Tuesday, April 21, 2009

Eco-nomics: What Are the True Benefits of Wind Power?

A friend called me when the WW cover story on wind energy came out. He thought Jacquiss missed a big part of the story. I have been meaning to post on this for a long time (as you can see by the date on the story) but I have not had time to poke around more.

The basics are thus: Jacquiss points out the heavy subsidy that wind energy gets through things like the Business Energy Tax Credit. This is often thought of as a good thing because wind energy displaces environmentally damaging coal and natural gas based power generation. But the reality is not nearly so simple.

Since we get a lot of our energy from hydro we have a source of energy that is easily adjustable - much easier than a gas or coal fired power plant which can't just stop and start easily. So PGE and other wind utilities pay Bonneville to spill water when the wind is blowing hard.

This is not at all to say that wind energy credits are not worth it, or that in the long run we are better off if we subsidize the infrastructure now, rather it to simply say that if we are going to accurately weigh the cost of all of these subsidies to the state (and Jacquiss does a good job of this) we need to be clear about the actual benefits of wind power.

So if you are a customer of wind energy (like I am) it might come as a surprise that your wind sourced power is not offsetting coal and natural gas at anything close to one-for-one, in fact you might be offsetting hydro much more than coal and natural gas.

As I said above, I thought it might be fun to poke around and see what I could find out, but then I remembered that I have a real job. So if you know something about this chime in and add or correct at will.

[Photo credit: Thomas Boyd/The Oregonian]


Robert said...

I'd be interested to read your source for spilling hydro to offset wind, I didn't see it in the article. I also think a good summary would have totalled all the various credits and compared them to the size of the investment PGE made.

Jeff Alworth said...

Interesting, I have a post up at BlueOregon about power today, too. Great minds?

One thing that could help knit wind into the grid is something called "pumpted storage." My understanding is that the way it would work is you'd create a reservoir in conjunction with dams. Wind tends to blow at night, when the energy isn't needed by the grid. During that period--and other windy, low-use periods--the power produced by wind would be used to fire pumps that would dump water into these reservoirs. When the grid needed energy, the water gets dumped through hydro turbines and produces electricity.

The grid has been keyed to fossil-fuel generation for decades. It's no wonder that other solutions haven't been worked in yet.

Brian said...

The problem with the wind tax credit is that it is an indirect approach toward reducing coal generation. The direct impact of the credit is to make wind more profitable, but the indirect desired result is really uncertain, and if you re-read the WW article you will notice that it is completely silent on the success of the system on reducing coal generation, and the dependence on the hydro system isn't mentioned at all.

A tax credit for wind is far more politically palatable than increasing the tax burden on coal generation, but we risk the possibility that we are picking favorites, and we are not allowing the market to find the right mix of conservation and alternative sources. It is highly likely, from an economics perspective, that the resulting outcome is inefficient.