2 megawatts to 1.6 megawatts (a 33% increase in average capacity) in just three years. Today’s typical new turbine has a 2.3-megawatt capacity; 7-megawatt turbines will be available soon. The newer turbines can wring more electric power out of the wind (especially at lower wind speeds) than older turbines could. The combination of greater output and greater capacity nearly offsets the materials and labor cost increases plaguing traditional resources.