With Wind Energy Prices at All-Time Lows, DOE Is Cautiously Optimistic

Wind electricity costs have dropped to about 2.5 cents per kilowatt hour, a highly competitive price in some parts of the country.

A worker makes adjustments to a wind turbine at Black Butte Lake near Orland, Calif. The turbine went online in 2013. Only about 1,000 megawatts of new capacity was added in 2013, just 8 percent of 2012's total.Credit: U.S. Army photo by Robert Kidd

With new wind power installations rebounding from last year's free fall, there's still a chance that wind could provide 20 percent of U.S. electricity by 2030, the Department of Energy projected on Monday.

But that will probably require a favorable mix of market developments, technology progress  and regulatory policies, suggested DOE's annual wind technologies market report.

Amid turmoil over tax incentives, barely 1,000 megawatts of new capacity were added in 2013, just 8 percent of the previous year's record-setting total. "All signals point to more robust growth in 2014 and 2015," the report said. But beyond that, things get murky again.

The most positive sign for the wind power industry in the 82-page report was that both the cost of wind turbines and the price of wind-powered electricity continue to fall.

Wind power prices, as measured in power purchase agreements (PPAs) for the nearly 30,000 megawatts of projects that have been built or soon will be, "have reached all-time lows," the report found.

After topping out at nearly $70 per megawatt hour in 2009, the national average levelized price of wind purchase agreements fell to around $25 last year, the report sad.

That means wind electricity costs about 2.5 cents per kilowatt hour, a highly competitive price in some parts of the country.

Back in 2009 and 2010, wind was being squeezed out of the competitive wholesale power price range, the report said. In 2011 and 2012, wind prices rejoined the upper end of the competitive range, but now wind is "back at the bottom of the range once again."

For the first time, this annual report also forecast wind PPA prices against the prices for natural gas, and it found wind looking favorable for the foreseeable future—"below even the low-end of gas price forecast for two decades."

But this kind of prediction depends on whether Congress restores the on-again off-again tax provisions that subsidized wind power through 2012. In 2013, Washington pulled the rug out from under the industry, then gave it a new lease on life this year and next, and has left its future uncertain after that.

Other policy considerations matter, too—notably the effects of the Environmental Protection Agency's proposed crackdown on carbon emissions from the electric power industry.

"More stringent EPA environmental regulations on fossil plant retirement and energy costs may create new markets for wind energy," the report said.

"Regardless of future uncertainties, and despite the poor showing in 2013, wind power capacity additions in recent years have put the United States on an early trajectory that may lead to 20 percent of the nation's electricity demand coming from wind energy by 2030," the report said. "Nonetheless, annual wind additions in 2013 fell well short of the pathway...and projections for additions in 2014 through 2016 similarly fall short" of what would be needed to keep on track toward the 20 percent milestone.

"Achieving 20% wind energy by 2030 may require effort and investment that go beyond business as usual."

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