Last month, former Texas Governor and new Energy Secretary Rick Perry tasked his staff with looking at America’s power grid. Secretary Perry wants to know how federal policies are impacting energy sources that are vital for ensuring the grid’s long-term reliability, resilience and affordability. Recently, I wrote that Perry is asking the right question. As the governor who oversaw the transformation of Texas into a wind power leader, Perry is going to like what his staff finds.
Here’s why. In his memo, Secretary Perry laid out three critical yardsticks he wants to assess with his 60-day review. I will offer my take on each of these — from a wind industry perspective — in three columns leading up to our annual WINDPOWER conference in Anaheim, Calif., on May 22-25.
Power Markets and Price
Perry’s first key metric is the marketplace. He wants to know how policies and a changing fuel mix are changing wholesale electricity markets.
It’s an important question because the business reality has moved past decades-old assumptions about how the grid operated when it was powered largely by coal, gas and nuclear.
But what has kept pace is the ability of the grid to adapt to a different energy mix, with widespread switching from coal to gas, and the addition of large amounts of economically competitive renewable energy.
Wind in particular is winning in the marketplace, because of its proven grid reliability and market-beating cost. Wind power costs are down 66 percent since 2009, as low-cost wind has joined low-cost natural gas as a market leader.
Indeed, across much of the nation, wind is now the cheapest source of new electric-generating capacity, attracting utilities such as Xcel Energy and MidAmerican Energy, and corporate buyers such as Amazon, Google, Home Depot and GM.
And as wind has increased its market penetration almost five-fold since 2008, overall U.S. wholesale power prices have dropped more than 60 percent. That is no coincidence.
In fact, in 2016 wind exceeded hydro as the No. 1 U.S. renewable energy in total capacity, enough to power 24 million homes. Wind capped a second straight year at more than 8,000 MW installed and beat both natural gas and solar in new U.S. utility-scale capacity for 2015-2016 combined, according to the Federal Energy Regulatory Commission.
The market has adapted and built up tremendous momentum behind its lowest-cost energy sources. Today, customers’ preferred U.S. energy choices are wind, gas and solar, based on the latest levelized cost of energy (LCOE), as reported by Lazard.
Not surprisingly, these three home-grown energy sources accounted for more than 90 percent of new U.S. utility-scale electric-generating capacity last year. And in the first quarter of 2017, the U.S. wind industry installed nearly 1,000 new wind turbines, for its strongest 1Q since 2009.
Let the Marketplace Decide
Some may not like this new economic reality, but it remains a reality nonetheless. And it’s a reality that powers a workforce of more than a half a million U.S. jobs today, and well over a million U.S. workers in years to come.
Federal and state policies have an important role in encouraging innovation without excessive regulation, ensuring a level playing field for competition based on price, eliminating barriers to entry and connecting supply with demand centers, and enabling investment with a predictable business environment.
Ultimately, however, it is up to the marketplace to decide winners and losers, based on price.
Those who oppose wind power’s role in reducing prices are arguing to turn back the clock to higher electricity costs for consumers and businesses.
That’s not a winning proposition.
NEXT WEEK: More on how wind power has grown while the grid has become more stable.