The True Cost of Wind Energy
Posted on May 2nd, 2010 at 11:20 pm by Steve

The problem with wind energy is that it drives prices down! From Bloomberg news:

After years of getting government incentives to install windmills, operators in Europe may have become their own worst enemy, reducing the total price paid for electricity in Germany, Europe’s biggest power market, by as much as 5 billion euros some years, according to a study this week by Poeyry, a Helsinki-based industry consultant.

Jerome a Paris has an excellent discussion of the article over at The Oil Drum. He also links from there to an excellent (and entirely wonky) discussion of the proper pricing of wind power. It is a great article – one key takeaway is that wind power actually brings electricity prices down! Understanding that assertion requires a discussion of marginal costs, initial investments, demand curves, spot pricing, intermittency, externalities, and Spitzenlast (see above), but it’s totally worth it.

Another key point is that “market” pricing actually tilts the playing field toward fuel-based generation of electricity, because of its lower capital and debt-servicing requirements:

selecting market mechanisms to set electricity prices (rather than regulating them) is, again, not technology neutral: here as well, deregulated markets are structurally more favorable to fossil fuel-based generation sources than publicly regulated price environments.

So while I definitely wanted to highlight the issues around wind power (and point you to some excellent, informed commentary), I mostly just wanted an excuse to show that graph! SPITZENLAST!