EnergyThe costs of using wind energy, natural gas for electricity virtually equal

The costs of using wind energy and natural gas for electricity are virtually equal when accounting for the full private and social costs of each, making wind a competitive energy source for the United States, according to a new study on the federal tax credit for wind energy.

Just released by researchers at Syracuse University and the University of California, the analysis shows that wind energy comes within .35 cents per kWh when levelized over the 20-year life of a typical wind contract, compared on an equivalent basis to the full costs for natural gas-fired energy, according to Jason Dedrick, associate professor at Syracuse University’s School of Information Studies (iSchool).

“The true cost of electricity from wind power and natural gas are effectively indistinguishable, yet because the cost of carbon emissions is not included in the market price of gas, wind has not been a competitive form of energy use in most of the United States, without government pricing support,” Dedrick said.

A Syracuse University release reports that the analysis starts from the U.S. Department of Energy (DOE) estimates of the lifetime “levelized” cost of electricity from a new wind farm, and also from an advanced combined cycle gas plant. The analysis develops a new metric that incorporates long-term factors which are not included in the DOE numbers. Accordingly, the study also reveals that the recently-expired Production Tax Credit for wind makes up for the lack of any mechanism to make fossil fuel generators pay for the cost of carbon emissions, Dedrick noted.

Researchers for the study, “Visualizing the Production Tax Credit for Wind Energy,” in addition to Dedrick, are Kenneth L. Kraemer, research professor, University of California, Irvine; and Greg Linden, senior research associate at the University of California, Berkeley.

Gas appears cheaper
Current national-average estimates from the DOE are 8.7 cents per kilowatt-hour (kWh) for wind and 6.6 cents for gas-fired energy — making gas appear as a much cheaper alternative, Linden noted. Incorporating the new metric into the analysis, however, shows that the tax credit “is actually compensating for a market failure to price the future cost to society of carbon emissions,” Linden explained. “In the absence of a carbon tax, the PTC [production tax credit] can serve as a stand-in to make the market reflect the true costs of energy.”