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Doubling Wind Power Could Save Mid-Atlantic Consumers $6.9 Billion A Year

By Adam James, Guest Contributor on May 9, 2013 at 2:01 pm

"Doubling Wind Power Could Save Mid-Atlantic Consumers $6.9 Billion A Year"

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Wind power had a banner year in 2012, accounting for more new generating capacity than any other resource. Despite the boom in cheap natural gas, 42 percent of all new capacity last year was actually from wind, which clocked in at 13,131 MW in new installations for the year.

The economics for wind power have only gotten more compelling, helped in no small part by the Production Tax Credit and the Investment Tax Credit creating strong investment incentives. This boom in wind power has begun to transform electricity markets across the country, creating significant net benefits for consumers and providing low carbon power to homes nationwide.

A new report from the consulting firm Synapse and Americans for a Clean Energy Grid found that increases in wind power in the PJM Interconnection could save consumers $6.9 billion per year out to 2026, along with 14 percent reductions in CO2.

The PJM Interconnection is the world’s largest competitive wholesale electricity market, serving 60 million customers across 13 states and the District of Columbia. Currently, wind provides about 1.5 percent of the electricity to PJM’s customers, and accounts for 3.4 percent of installed capacity. Based just on the Renewable Portfolio Standards in states within the PJM region, renewables must provide 14 percent of all electricity by 2026. It is likely that about 11 percent of this will come from new wind generation.

The report from Synapse uses the projections from meeting Renewable Portfolio Standards as a reference case, and then takes a look at the effects of doubling the amount of wind power required by statute in the PJM region out to 2026. By modeling the production costs and capital investments, the authors can ascertain what the difference is between these two cases for revenue requirements (and therefore, the impact on ratepayers). The big difference between these two cases is that in the reference scenario, natural gas composes the majority of new generation beyond what the state Renewable Portfolio Standard requires—and wind takes that market share in the other. This illustrates the shortsightedness of the “cheap natural gas” narrative that has become conventional wisdom in mainstream reporting. The cheaper bet, actually, is increasing deployment of wind.

The report finds that doubling capacity of installed wind, from 32.1 GW in the base case to 65.4 GW in the wind case, would create net savings of $6.9 billion per year. This is the result of savings from production costs amounting to $14.5 billion, and capital investment requirements of $7.6 billion. Remember that the capital investment numbers here represent the difference between what would be spent in the reference case ($17.4 billion) and what would be spent in the wind case ($25 billion).

The other benefit of more wind in PJM is lower wholesale prices. The report finds that the load-weighted average annual price for power drops from $80.27 per megawatt hour to $78.53 per megawatt hour.

The report notes that “the price differences are the greatest in non-summer months, when wind output is the highest, load is the lowest, and supply margins are the greatest.” These price differences are a function of how the electricity market works; the clearing price for all resources is set by the last marginal unit that is needed to meet load. More wind power in the system, whose bids are close to zero because of no fuel costs and low operational expenses, edges out the use of peaker plants. Since these peaker plants are often much more expensive, the net effect of more wind power in the market is that the clearing prices get set lower– saving consumers money while still providing the same electricity.

While net prices are lower, the modeling shows that market prices are higher in the summer months due to variability of wind output. These higher prices are reflective of the fact that more peaking fossil fuel resources are used in those times when wind power isn’t as available, or when load is higher and more resources are required to meet demand. This dynamic could be altered by new energy storage technology, higher utilization of demand response, and increasing efficiency standards to drive demand reductions during peak hours.

On top of all that, the high wind case means that CO2 emissions will go down significantly from 3.2 million tons to 2.6 million tons. This is the equivalent of taking a million cars off the road, or forgoing 610 million gallons of gasoline.

The bottom line is that going beyond the Renewable Portfolio Standards in the PJM region would lower electricity prices, save ratepayer’s money, and lower emissions to help fight climate change.

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2 Responses to Doubling Wind Power Could Save Mid-Atlantic Consumers $6.9 Billion A Year

  1. SecularAnimist says:

    Adam James wrote: “… increases in wind power in the PJM Interconnection could save consumers $6.9 billion per year out to 2026, along with 14 percent reductions in CO2.”

    I guess that’s a perfect example of the “draconian sacrifices” that the fossil fuel propagandists insist no one will accept.

    • Merrelyn Emery says:

      Yep, and my rellies who have their solars in already are making $ – that’s a REAL sacrifice, ME