The High Cost of Low-Value Wind Power

April 17, 2013

Subsidies for renewable energy distort markets and are economically inefficient, driving out legitimate competitors and leading to higher prices in the long run. Despite the evidence that shows the negative effects of renewable energy, there are still those that make an argument for it, says Jonathan A. Lesser, founder and president of Continental Economics Inc.

Consider arguments for subsidized renewable wind energy:

  • Renewable generation simply needs more time to innovate and reduce its costs to be fully competitive with fossil generation.
  • Conventional energy generation has been subsidized for over a century; therefore, renewable generation deserves subsidies as well.
  • Economic salvation will come from a subsidized "green energy" path.
  • Reduced emissions of air pollutants.
  • Greater energy independence, reducing dependence on crude oil.
  • Reduction in fossil fuel price volatility.

The reality counters the arguments for wind energy:

  • Wind generation is inherently variable and intermittent.
  • It produces electricity only when the wind blows.
  • Wind generation is not available when it is needed.
  • Pollutants are already regulated under the Clean Air Act.
  • There is no consensus on the social cost of carbon emissions.
  • Energy independence is not a social benefit.
  • There is no evidence that wind generation reduces the U.S. demand for crude oil.
  • Reduced fossil fuel price volatility is not a social benefit.
  • There is no evidence that wind energy reduces price volatility.

Subsidized wind energy also requires additional back up generation, which creates additional costs. Wind generation's production pattern is not only volatile and unpredictable, it also has low economic value. Subsidized wind energy distorts electricity markets by artificially lowering electricity prices in the short run and leads to higher prices in the long run.

Source: Jonathan A. Lesser, "The High Cost of Low-Value Wind Power," Regulation Magazine, Spring 2013.

 

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