This week, the US Department of Energy released a report that looks at the state of wind power in the US, showing the numbers for 2018. The analysis shows that hardware wind prices are down, even as new turbine designs increase the typical power generated by each turbine. As a result, recent wind farms have become so cheap that you can build and operate them for less than the estimated cost of purchasing an equivalent gas plant.
Wind is even cheaper at the moment because of a tax credit given to renewable energy production. But this credit is in the process of fading, leading to long-term uncertainty in the electricity market, where demand is generally stable or declining.
In 2018, about 7.6 GigaWatts new wind power was added to the grid, which is just over 20 percent of capacity additions in the US. This puts him third behind natural gas and solar energy. However, this is less impressive than it may sound, given that things like coal and nuclear are essentially dwindling. Because the best winds are not evenly distributed in the US, there are areas, such as parts of the Great Plains, where wind installations accounted for more than half of the new power capacity installed.
Overall, this results in installed US power of up to nearly 100 GW. This leaves only China ahead of the US, although the difference is significant as China has more than twice the capacity of the US installed. It still leaves wind to supply just 6.5 percent of total electricity in the US in 2018, which puts it behind a dozen other countries. Four of them – Denmark, Germany, Ireland and Portugal – receive more than 20 percent of their total electricity needs from wind and Denmark over 40 percent.
This figure is remarkable, since having more than 30 percent of your interruptible power is a challenge for many existing networks. But there are a number of states that have already cleared the 30 percent threshold: Kansas, Iowa and Oklahoma, with both Dakotas not far behind. The Southwestern Energy Basin, which serves two of those states plus the Texas wind giant, is currently receiving a quarter of its wind power. (Texas leads the US with 25GW of installed wind power.)
So while wind remains a small factor in the US common electricity market, there are parts of the country where it is a major factor in the generation mix. And given the prices, these parts are likely to expand.
In the United States, wind energy prices rose until 2009, when agreements to buy electricity for wind-generated electricity reached about $ 70 per megawatt-hour. Since then, there has been a very steady decline and in 2018 for the first time the national average fell below $ 20 / MWh. Again, there is regional variation with the Great Plains, which see the lowest prices, in some cases reaching the average adolescent.
This puts the wind in an incredibly competitive position. The report uses an estimate of future natural gas prices, which show a very gradual increase from about $ 10 / MWh to 2050. But natural gas itself, without considering the planet's cost of burning it for electricity – is already over $ 20 / MWh. This means that the wind located in the center of the US is now cheaper than charging with a natural gas installation, and the wind located elsewhere is approximately equal.
The report notes that photovoltaics have reached prices that are roughly equivalent to wind farms, but have reached a starting point of around $ 150 / MW-hr in 2009. So unless natural gas prices reverse the expected trend and become cheaper, wind and solar will remain the cheapest sources of new electricity in the US.
The offsetting price of electricity, which eliminates the impact of incentives and subsidies on final prices, puts the wind below $ 40 / MWh in 2018. The cheapest form of natural gas production was about $ 10 more per MegaWatt-hour. Note that recently in 2015, the US Energy Information Agency predicted that wind levels that will be leveled in 2020 will be $ 74 / MWh.
Built on better technology
Why is the wind much cheaper than expected? Part of it is in improved technology. The report notes that in 2008, there were no turbines installed in the United States with rotors over 100 meters in diameter. In 2018, 99 percent of them were above 100 meters and the average size was 116 meters. Generally, the turbine generator grows in parallel. The average capacity for installations for 2018 was 2.4MW, up five percent from the previous year.
The area swept away by the blades goes up with the square of their length. Thus, although the blade length and the nominal generating capacity increase in parallel, the real potential energy contribution from the blades grows much faster. This results in the reduction of the so-called specific wind turbine power. These lower power turbines work better in areas where the wind is not as strong or constant. On really windy days, they will saturate the generator's ability to draw energy, while on a more typical day, when winds are lighter or more chaotic, they will draw more from them.
So, although more turbines are being built on sites without the best wind resources, we are producing more turbine energy. Capacity ratios – the amount of power produced relative to the size of the generator – for projects built in the previous four years have now reached 42 percent, a figure that would once require offshore winds. That dragged the capacity of the entire US wind industry to over 35 percent for the first time last year.
The economics of these low-wind designs are so good that 23 existing sites have been "re-routed" with new, larger rotors replacing the older hardware of the existing towers. One thing that may be encouraging is that older plants (those that are a decade or older) seem to have a slight decline in the capacity factor over time. But the reason for this is not clear at this point, so this is something that will need to be traced in the future.
Better grid management has also helped to save wind. Sometimes strong winds can cause wind farms to produce excess power over consumption, which results in reduced farm output. This process, called redundancy, remained a small factor, with only two percent of the potential generation losing in this way. In other words, if limited electricity was used, it would only increase the average capacity factor by 0.7 percentage points.
Overall, given these economies, it is clear that the economic case of wind energy will remain stable as tax credits for renewable energy construction fade over the next few years. But the disappearing credits are driving many developers to start projects sooner than later, so we may see a construction bubble in the next few years, followed by a dramatic decline.