Thursday, November 8, 2012

Wind energy vs. natural gas – Can wind compete without subsidies?

Wind energy is definitely one of the most cost-effective renewable energy sources, but has wind energy really become cost-competitive with natural gas? Elizabeth Salerno, AWEA’s director of industry data and analysis recently said that “if you’re going to build a new wind farm, it is going to be (cost) competitive with any other new form of generation.”

However, natural gas is becoming increasingly cheaper due to the fast growing shale gas extraction so in order to have a clear perspective on total costs related with wind and natural gas we need to take a look at several different factors. Wind energy still cannot compete with natural gas without the subsidies.

The 2011 data by EIA says that the cost of a new onshore wind installation is at 9.7 cents per kilowatt-hour, while natural gas power plant has costs at 6.3 cents per kilowatt-hour. Wind energy sector still needs incentives in order to compete with natural gas, for instance wind energy tax credit alone has decreased wind power costs by 2.2 cents per kilowatt-hour.

Don't get me wrong here, natural gas is also still being subsidized but not as heavily as wind energy is. The U.S. wind energy industry fears what will happen with the production tax credit for wind energy that is set to expire at the end of 2012. The uncertainty about the wind energy production tax credit is the main reason why U.S. wind energy industry is experiencing some sort of stagnation, mostly because the current U.S. wind energy policy doesn't offer wind energy developers long term guarantees.

Why is wind energy sector still dependent on subsidies from the government? For starters, wind energy technologies are still developing while fossil fuels technologies are already developed and this is the main reason why wind power requires larger subsidies in comparison to natural gas.

Natural gas is readily available throughout the United States and is also significantly less polluting in terms of greenhouse gas emissions as compared to coal. There are already fears within the U.S. wind energy industry that natural gas may significantly slow down further development of wind energy industry in United States.

Many Americans still have doubts whether wind energy is the right answer to lead the nation to clean energy future, not only due to higher costs but also because of the intermittency issue, which doesn't give wind energy 24-7 reliability without ensuring the adequate energy storage solution.

What wind power needs is more scientific and technological innovations. The science and technology are needed to for wind energy to achieve cost parity with fossil fuels, develop more efficient wind turbines and ensure reliability of wind power by solving intermittency issue.