My new column is up RealClearMarkets:
The U.S. Department of Energy just released a report in which it claims that consumers and the environment would benefit from increasing the proportion of electricity derived from wind power. As the White House press release puts it:
"The report shows that with continuing technological advancements, cost reductions, and siting and transmission development, the nation can deploy wind power to economically provide 35% of our nation's electricity and supply renewable power in all 50 states by 2050."
The "continuing technological advancements" and "cost reductions" mean the White House's estimate is based on hope - hope that some as-yet unimagined future technology will change the economics of wind power, making it more cost effective than fossil fuel-based generation. That's not impossible - but it is very unlikely. And hope without change can be both costly and unpleasant.
A 2012 report from Reason Foundation examined the economics of wind power as it exists, not the one we hope for. The study found it isn't economically feasible to expect wind generation to produce more than 20 percent of operating electricity capacity, and even that is stretching it. The Department of Energy study assumes that the 35 percent capacity (up from about 4.5 percent today) would be reached by some combination of "low wind costs" and/or "high fossil fuel costs."
However, as the Reason Foundation study points out, expanding wind penetration beyond about 10 percent requires a significant increase in the amount of available "spinning reserve" - instantly available power generation from an alternative source that can be brought online whenever the wind is too strong or too weak to supply enough power into the grid. That need for backup increases the capital costs of wind power because the spinning reserve generating capacity must be available even if it is not being used. In addition, since the spinning reserve is likely to be in the form of natural gas (because it is the lowest cost source of power and the one that can by brought online most quickly), the cost of fossil fuels has a much less significant impact on the cost competitiveness of additional wind generation.