Wednesday, November 12, 2008

Drew Thornley on Texas Wind

The Texas Public Policy Foundation is undoubtedly a right wing outfit. its chairman of the board is Dr. Wendy Gramm. If you are from Texas, you probably know who she is. I would not trust Wendy Gramm or The Texas Public Policy Foundation on matters related to ideology, but in matters of fact, I would expect accuracy from that source. The Texas Public Policy Foundation opposes subsidies for wind. I do not see this as an ideological issue. Huge wind subsidies are going to bug bucks Republican backers, like T. Boone Pickens.

The TPPF has looked at the Texas subsidy for wind generated electricity. It has just published a report, Texas Wind Energy: Past, Present, and Future, that is loaded with all sorts of detailed information about the wind Industry in Texas.

For example we have a detailed description of a 1.5 MW Windmill:

• Turbine Weight: 185,000 pounds (92.5tons)
• Tower Weight: 190,000 pounds (95 tons)
• Concrete: 294 cubic yards—439 tons per foundation.

Drew Thornley, the author of Texas Wind Energy states:
The distinction between wind and wind energy is critical. The wind itself is free, but wind energy is anything but. Cost estimates for wind-energy generation typically include only turbine construction and maintenance. Left out are many of wind energy’s costs—transmission, grid connection and management, and backup generation—that ultimately will be borne by Texas’ electric ratepayers. Direct subsidies, tax breaks, and increased production and ancillary costs associated with wind energy could cost Texas more than $4 billion per year and at least $60 billion
through 2025.
Thornley does a good job of characterizing the annual and seasonal unreliability of wind, the notes a report by the Texas Comptroller of Public Accounts. that states:
in 2007 wind accounted for 1.4 percent of electricity generated in July and 4.3 percent in December. Wind accounted for 4.5 percent of the electricity generated in ERCOT in January 2008, compared with 1.9 percent the previous January.
Thornley correctly understands thr impact of inflation on future cost of wind mandated grid expansions:
The projected overnight costs (i.e., capital costs less interest, inflation, and escalation costs due to increased material and labor costs) of these plans are $3.78 billion, $4.93 billion, $6.38 billion, and $5.75 billion, respectively. Because these are overnight cost estimates, they do not include escalating labor and material costs or financing costs during construction. Thus, the installed costs, which will be used to establish future transmission rates, should be considerably higher.

In addition to these transmission cost estimates, collection (or gathering) costs for each scenario are estimated to be $410-530 million, $580-820 million, $720 million-1.03 billion, and $670-940 million, respectively. These, too, are overnight costs. delay other projects, such as construction of nuclear reactors.

Thornley adds
Energy consultant Jeffry C. Pollock quantified the rate impact of future transmission investment on various customers. Taking into account rising material and labor costs, interest/financing costs, and routing issues, the installed cost for CREZ Scenario 2 is estimated to be $7.8 billion ($3,282,828.28 per mile).
Thornley notes hidden cost for wind generation systems including:
• Wind-energy transmission costs;
• Grid-connection and grid-management costs;
• The costs of backing up wind turbines with traditional power sources;
• Lost tax revenues from federal and state subsidies and tax breaks.
Thornley notes another, little noticed. subsidy for wind in Texas:
unlike conventional-power generators, wind-energy providers do not have to pay ERCOT for generation-schedule deviations.† This is no small perk for Texas’ most intermittent energy source, and it distorts wind energy’s price, relative to conventional power prices. The result of this is that non-wind generators, and primarily customers, must bear the cost of ERCOT’s deploying regulation and other reserves when there are large deviations from their schedules. 

Texas Wind Energy contains a very illuminating discussion of recent research on the cost of wind.

Clearly then Drew Thornley has made an important contribution to my case study of Texas wind, and has written a report that adds to our growing body of knowledge about the costs and liabilities of renewable generation of electricity.

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