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Study: Wind Electricity Several Times as Expensive as Conventional Sources

October 7, 2015

On average, electricity from new wind resources is nearly four times as expensive as that from existing nuclear sources and nearly three times as expensive as using existing coal sources, a new study by the Institute for Energy Research (IER) reports.

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On average, electricity from new wind resources is nearly four times as expensive as that from existing nuclear sources and nearly three times as expensive as using existing coal sources, a new study by the Institute for Energy Research (IER) reports. The study, What is the True Cost of Electricity?, used data from the Energy Information Administration and the Federal Energy Regulatory Commission.

“This study points to the need to let economic decisions about energy be made on a commercial basis rather than on a political basis,” said Mark Jamison, Ph.D., director of the Public Utility Research Center at the University of Florida . “Too often people suffer from the illusion of knowledge and, believing they know what investments others should make, support political decision-making that favors one technology over another.”

Apples to Apples

Until this report, almost all measures of the cost of electricity only assessed costs involved in building new plants. In contrast, IER compares existing plants to new ones. Comparing new renewables to existing traditional electric generating sources, IER found, existing coal cost $38.4 per megawatt-hour on average (MWh), natural gas cost $48.9 MWh, and nuclear cost $29.6 MWh, each approximately one-third or at most half of the cost of new wind generation sources, $112.8 MWh on average.

Despite facing significantly stricter regulations, the study found, even new coal, gas, and nuclear plants, at $97.7, $73.4 and $92.7 per MWh respectively, cost less than new wind power generation. 

Renewables Cheapness ‘Patently False’

Discussing the findings of the study, IER economist Travis Fisher said, “The notion that wind and solar power are becoming cheaper than sources like coal and nuclear is patently false.” 

“This narrative tends to compare only brand-new power plants—highly subsidized wind and solar installments—to coal plants paralyzed by costly and unprecedented regulations,” said Fisher. “The implication is there is no longer a cost premium in replacing the output of today's existing coal plants with power from wind and solar facilities, never mind the obvious reliability problems in attempting to do that.” 

The IER study arrived amid estimates existing and proposed federal and state policies threaten to shutter more than 111 GW of existing coal and nuclear generation, while forcing large amounts of renewables (such as wind) onto the grid. 

“Coal-fired capacity is being shut down before the end of its economic and depreciable life,” said Jim Clarkson, president of Resource Supply Management (RSM). “The scheme for replacement is renewable capacity,… [which] must be backed up by natural gas-fired capacity and its attendant capital recovery.” 

As a result, Clarkson warns, “Consumers will pay three times for capacity for the same output.” 

Fisher concurs with Clarkson’s assessment. “Policies that shut down existing coal plants and prop up wind and solar—such as the EPA's carbon regulation—will inevitably increase the cost of electricity and increase the financial burden of everyone with an electricity bill, particularly low-income Americans,” Fisher said. 

D. Brady Nelson (darren.nelson@me.com) is a columnist with Townhall.

Internet Info

Thomas F. Stacy, George Taylor, “The Levelized Cost of Electricity from Existing Generation Sources,” Institute for Energy Research, June 24, 2015: https://www.heartland.org/policy-documents/levelized-cost-electricity-existing-generation-sources

Author
Darren Brady Nelson is an Austrian school economist who serves as the chief economist at LibertyWorks and as an associate scholar with the Center for Freedom and Prosperity. Nelson is also a policy advisor to The Heartland Institute.
darren.nelson@me.com