Gas boom puts wind power on economic ropes

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NEW YORK — Wind power in the United States is on a respirator.

The $14 billion industry, the world’s second-largest buyer of wind turbines, is reeling from a double blow — cheap natural gas unleashed by the hydraulic fracturing revolution and the death last year of federal subsidies that made wind the most competitive of all renewable energy sources in the United States.

Without restoration of subsidies, worth $23 per megawatt hour to turbine owners, the industry may not recover, and the U.S. may lose ground in its race to reduce dependence on the fossil fuels driving global warming, say wind-power advocates.

They place the subsidy argument in the context of fairness, pointing out that wind’s chief fossil-fuel rival, the gas industry, is aided by the ability to form master limited partnerships that allow pipeline operators to avoid paying income tax. This helps drive down the cost of natural gas.

“If gas prices weren’t so cheap, then wind might be able to compete on its own,” said South Dakota Gov. Dennis Daugaard, a Republican.

Consider that gas averaged $8.90 a million British thermal units in 2008 and plunged to $3.73 last year, making the fuel a cheaper source of electricity for utilities. Congress allowed the wind Production Tax Credit to expire last year, and wind farm construction plunged 92 percent.

The shift in fortunes for the two fuels arrives at the moment when wind was beginning to rival gas on price alone, according to data compiled by Bloomberg. That means the industry’s future will be shaped by the debate over what counts as support from the government and when, or if, Congress moves to rethink the credit.

“Cheap gas has definitely made it harder to compete,” said David Crane, chief executive officer of NRG Energy, which builds both gas and renewable power plants. He said that with the subsidy, companies were able to propose wind projects “below the price of gas.”

Both wind and gas cost about $84 a megawatt hour to install worldwide, excluding subsidies, according to Bloomberg New Energy Finance. That’s 3 percent higher than a coal-fired power plant costs and about half that of nuclear reactors.

Daugaard joined Sen. Ron Wyden, D-Ore., chairman of the Senate Finance Committee, in pushing to extend the Production Tax Credit, which expired in December and is part of a package of 50 lapsed tax breaks the committee agreed on April 4 to extend.

The credit appeals to Democrats and Republicans alike in states that have strong wind resources as well as those with turbine and blade factories, like Kansas and Colorado. Still, the Republican-led House may not support efforts to extend the tax credits before the November election, according to the American Wind Energy Association.

America’s Natural Gas Alliance, which represents independent gas producers in Washington,

D.C., has no position on the tax credits for wind, said Dan Whitten, a spokesman. The group also welcomes proposals to expand master limited partnerships to additional energy sources such as wind.

Nowhere is the economic debate about wind versus gas more finely balanced than in the U.S. While North America ranks behind China in terms of total installations, the price of gas and structure of support for the industries has made it among the most competitive markets in the world.

The best wind farms in the breeziest areas, such as South Texas, can be built for $60 a megawatt-hour, below the $65 price of a high-efficiency gas turbine, according to New Energy Finance.

Behind those headline figures are hundreds of variables that determine whether a utility picks wind or gas. The best wind farms may operate 45 percent of the time, while ordinary ones work less than a third of the day. The tax credit often is the decisive factor in determining whether to build a wind farm.

“Without the Production Tax Credit, we don’t expect wind to be at cost parity with gas” in most places in the U.S., said Stephen Munro, an analyst at New Energy Finance.

Power technologies don’t compete on price alone. Most states require utilities to supply an increasing amount of their electricity from renewables.

And most utility executives have scars from swings in fossil fuel costs. A deep freeze in New England increased the cash price for gas near Boston tenfold to more than $76 per MMBtu in January.

“The polar vortex showed us the problem with relying too much on gas,” Tom Kuhn, president of the Edison Electric Institute, said in an interview.

Comments

AWEAPeebles 4 months ago

We must avoid erecting barriers against reliable, affordable sources of renewable power. Wind provided over 4 percent of the country’s electricity in 2013. With smart policies in place, that number can reach 20 percent by 2030.

The Production Tax Credit for wind power is a valuable incentive that allows wind energy to compete with more traditional, well-established energy sources. We should urge Congress to expedite its renewal. Wind power, with the help of the PTC, has dropped in cost 43 percent in just four years. Clean, reliable, and affordable, wind power is a smart piece of our energy future.

Wind energy can lead us to increased energy independence while reducing costs and pollution, especially carbon dioxide emissions. The more than 60 gigawatts of installed wind capacity at the end of 2013 already avoids nearly 100 million tons of carbon dioxide annually. Those offsets are permanent for the life of a project, the equivalent of taking 17 million cars off the road.

The fact that wind power uses no water to generate electricity means the currently installed U.S. wind fleet will avoid the consumption of 36 billion gallons of water per year.

And wind power provides thousands of Americans with well-paying jobs. However, the on-again, off-again nature of the PTC must be resolved before businesses in American wind power are able to plan for the long term. Each time the PTC is allowed to expire, production contracts and jobs are threatened.

Until a long-term solution can be found for our energy policy, we need to extend this valuable incentive so that wind power can continue to work for people across the entire country, driving our economy and preserving the environment.

For more information on wind power, visit www.awea.org

Peebles Squire AWEA

1

AWEAPeebles 4 months ago

We must avoid erecting barriers against reliable, affordable sources of renewable power. Wind provided over 4 percent of the country’s electricity in 2013. With smart policies in place, that number can reach 20 percent by 2030. The Production Tax Credit for wind power is a valuable incentive that allows wind energy to compete with more traditional, well-established energy sources. We should urge Congress to expedite its renewal. Wind power, with the help of the PTC, has dropped in cost 43 percent in just four years. Clean, reliable, and affordable, wind power is a smart piece of our energy future. Wind energy can lead us to increased energy independence while reducing costs and pollution, especially carbon dioxide emissions. The more than 60 gigawatts of installed wind capacity at the end of 2013 already avoids nearly 100 million tons of carbon dioxide annually. Those offsets are permanent for the life of a project, the equivalent of taking 17 million cars off the road. The fact that wind power uses no water to generate electricity means the currently installed U.S. wind fleet will avoid the consumption of 36 billion gallons of water per year. And wind power provides thousands of Americans with well-paying jobs. However, the on-again, off-again nature of the PTC must be resolved before businesses in American wind power are able to plan for the long term. Each time the PTC is allowed to expire, production contracts and jobs are threatened. Until a long-term solution can be found for our energy policy, we need to extend this valuable incentive so that wind power can continue to work for people across the entire country, driving our economy and preserving the environment.

Peebles Squire AWEA

0

GeneandCassie 4 months ago

Does using water to generate electricity actually 'consume' the water??? Or is the water just passed through the structure housing the generation equipment; and then available for reuse further downstream???

An energy generation mix is needed. One nice thing about hydropower is that the generation can be timed for when it is needed most; through storage of water within a reservoir.

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