Wind Lowers Power Prices: New Scientist

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Friday July 30, 2010 · 3:51 PM PDT

2010/07/30 · 15:51

Part of my Wind series

European Tribune editor John Evans (afew) and I wrote an opinion piece on the economics of wind power for New Scientist, and it has now been published.

All power to the wind - it cuts your electricity bills - opinion - 26 July 2010 - New Scientist

ATTEMPTS to discredit wind power often claim that wind turbines need to be subsidised. Apiece in British newspaper The Daily Telegraph last month asserted that each wind turbine in the UK receives, on average, £138,000 in subsidies a year, and that as a result wind-power investors are coining it hand over fist at the taxpayer's expense.

So are wind farms subsidised?

The usual disclosure: I advise wind developers on their financing needs.

In the sense of direct government support, very rarely. What they do enjoy in most countries, though, is a guaranteed right of access to the grid, and minimum prices for the electricity they produce.

The article explains marginal pricing and the merit order effect that lowers average electricity prices, going on to suggest that established producers are hostile to further penetration of wind in electricity generation because it deprives them of windfall gains on high spot prices.

Imagine you run a utility company with coal-fired or nuclear plants. From your perspective, wind power is causing you to lose out on the windfall cash previously provided by high spot prices at times of peak demand. Will you be inclined to look favourably on plans to increase the share of wind power in total electricity generation?

And ends with a perspective on the organisation of the market:

It may be that the electricity market will evolve into one that offers long-term fixed prices to producers, as power distributors take into account the long-term stability of the cost of wind power. In that case, wind will need no special favours, since it will be cost-competitive with nuclear and coal. Until that happens, the framework in which wind operates - permitting investment while lowering prices for consumers - is not an abusive subsidy but simply intelligent market regulation.

Read the whole thing here.

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Wind Lowers Power Prices: New Scientist

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