Sunday, June 8, 2008

A 5 to 7 trillion dollar subsidy to the wind industry?

Yesterday, the Abilene Reporter-News published a guest column by Professor Patricia A. Lapoin of Abilene's McMurry University. The column's title is "There's a price for subsidizing wind energy with taxpayer dollars."

Abilene has good, although not not outstanding wind resources. And wind farms are spring up there. In addition, Abilene is just a Texas hop, skip and jump away from the Texas Panhandle, whose wind resources are considered to be among the best in the country. Thus criticism of wind power, coming from an Abilene source, would tend to go against local interest.

Lapoin, who in addition to teaching Business Administration at McMurry University is the President of P&L Consultants, is an opponent of wind generated electricity for personal reasons. Lapoin lives next to a wind farm in Taylor County, Texas and complains that neighborhood windmills are extremely noisy, are eyesores and generally destroy the the quality of rural life. The huge 421 turbines Horse Hollow Wind Energy Center in Taylor and Nolan Counties comes within a half mile of her home. "The land in Taylor County is forever damaged," Lapoin says.

In yesterday's Abilene Reporter-News, Lapoin laid out an analysis of the US Department of Energy's most recent wind energy report, "20% Wind Energy by 2030". She reports:

"According to a recent report by the National Renewable Technology Laboratory (DOE), wind energy could account for 20 percent of the nation's electricity by 2030. To reach this target, wind turbines would have to produce 300,000 MW of power or 1,000,000 MW installed capacity. The 500,000 plus wind turbines would cost the taxpayers between $5-7 trillion."

Lapoin compares land use with wind, and nuclear:

"For a comparable amount of electricity output, a nuclear power plant requires approximately 50 acres of land vs. 80,000 acres of land for wind farms -- 1,600 times the land usage for wind generated power! For the same or less taxpayer money, why not put those taxpayer dollars into more nuclear power plants and protect our natural environment from the thousands of square miles of industrial wind turbines dotting the landscape?"

I did a brief analysis of some of the assumptions that underlay "20% Wind Energy by 2030," and found that estimates for future cost did not acknowledge the realities of materials inflation, and other factors that would affect wind facilities construction costs.

Key assumptions of "20% wind Energy" are highly questionable. For example it is assumed that the cost of wind estimated to be $1,730/kW in 2005 would remain constant until 2010, and then would decreasing 10% by 2030. This is preposterous. The cost of installing windmills rose to something like $1900/KWh in 2007 and the cost of materials is projected to continue the inflationary pattern of this decade. The assumptions about offshore wind are even more preposterous: $2,520/kW in 2005, decreasing 12.5% by 2030. In fact, the cost of offshore wind projects was closer to $5,800 in 2007 and was rapidly ascending. The expectation of a 12.5% drop in the cost of installing off shore wind facilities by 2030 is a pipe dream. The expectation that there would be a capacity factor improvements about 15% on aveover all wind classes between 2005 and 2030, is unrealistic given the European experience, of declining capacity factors with each new windmill facility.

Professor Lapoin's estimates partially rest on what are extremely unrealistic assumptions by the wind industry. Hence her estimate of a 5 to 7 trillion subsidy required to meet the 20% wind penetration by 2030 goal may be if anything conservative. And that 5 to 7 + trillion dollars subsidy will be expended on an energy generation system that still requires fossil fuel back up, and will produce at most only 20% of our current electrical needs. The 20% wind power idea, fails the "economic rationality" rest.

Update 6/9/08: Mike commented yesterday about the lack of detailed analysis in support of Patricia Lapoin's major contentions. I had already begun an attempt to verify Lapoin's numbers before I saw Mike's comment. My calculations were that given Lapoin's assumptions, I could only find an annual subsidy that was over 100 times smaller than Lapoin's 5 to 7 trillion. This does not mean that she simply tossed out a huge number, or that she does not have such an analysis, simply that she her numbers cannot be verified by my "rough and ready" methods. It would be most desirable if Lapoin has such an analysis that she publish it quickly.


Mike said...

Lapoint is a a professor of management with the school of business at McMurry University. She was also a plaintiff in lawsuit against a wind energy company. The suit claimed that that some wind turbines near her home is a public nuisance.


Charles Barton said...

Mike, I am aware of the lawsuit. Many people who live close to windmills find them unpleasantly intrusive. I believe that analysis of business subsidies are within the area of competence professors of business administration.

Mike said...


I frankly found the professors opinion piece to be rather lacking in analysis of tax subsidies. It was more in the way of a rant and it reminded me of Romm's propaganda article against nuclear power in Salon.


Charles Barton said...

I headed the post with a question mark, because I was not sure how valid her estimate. She has publish a peer reviewed paper on wind. I would hope she has another in the works in which she elaborates her subsidy figure analysis.

Anonymous said...

If you want to talk about NIMBYs, there are a lot more for nuclear power (which condemns much more than 50 acres when it goes bad) than there are for wind.

David Herr said...

Based on your numbers, Charles, I can see where the $5 to $7 trillion comes from. The DOE claims that to provide 20% of all energy, 300 GW of wind capacity will be necessary, which would require 1000 GW of installed capacity. That assumes a capacity factor of 30%, which is higher than wind has typically produced. Multiplying that 1000 GW by today's cost of over $2,000/KW would yield $2 trillion. What Lapoin probably did, but apparently did not document in her article, is assign a higher cost per KW and a lower capacity factor. Adjusting the numbers to $3,000/KW and a capacity factor of 20% would yield $4.5 trillion. Add in interest and higher maintenance and depreciation costs, and you get over the $5 trillion mark.

Speaking of maintenance and depreciation, does anyone have estimates of what the maintenance cost is, and how long an average turbine is expected to last before replacement is necessary? Can current wind turbines last as long as the 40 to 60 years a nuke plant could be expected to last?


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