Vestas Study: Wind Takes the Clean Power Crown

REPORT

WIND TAKES CLEAN POWER CROWN

On Cost, Carbon and Conserving Water, Wind Power Gets Top Marks as the Most Cost-Competitive Clean Energy that is Ready to Turn On Now

 

Road to Climate Accord in Paris: Reports Show Renewable Energies Gaining Traction as Low-cost Power Choices, Serious Solutions to Climate Change

 

December 2015

WIND TAKES THE CLEAN POWER CROWN

On Cost, Carbon & Conserving Water, Wind Power is the Clean Energy Source Ready to Turn on Now

INTRODUCTION

 

Road to Climate Agreement in Paris: Renewable energy gains traction as low-cost choice, serious solution to climate change

While cost-competitiveness continues to dominate as a driver of success in the energy marketplace, another key motivation for switching from carbon-based fuels to clean energy is providing solutions to the threat posed by climate change.

In December 2015, representatives from countries around the world gathered in Paris for the 21st “Conference of the Parties” (“COP 21”) to the 1992 U.N. Framework Convention on Climate Change.

The objective: A global agreement that takes meaningful steps to address climate change, cutting greenhouse gas emissions to limit world temperature increases to well below 2 degrees Celsius above pre-industrial levels, and striving to limit the increase to 1.5 degrees.

Clearly, among of the main ways to achieve these goals will be measures that encourage a rapid transition away from a fossil-fuels and greater investment and market share for clean energy sources and solutions – primarily wind and solar power, as well as energy efficiency.

Going into the Paris conference, participant countries – along with states, counties, cities and companies – had already taken individual, bilateral and multilateral actions to increase their use of clean energy and reduce their greenhouse gas emissions.

Particularly noteworthy is the clean energy revolution occurring in the marketplace.

Since the global climate talks began in 1992, renewable energies such as wind and solar power have gone from being barely blips on the radar screen to now accounting for nearly 600 gigawatts (GW), or 5 percent, of the world’s electricity generating capacity.

Wind power accounts for some 400 GW and solar power nearly 200 GW of that total, and growth of both is accelerating. (see chart below)

 

In the U.S., rapidly declining costs of wind and solar power have made clean energy a key contributor to the power grid, and a serious competitor to natural gas and coal for utilities and power companies.

More utilities are turning on cost-competitive clean energies like wind and solar, and turning off fossil fuels like coal and natural gas, which are becoming more expensive by comparison. According to the U.S. Energy Information Administration , “nearly 16 GW of generating capacity is expected to retire in 2015, 81% of which (12.9 GW) is coal-fired generation.”

Through the first three quarters of 2015, wind was the #1 newly installed U.S. energy source, accounting for 41 percent of all new capacity, followed by natural gas and solar.

Factor in growing concerns about climate and energy security expressed by U.S. and world leaders like the Pope, along with the boost for renewable energy in the new federal Clean Power Plan (CPP) – and it’s clear we’ve turned the corner in the public debate about energy.

With smart energy policies (see more on the CPP below) and continued rapid improvements in renewable energy technology and cost, it’s quite possible that even the “accelerated case” estimated by the International Energy Agency will be surpassed, with net worldwide additions of clean energy potentially exceeding 160 GW a year by the end of this decade.

 

Clean Power Plan: EPA engages states in meeting stricter carbon emissions reduction goals

In the fall of 2015, the United States finalized its Clean Power Plan (CPP), which aims to slash carbon pollution from existing power plants 32% below 2005 levels by 2030. Not surprisingly, clean energy plays a major role.

Renewable energy is a “key strategy for meeting” CPP goals, with the EPA expecting “clean renewable energy generation to increase under the Clean Power Plan to nearly 20% of all power supplied by 2030…”

At the same time, coal-fired generating capacity is projected to shrink, since it is the most carbon intensive.

This graphic illustrates some of the benefits that will result from the U.S. switch to cleaner energy. Continued below is further discussion of the benefits flowing from a switch to clean energy and away from fossil fuels.

The U.S. isn’t the only country looking to lower its greenhouse gas emissions. In September 2015, China and the U.S. issued a joint statement, in which China pledged to “lower carbon dioxide emissions per unit of GDP by 60%” by 2030 while promoting renewable power, iincluding tripling its wind power capacity by 2025 . By the end of 2015, China’s wind power capacity is expected to reach 120 GW , while its solar capacity is projected to hit 150 GW by 2020. Another big developing country, India, is looking to reach 100 GW of wind power capacity by 2022 . And the list goes on, as many countries realize that clean energies like wind are among the quickest, most cost-effective ways of meet both economic and environmental goals.

Growing Demand for Wind: Action Extends to Statehouses, City Halls and Corporate Board Rooms

There have been major initiatives at the local government and corporate levels as well. In California, Gov. Jerry Brown recently signed legislation that seeks to have the state generate half its power from renewable sources by 2030.

Municipalities are also playing a part, with former New York City Mayor Michael Bloomberg writing in Foreign Affairs that cities account for 70 percent of greenhouse gas emissions, and “cities, the primary drivers and likeliest victims of climate change, hold the antidote as well.” In September 2015, the number of cities and regions committed to ambitious greenhouse gas cuts reached 38, with “$8.7 trillion in GDP…larger than any country except the United States and China.”

At the corporate level, the number of companies signing the American Business Act on Climate Pledge reached 81 in October 2015, representing more than $3 trillion in annual revenue and employing more than 9 million people. The graphic below illustrates some of the major players – such as Amazon, Apple, Google, IKEA, Microsoft, and Walmart – adding renewables to their investment portfolios.

Cost-competitive clean energies are proving that what makes good sense for the environment and the planet can also make good sense for business.

 

THE CLEAN POWER COMPETITION

Measuring up

The Competition

Clearly, the momentum for clean energy is strong, and it shows no signs of slowing anytime soon.

Measured up against fossil fuels, the advantages of clean energy sources are formidable: Cost-competitive economically, environmentally beneficial with almost no carbon emissions, water usage or polluting particulates such as lead and mercury that damage human health and the environment.

But, which renewable power source is best? Wind, solar, hydroelectric, geothermal and biomass are among the clean energy sources taking on their conventional fossil fuel and nuclear energy competitors.

As policymakers, utility executives, business leaders and other potential customers make the switch to low-cost renewable power, how do the clean energy choices stack up against each other on these key measures?

I. Cost Efficiency

II. Carbon Reduction

III. Conserving Water

I. Comparison on Cost Efficiency

A number of factors are responsible for clean energy’s advances in the last two decades. In the marketplace, the most important has been cost. In the United States, real costs for wind power are at their lowest levels over the last six years – down 61% according to a new report from Lazard . With advances in wind turbine technology and reliability, wind power generating capacity has been booming.

In its November 2015 update, Lazard estimates the levelized cost of energy (LCOE) of onshore wind power to be significantly cheaper than new coal, natural gas or nuclear power plants. Wind power also stacks up very well with other renewable energy sources.

According to the report (see graph below), wind averages an unsubsidized LCOE in the U.S. of $32-$77/MWh, lower than every other form of “alternative energy” – rooftop solar ($109-$193/MWh), fuel cells ($106-$167/MWh), geothermal ($87-$117/MWh), biomass ($82-$110/MWh), and utility-scale solar ($50-$70/MWh). Only energy efficiency, which isn’t so much a new energy source as using less energy per unit from any source, comes in lower ($0-$50/MWh).

Wind power is particularly inexpensive in certain regions of the U.S. that have steady, reliable winds and wide-open spaces for locating large wind farms . In fact, the Great Plains states are often referred to as the “Saudi Arabia of wind” and for good reason, as is apparent from a quick look at the U.S. wind power resource map.

The New York Times in November 2014 reported Oklahoma wind power was getting so cheap it is like “a Blue Light Special,” adding that: “In the interior region of the country, from North Dakota down to Texas, where wind energy is particularly robust, utilities were able to lock in long contracts at 2.1 cents a kilowatt-hour, on average,” and that is “down from prices closer to 5 cents five years ago.”

A U.S. Dept. of Energy (DOE) 2014 Wind Technologies Market Report shows how this trend plays out, as wind power purchase agreement (PPA) prices fall, which “is particularly evident within the Interior…as a result of its low average project costs and high average capacity factors…”

Clearly, the cost trends for wind power are moving in the right direction. So is the technology, which DOE notes, is improving by leaps and bounds. This includes “higher hub heights, larger rotors, and improved energy capture,” all facilitating access to “the stronger and more consistent wind resources typically found at greater heights above ground level.” DOE says these advances are “increasingly unlocking cost-effective wind in regions with more moderate wind resources” and “enabl[ing] wind to be a true nationwide economic resource.”

Costs have been falling for other forms of clean energy as well. Solar power’s LCOE, according to Lazard , has dropped by 82 percent in the past six years, though starting from a higher level than wind. Since 1977, the average cost of solar PV has declined from more than $76 per watt in 1977 to under $1.50 per watt by early 2015. These price reductions are expected to continue in coming years, with ongoing technological and cost improvements.

By contrast, nuclear power plants have seen enormous cost overruns , with the estimated cost of building a new nuclear plant actually increasing sharply , “from between $2 billion and $4 billion per unit [in 2002] to $9 billion per unit [in 2008].” As for coal-fired power plants, costs are high – significantly higher than for onshore wind power – in part due to the need for expensive pollution mitigation technologies such as “scrubbers” or “carbon capture.”

Looking ahead, it is unlikely that new coal-fired power plants with state-of-the-art pollution control technologies will be cost-competitive with clean energy sources.

For their part, natural gas-fired power plants are relatively cheap at present , given the abundance of natural gas resulting from the “fracking” boom. However, there is no guarantee that natural gas prices will remain low into the future, particularly given track record of volatility in recent decades.

Winner on Cost —

In the competition on cost-efficiency and price, wind power comes out on top by a significant margin among all clean energy sources. Wind is also the only clean energy that currently can more than hold its own against natural gas on the basis of real cost – even without taking the cost of pollution into account. Over a 20-year period, wind power can guarantee its low price; natural gas simply cannot.

 

II. Comparison on Carbon Reduction

Even with climate change an increasingly urgent issue, world demand for electricity is expected to keep growing for decades. The choice of power generating technologies increasingly needs to look at how cost-effective the technologies are at producing power with minimal or no carbon pollution.

According to Lazard’s 2015 analysis, the choice here is clear: coal-fired power plants are certainly not the answer, while “policies designed to promote wind and utility-scale solar development could be a particularly cost effective way of limiting carbon emissions; rooftop solar and solar thermal remain expensive, by comparison.”

The Union of Concerned Scientists reports: “Compared with natural gas, which emits between 0.6 and 2 pounds of carbon dioxide equivalent per kilowatt-hour (CO2E/kWh), and coal, which emits from 1.4 to 3.6 pounds of CO2E/kWh, wind emits only 0.02 to 0.04 pounds of CO2E/kWh, solar 0.07 to 0.2, geothermal 0.1 to 0.2, and hydroelectric between 0.1 and 0.5.”

The Union of Concerned Scientists rates wind and solar highest among clean energies – both are carbon-free producing power. It does note the hazardous materials used in solar PV manufacturing and “emissions associated with other stages of the solar life-cycle.” It also says: “Renewable electricity generation from biomass can have a range of global warming emissions depending on the resource and how it is harvested,” as “sources of biomass can generate significant global warming emissions.”

As for nuclear power, advocates like to point out that it doesn’t emit carbon pollution.

While that is the case, it’s also true that building new nuclear power plants is a far more expensive way to generate carbon-free power than wind power or utility scale solar.

For instance, Utility Dive recently reported that “the Vogtle nuclear facility in Georgia and V.C. Summer nuclear facility in South Carolina are both some three years behind schedule in construction and each is expected come in billions of dollars over their original budgets.”

In addition, “The U.S. Energy Information Administration forecast of nuclear generation falling by 10,800 MW through 2020 could be understated, according to analysis from Fitch Ratings, because political pressure and higher-than-expected operations and maintenance costs are accelerating plant retirements.” Clearly, new nuclear power plants are not a realistic option for providing clean, affordable power, nor are they likely to be for the foreseeable future.

Another option, natural gas combined-cycle power plants, is certainly better than coal on carbon emissions. However, new natural gas power plants are more costly than wind on a “levelized cost” basis, and natural gas prices are volatile, whereas the “fuel” for wind turbines is free and inexhaustible. In addition, natural gas comes with a variety of environmental concerns related to its production – for instance, emissions of methane, a potent greenhouse gas – and transport (via pipelines) than wind power.

Winner on Reducing Carbon —

In the competition on carbon reduction, wind power has a slight edge on the margins over solar among clean energies. Both are light years ahead of fossil fuels.

 

III. Comparison on Conserving Water

As fresh water supplies become ever more strained due to a growing population, warming climate, agricultural water demand and other factors, concerns over excessive water use in the extraction, processing and production of power are increasingly salient.

The Union of Concerned Scientists, among others, has studied the issue and found both “thermoelectric” (fossil fuel plants boiling water to produce steam and generate electricity by turning turbines) and nuclear power plants (requiring water for cooling) use enormous amounts of water – up to 5.9 billion gallons per year, enough to supply more than 100 cities the size of New York, the organization finds. That includes thermoelectric power plants located in the arid, increasingly drought-impacted western United States, where water is increasingly being rationed, people are ripping out their lawns, and expensive water projects are being undertaken.

On nuclear power, the Union of Concerned Scientists reports that “in 2008, the U.S. nuclear fleet withdrew nearly eight times more freshwater than natural gas plants per unit of electricity generated, and 11 percent more than coal plants.” The following graphic, from the Union of Concerned Scientists, summarizes the amount of water used by each electricity-generating source.

At one extreme, coal, natural gas and nuclear consume large amounts of water, depending on which cooling technology is used.

Fracking to unlock stores of natural gas in the U.S. can seriously impact fresh water supplies. A review “of more than 500 fracking-related studies… concludes that there is ‘no evidence that fracking can be practiced in a manner that doesn’t threaten human health.'” A high-pressure mix of toxic chemicals pumped underground to free natural gas can have disastrous results if it gets into aquifers and pollutes ground water.

Wind power consumes almost no water. Photovoltaic solar also uses very little water, although slightly more than wind power. Geothermal, biomass, and some types of concentrating solar power (CSP) plants – when they rely on recirculating cooling systems and steam to drive turbines – have water use in the range of nuclear or coal. Clearly, this is a major factor in deciding which power generating options make the most sense in a water-constrained world.

Winner on Conserving Water —

On conserving water resources, wind power takes another close win over solar, which is water-friendly in most cases (except CSP). Both are a stark contrast with conventional energies like coal, natural gas, and nuclear.

 

WINNER: WIND ENERGY TAKES THE CLEAN POWER CROWN

Overall, wind takes the clean power crown, by a healthy margin. It is the most cost-effective energy source across large swaths of the U.S., ahead of utility-scale solar on average and competitive with natural gas combined-cycle plants. On water use and other environmental impacts of the various power sources, wind power comes out on top again, edging out solar, which is also strong by these measures.

Unlike natural gas, there’s no need with wind or solar power for dangerous, dirty, water-intensive “fracking” – which scientific studies show “worsens air quality, contaminates water sources and harms public health.” Wind and solar power also don’t require blowing up mountains, common with coal.

Wind power has huge potential, particularly looking at both onshore and offshore. The National Renewable Energy Laboratory reports onshore wind has a technical potential capacity of 11,000 GW – more than ten times greater than the total for existing U.S. power generating capacity today. Add in the potential capacity of 4,000 GW for offshore wind power – approximately four times the current total for U.S. power generating capacity – and wind power’s appeal becomes clear to supply the nation with an inexhaustible, clean and low-cost source of electricity for generations.

Without question, solar also has significant potential – as much as 200,000 GW – in the U.S alone, notes NREL. Solar still costs more than wind power, but it is important to note solar and wind can be highly complementary – in their generation profiles, geographic diversity, diurnal variability, etc. As NREL points out , wind and solar “outputs are not highly correlated” in time of day, location, etc.

Widespread adoption of wind and solar has already begun effectively reducing fossil fuels’ capacity factor , raising fossil fuel’s relative cost and setting off a “virtuous cycle” that reinforces the trend. This past year, wind power improved its capacity factor 14 percent, while natural gas-fired power plants’ capacity factors dropped by 12 percent.

Market acceptance of wind and solar power has grown by leaps and bounds. As the American Wind Energy Association notes, total wind power capacity in the U.S. is up 30-fold since 1999, from just 2.4 GW to nearly 66 GW in 2014. Global demand for wind power is “booming like never before,” and is likely to reach 428 GW capacity by the end of 2015, up 7-fold from just 60 GW in 2005. If current trends continue, wind energy could potentially supply 35% of U.S. electricity by 2050, up from around 5% at present.

 

ANALYSIS AND IMPLICATIONS

For a wide range of very compelling reasons – economic, environmental, health – a rapid switch from fossil fuels to clean energy such as wind makes tremendous sense. The final Paris Climate Agreement brings this into sharp focus, as do almost monthly reports of record-shattering heat around the world. Negotiators from 196 countries agreed on a course that will accelerate the momentum wind and other clean energies have built, further strengthen investments in renewables and hasten the transition from fossil fuels.

Among the key solutions in a serious strategy for success, clean wind power – along with solar and energy efficiency – are front and center.

The bottom line is wind energy has become the least expensive choice for new power capacity in many markets, while at the same time slashing carbon emissions, consumption of water, and other adverse environmental impacts linked with fossil fuel production, transportation, refining and consumption.

DOE issued a report earlier this year, Wind Vision: A New Era for Wind Power in the United States, reinforcing these findings:

• “Wind power is one of the fastest-growing sources of new electricity capacity and the largest source of new renewable power generation added in the U.S. since 2000.”

• Deployment of wind power at 20% by 2030 and 35% by 2050 – both achievable goals – would confer myriad environmental and health benefits. These include “Cumulative benefits of $400 billion (net present value 2013-2050) in avoided global damage from [greenhouse gas emissions];” “cumulative benefits of $108 billion through 2050 for avoided emissions of fine particulate matter (PM), nitrogen oxides (NOX), sulfur dioxides (SO2 );” “21,700 premature deaths from air pollution avoided;” “23% reduction in water consumed by the electric sector in 2050.”

• Continued wind power deployment would also yield tremendous economic benefits, including some “600,000 wind-related gross jobs spread across the nation;” “$1 billion in annual land lease payments;” and total “cost savings of $149 billion by 2050.”

In sum, wind power is the lowest-cost clean energy source and a ready climate solution, today. No need to wait for R&D or cost reductions; wind power is ready to meet world clean energy needs for years to come.

This competition among clean energies in the marketplace will continue for decades. If engaged vigorously, the outcome has the potential – from an energy cost and climate perspective – to make everyone winners.  

   

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Chris Brown is president, Vestas Americas and board member and past chair of the American Wind Energy Association. Prior to Vestas, he served as Chief Operating Officer for the City of Detroit for about two years. A board member on the American Wind Energy Association, Brown's energy background includes time in the offshore wind industry, senior executive at a large U.S. utility and managing director at an international utility. Previously, he was Founder and Chief Executive Officer of Deepwater Wind LLC, where he created the plan for a 3,000 MW offshore wind company; Executive Vice President for DTE Energy Resources, where he was responsible for DTE's largest non-utility businesses including Energy Services, Coal Services, Biomass and Methane Resources; Senior Vice President of Singapore Power and Managing Director of Singapore Power International; Director of Asia Operations for Entergy Corporation; and Counsel for Constellation Energy. Brown holds a Juris Doctor degree from the Villanova University School of Law and a bachelor's degree in political science from the University of Delaware. He also attended Bonn University in Bonn, Germany, as a Fulbright Scholar, where he studied economics and finance.

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