Thursday, September 27, 2007

A General Overview of the Costs and Benefits of Wind Power

I’ve been pondering how to evaluate the costs and benefits of the proposed agreement between Delmarva Power and Bluewater Wind. Here are some general thoughts:
At the outset of the 25 year period, the cost of wind power will be higher than the cost of conventional generation, but will remain stable thereafter. (Remember, one of the criteria in the RFP process was price stability.) The cost of conventional power will almost certainly rise well above the cost of wind power over the 25 year period for three reasons.

First, fossil fuel prices will continue to climb. For instance, the wellhead price of natural gas, measured in dollars per thousand cubic feet, increased from $0.44 in 1975 to $3.68 in 2000 — a factor of eight over the 25 year period.
Second, the cost of expected carbon controls will lead to a sharp increase in the price of electricity from fossil fuels, especially coal. An MIT study published earlier this year estimates that carbon sequestration is likely to increase the cost of electricity by 27 percent and reduce effective power generation by 19 percent.
Finally, as Jeremy Firestone and Willett Kempton of the University of Delaware point out, including the health costs of conventional power shifts the balance in favor of wind power by about $1 billion.
Again, these are general considerations. I won’t pretend to know enough at this point to offer an economic model. Even so, these general factors point to wind power as offering clear advantages for the people of Delaware.


Anonymous Anonymous said...

I did a google search on the term "cost of wind generated electricity." There were about 1,750,000 hits. These links look interesting. I note that one uses a 30% operating period for rates of less than $0.04/KwH in 2007. This looks competitive to present fossil fuel rates.

10:27 AM, September 27, 2007  
Blogger Tom Noyes said...

Thanks. I will check these out. I'm hoping to be able to present a more quantitative analysis once I do some more homework.

10:47 AM, September 27, 2007  
Anonymous Anonymous said...

$0.44 in 1975 equals $1.48 in 2000. So it is not an eightfold increase but a two and a half times increase AFTER inflation.

My $0.02. I don't know if that helps or hurts your argument.

12:38 PM, September 27, 2007  
Blogger Tom Noyes said...

Another reader who does his homework!

Actually, with inflation factored in (and the period I cited included years of high inflation) the increase drops to 3.3 times.

A quantitative model would equalize the effects of inflation for all options.

Thanks for your $0.02 worth.

2:10 PM, September 27, 2007  

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