As others have pointed out, the title is highly misleading because the facility has yet to be built. Moreover, projecting a cost-per-kwh over 20 years is a measure in futility. It's impossible to project energy prices 20 years in the future-- it's very possible another energy source will trump this facility's cost per kWh. In addition, cost per kWh amortizes the cost of construction where money is spent today for benefits to accrue in the future. How you determine this discount rate has a massive impact on the supposed value of the facility.
As PG himself has pointed out, behind every significant news article is a submarine pushing public opinion[0]
> Moreover, projecting a cost-per-kwh over 20 years is a measure in futility. It's impossible to project energy prices 20 years in the future-- it's very possible another energy source will trump this facility's cost per kWh.
You don't have to predict any prices to predict the costs of a specific facility.
> In addition, cost per kWh amortizes the cost of construction where money is spent today for benefits to accrue in the future. How you determine this discount rate has a massive impact on the supposed value of the facility.
Sure, but it's easy to take the construction cost and run your preferred discounting math on it.
> behind every significant news article is a submarine
This ain't a submarine, it's clearly promoting the specific installation...
I agree on the clickbaityness of the title but disagree on your assertion that one can not predict what this price a project is willing to sell its energy generated at given the expected costs of developing the project. (This is different from them making a prediction in energy costs far into the future, which you assert).
This is because the majority of “material” factors within the project can be known with a reasonable degree of certainty today. Expectations of costs over the course of the project can in theory be protected via contract (I.e. land rights over decades, service agreements from manufacturers of the turbines) or are “fixed” and are “costs incurred today” and can be amortized over a given a period of time. Additionally, insurance and warranties on the equipment move the risks off to others to further help generating certainty which can be extrapolated to a reasonable “expected rate of returns/expected cash flows” - I.e. What, given all of what they’d know - the price of selling electricity over a given period of time is needed to pay back on the project. Apparently this developer determined that they can sell their electricity for 7.5Cents(USD)/kWh over a period for 20 years and still make a reasonable profit.
(Note: I also don’t agree that there isn’t an agenda/narrative with such an article & title. Just that if developers couldn’t predict such costs, they wouldn’t guarantee the low price in the first place).
It sounds like they already did some kind of 20yr swap - 'a long-term power-purchase agreement had helped the wind farm “offer an attractive price” to consumers'
Yes, that is essentially what a PPA sets out. There are several structures that can be deployed, but fundamentally its fixing the future revenue streams of the asset. The buyer of the PPA wins, as they get a fixed cost. The seller wins, their revenues are fixed and known, and they can get more leverage from debt finance because of this - thus, they get a better return on their equity investment.
The price is on the subsidy awarded not on the actual price the energy is sold at.
The subsidies in the UK are dropping to these levels.. And for some European projects there are zero subsidy (though these are contracted in a different way so not exactly comparable).
I thought the project was dead due to lobbying by the Kennedy and Koch families (talk about strange bedfellows) in 2017. Has it been resurrected under a different name?
Cape Wind was proposed for Nantucket Sound, north of the islands and just 5 miles south of Cape Cod. Vineyard Wind will be 15 miles south of the islands.
>This was confirmed by the CEO of the project, Lars Thaaning Pedersen, who said in a statement that federal tax credits and a long-term power-purchase agreement had helped the wind farm “offer an attractive price” to consumers.
Would it not make more sense to include the federal tax credits since they would be at the cost of the tax payer?
You should read the articles you posted. They're redefining subsidy to mean:
> not only supply costs but also (most importantly) environmental costs like global warming and deaths from air pollution and taxes applied to consumer goods in general.
In other words, that $5 trillion is the indirect cost, not in addition to the indirect cost.
Isn't a subsidy just a negative tax on what's seen as a positive externality? I get the argument for trying to find a 'market-based solution', but at some point a relatively small group of people (government representatives) need to make a decision that will affect the whole market/population. Whether they're taxing one thing or subsidizing something else, a decision is being made.
Imagine we wanted to influence people to eat burritos instead of tacos. Tacos are currently very popular. The normal cost of a taco is $3 and the normal cost of a burrito is $4. Let's say I have $4.
If we subsidise the burrito by $2, then the burrito will cost $2 and the taco will cost $3. I have $4 so I can buy either of them. They are about the same price (with the burrito being just a little cheaper). However since I'm used to buying tacos, there's a good chance that I won't switch.
If I leave the burrito at $4 and tax the taco an extra $2, then the burrito will cost $4 and the taco will cost $5. I don't have $5 so I'm forced to buy a burrito.
Of course the problem is that in the second scenario everything costs more and the government is pocketing the tax. So while it's arguably going to be more effective at switching people to burritos (because a subset of people will no longer be able to afford tacos), it's easy to market against: "The government is destroying the economy by putting tacos out of reach of the everyday person. Food will be 33% more expensive because of this tax that is designed to funnel money into government coffers. There are 2 million taco makers who will lose their jobs because of this terrible tax. Vote for us and we will return the choice back to consumers."
That's valid as long as there are only two choices, but a more accurate analogy would be that we don't really care what people eat as long as they eat fewer tacos. You could subsidize burritos, but that's less effective for people who would have had enchiladas as their second choice. In fact, some portion of people who would have bought enchiladas anyways might end up getting burritos because they're now cheaper, and the government foots the bill for no good reason.
Another factor to consider is that the subsidy must be paid for by somebody, so you end up needing to raise the money through taxes anyway. This means that ultimately you are raising net taxes on everything that's not subsidized.
With all that being said, you're completely right that subsidies are an easier sell. They have an enormous advantage: you can seperate the spending / mechanism of action (which people love) from the taxes that pay for it (which people hate). Taxes on bad things inherently tie the two together, which makes the marketing harder.
Additionally, the benefits of subsidies are concentrated while the costs are diffuse, which makes it easier to build a strong voting block in favour of subsidies.
It is better to tax the negative outcome, because then the choices about what replaces it are not being made directly by the government, and that can reduce costs and to an extent scale up more quickly. But, US politics seems too dysfunctional for a carbon tax, so unfortunately we’re left with deciding whether to let the perfect be the enemy of the good.
We know carbon emissions are bad, but we don't know that any particular alternative is the one we should use instead.
Subsidizing various things instead of taxing fossil fuels is a classic example of looking for your keys under the streetlight. A simple, obvious solution that you know is wrong is not a good one.
First, this is incorrect in general. Others will make the points about tax vs subsidy re: externalities.
But the comment also misses one of the main points of subsidies: they aren't simply to offset some externality, they are used to provide efficiently leveraged market availability to products that are at the beginning of an industrial learning curve which will reduce costs over the longer run.
They let us get the tech out of the local minima that it would otherwise be stuck in to move further out on the learning curve so that long-term savings can be had.
Subsidy is more efficient than taxes - based on undergrad economic theory - but it somewhat disregards exactly where the money for the subsidy comes from (at what cost to something else?) so reality will be different.
But I will say one thing for subsidy is it allows startups to enter a high tech space and take them as a funding source, ideally in proportion to how well the tech works.
Cap and trade can work out similarly (like Tesla selling their credits) to fund the R&D.
But the point is you want to do more than just tax the externality, if you can subsidize R&D by startups which fundamentally shifts the curve rather than just trying to move along it.
IF the government happens to choose the right technology to subsidize, then a subsidy is efficient. Suppose they pump a lot of money into wind, and then someone discovers a solar solution that's cheaper. That giant investment will have been wasted. By contrast, a tax lets researchers competing on a level playing field find the right substitute.
Externalities can be either positive or negative. For example, education has positive externalities, as well as healthcare. Subsidizing and taxing are both methods of dealing with externalities, and in this case subsidizing non-carbon emitting power sources is nearly equivalent to taxing carbon-emitting power sources.
Politicians in the United States can't accurately tax coal's externalities in the same way that they can't embark on a campaign of land redistribution. In the current climate, it is political suicide.
This depends. Mostly it depends on whether similar subsidies are included for other production methods.
Typically nuclear power operators have capped liability (e.g Price-Anderson in the US), or are simply assumed to be bankrupt in the event of a major incident, and taxpayers would need to pay the cleanup. This liability cap, and hence cap on insurance costs, is a subsidy.
So in short, it’s very hard to disconnect energy prices from various taxes and subsidies.
I really think it shouldn't be a hard line. Large reactors should need higher insurance, small reactors should need lower. One of the things making small reactors more practical is the insurance cost. And since it is a hard line companies figure they might as well build the biggest they can. Seems to hurt everyone involved.
Possibly. But if comparison is an endgoal that number should only be used against other forms energy that are also adjusted for their respective subsidies. But why is direct subsidy the only thing we should adjust for? How about cost the government pays indirectly for other energy forms? Environmental cleanup or other indirect costs for mishaps, etc. If we want a more holistic comparison let’s keep going up.
For the long-term power-purchase agreement wind has an advantage since over that time scale the total output is confident. There might be poor years and better ones but compared to long term uncertainty of fuel prices it is financially favorable. There is also a couple of decades of data on service and maintenance costs from large projects elsewhere in the world, settling past doubts on the technologies viability.
Not collecting taxes on something that might otherwise be taxed is not the same as someone taking your money via taxes and using it to pay for something. What does it cost you if the government doesn't tax your local church?
> Not collecting taxes on something that might otherwise be taxed is not the same as someone taking your money via taxes and using it to pay for something. What does it cost you if the government doesn't tax your local church?
Debt increases -> interest payments increase -> interest is paid at public expense from the general pool of taxpayers.
I know this sort of causal relationship isn't immediately obvious but it is there as it squeezes services for everyone else if you don't raise taxes to cover the difference.
Not collecting a tax does not increase debt. Outlays increase debt. If it did, then not taxing Apple 100% of its profits would be "costing" us all a fortune.
Please read a government budget sometime and look at current law vs exceptions to current law in the form of targeted tax breaks.
It is called a tax expenditure. Aka an expense or an outlay.
Making up an absurd position that requires redefining financial terms is a poor strategy.
Appying your logic, collecting $0 in taxes from everyone does not create any debt because you can simply reduce expenses to $0.
Please apply your position to your own life ($0 in income and $0 in expenses) and let me know if your position is a real one. I suspect the lack of shelter and food will convince you otherwise.
The article does not mention whether this price includes the cost of the peaking facility necessary to cover wind intermittence. The PPA price usually would not. Unless you have excess peaking capacity, bringing a big new wind farm online usually means you need a new big gas peaking facility.
Actually price stability and a lack of predictability are what is killing oil business. Sometimes it is cheap, sometimes it is not cheap. We've seen prices range from the lower thirties to over a hundred dollars per barrel in the last decade. Countries like Russia, Venezuela, and Saudi Arabia are suffering economically when prices go down. They 'fix' it by over supplying and subsequently under supplying. This then causes production bottlenecks and shortages that drive the price up again. Meanwhile their production is getting more expensive because they've exhausted all the cheap options which means they need the prices to be high most of the time or they are losing money. Likewise fracking based extraction in e.g. Texas is only economically viable if prices stay high.
Over supply due to countries dumping their reserves to balance their budgets are keeping prices low. This makes investments in more expensive ways to produce oil less attractive. Eventually cheap reserves will run out. So cheap oil is a double edged sword.
That's why wind projects like typically have investors behind them that used to dabble in oil. Just makes more sense to that than to invest in exploiting oil reserves that may never deliver enough ROI to be worth the trouble.
That's irrelevant. Unless you can show that the in place regimes would not have extracted the oil (something not even Norway can resist), the wars had no impact on its presence in the market (other than perhaps a delay during instability).
The assertion seems to be that US actions served to keep prices down (subsidized the market). It isn't clear to me what line of reasoning gets to that conclusion though with respect to military actions in the Middle East.
Markets like stability, doesn't much matter to the market if that stability comes from an authoritarian or a liberal democracy or something in-between so the claim that US military actions were some sort of stealthy, planned effort to subsidize the price of oil doesn't make sense to me.
The instability and the associated price increases in the oil market could be interpreted as a subsidy to other parts of the energy market by making it easier for them to compete against oil. Most businesses are pretty happy when something causes their competitor's production costs or selling price to increase.
But you're not wrong. These articles give false hope.
Average capacity of an offshore farm sits at 40% annually in best case scenarios while a typical LNG plant would be what around 80-90% capacity. So you need to build the same LNG plant locally anyways as a backup and switch it on and off as the wind changes. How is this sensible?
Ok maybe you wouldnt need to build the additional coal/gas plant if USA had a good network to shuffle electricity across states but even with your terrible infrastructure everyone complains about you cant seem to get a basic spending bill passed to fix potholes, so these people think you're going to be building these trans-continental cables to trade electricity? No luck.
A wind plant that burst between not enough and too much is not the same thing as a constant source. Giving away energy to Nevada is an example of a failure, not a stable source.
Coal power plants also need peaking support as base load power is not load following. Yet, because they are cheap enough that's not been a problem in the past.
Wind/Solar is thus filling the exact same base load niche of cheap power.
Solar though produces power roughly in phase with the demand curve.
Wind tends to wreck havoc on base load operations because it often produces a lot of power at night. Since wind is cheap the solution is to retire coal fired plants.
1,000 miles of power lines east or west pushes solar power +/- 1 hour earlier or later at the cost of ~3% efficiency. It's only nighttime that's a real problem but again, night time has lower overall demand.
Which means the duck curve is mostly a non issue over any large land mass. Alt least relative to coal / nuclear base load power plants.
Not suggesting that eclipses are the biggest concern with solar power and base loads but it does illustrate the complexity of matching supply and demand with renewables.
People use less power on cloudy days so this tends to average out.
Really though solar provides zero power for 1/2 the day so it needs some form of backup. Wind/Hydro/Storage work, but on top of that you simply want excess cheap solar / wind so a minimal reduction like an eclipse does not present a problem.
people imagine that making renewables work is just TOO HARD yet if you look at all of the infrastructure requried to make fossil fuels work it is a massive amount of money, tech, and effort. We send cities out into the ocean to drill holes into the curst of the earth, massive boats the size of stadiums to bring the oil to shore, then massive facilities to refine it and on and on and on. Then people act like figuring out large scale energy storage is just too hard! Sorry have to deal with global warming!
If drilling wasn't cost effective at the current price per barrel, they wouldn't do it, it's that simple. Perhaps you're underestimating how much a drilling rig can extract.
You're right about no pricing of global warming externalities, but that has nothing to do with your appeal to incredulity of 'cities on the ocean'. Have you seen the scale of a large offshore wind farm?
It doesn't seem to be a crazy price, although I think your units need adjustment?
Seems to be $533 per kilowatt of carrying capacity, which is 53.3 cents per W, as you mentioned.
A kWh (1 hour x 1 kW) usually costs between 5 and 10 cents depending on the market, so, how many hours will the line need to be carrying its full complement of electricity in order to say, increase the cost by (a contrived number) only 1 cent per kWh?
I fully admit I don't know the vagaries of load-shifting and transmission, however...
You don't just move power from a single farm for 30 years using just that line.
Reality is end up with a network of these lines at various utilization numbers. But, an average of say 60% seems achievable which would put you at around 0.33 cents per kWh over 1000 miles. Now specifics becomes a rather complex geometry problem as the US is mostly above the equator etc, but it does show you can shift power more than 1 hour for under 1 cent per kWh which makes this cheaper than storage.
You need opex and to show that a one hour shift is worth anything close to that. People in cold climates need heat in the dark. People in hot climates need air con in the evening after work. A 1 hour shift does little for that.
As coal plants cannot be turned down quickly when the demand goes down, they always depend on peaker plants which can be shut off quickly. If you wanted to supply the peak demand with coal, you would overload the net when demand drops.
The price given is the subsidy, not the cost of construction.
I’ve worked on multiple European offshore wind farms and no new gas facilitiy was constructed.... The switching on these things is insane, I think in the UK the nationa grid can switch off an entire +500MW facility in a couple of seconds.
I'm curious why wind power is in vogue now and wasn't, say, two decades ago.
Solar-electric I assume required some sort of scale or manufacturing advances to be competitive. But modern wind turbines seem to have been do-able decades ago.
Wind power is becoming cheaper relative to other sources of electricity, so it is becoming more popular. But why? Primarily, we figured out how to build bigger wind turbines. Bigger turbines give you:
- Wind higher up that is stronger and more constant
- Bigger turbines with longer blades that harvest more energy
- Fewer bigger turbines are cheaper to install and maintain than more numerous smaller turbines
Frankly, these things are well into the size of sky scrapers and isn't the sort of thing you just create overnight. Each generation incorporates learnings from the previous generation and gets iteratively bigger.
This Vox article does a better job of explaining things than I ever could:
Material science breakthroughs have improved the efficiency and cost effectiveness of turbines. Simply put, less friction means higher output and less maintenance. There are a lot of exotic ceramics and other materials available now that simply did not exist only a few decades ago. Also, economies of scale have matured the industry around this to the point where installation and maintenance cost are down and much more predictable.
With solar, panel efficiency has gradually improved and economies of scale is driving panel production and operation cost down as well.
Coal prices have been kind of stable since there is plenty to be mined. But since clean alternatives dipped below the coal prices a few years ago, coal has become a lot less attractive. That combined with heavy pollution means that coal plants are slowly being shut down and most plans for building new ones have been shelved. Meanwhile a lot of the remaining coal plants that are still operating are facing likely shut downs over the next decade or so because they won't be able to make a profit as clean alternatives drive prices down as they come online.
Turbine sizes have tripled in the last 10 years and the supply chain has matured so now there are multiple huge companies capable of building these things as cheaply as possible...
Completely misleading title: "sets record low price" indicates that it has done something, but the article says it has not been built. This, it has not set any price. Someone has projected a price.
Someone has struck a contract for future, on a price.
The price is the highest the energy will cost, for the lifetime of the contract absent force majure.
Why would the owner sign? The contract gives certainty. The contract means the owner can now get funding, they have a guaranteed income stream across the life of the contract.
The subsidy has been awarded at a fixed rate for the next 20 years, this subsidy is described as being a record low (not necessarily correct), so the title just about correct.
"Australia's best informed and most read web-site focusing on clean energy news and analysis, as well as climate policy."
It's an advocacy organization probably funded by clean energy lobby. There are quite a few of these climate advocacy "news" organizations being spammed on social media along with their supporters in the comment threads.
>Bloomberg reports that the 800MW Vineyard Wind project – a yet-to-be-built joint effort of Avangrid and Copenhagen Infrastructure Partners – is expected to provide electricity and renewable energy credits for 6.5 cents a kilowatt-hour (8.5c/kWh AUD) over the life of its 20-year contract.
Seems maybe a little premature to call it successful.
OTOH, great to see the US getting off the dime after much of Europe has tackled this - with sterling results. That our regrettable resistance is ending is in itself a great success.
I wonder if some of these savings should be set aside to directly go towards cleanup operations - processes to scrub CO2, reduce ocean acidification etc
It hasn’t been built, the “low” price is supported by federal tax credits which means all the taxpayers of United States, and its results are only “expected”. This is hardly a news article, it is more of a propaganda piece.
As opposed to its competitors (the points of price comparison) who get tax credits via the government not appropriately charging them for their negative externalities? How's that for the taxpayers of the United states supporting a low price?
Can we size these tax credits, please? Lots of argument in both directions without any sense of scale. If the tax credits artificially cheapen the price by 10% (i.e. 7.2 cents/kwh becomes 6.5 cents/kwh), they're not a major distortion.
If they cheapen the price by 50% (13 cents/kwh becomes 6.5 cents/kwh), then that's a big thumb on the scale.
Until there's more clarity on this, it's hard for me to take a side.
The wind energy production tax credit was $0.023 per kwh in 2016 -- It's indexed to inflation and then stepped down by 20% per year from there. So for projects initiating in 2018, the PTC should be $0.023 x 1.03^2 x 60% . (3% inflation for 2 years, 40% discount). So this project should expect to see ~$0.0146/kwh or 1.46 cents/kwh in subsidy.
> I'm not a fan of wind- big, ugly, noisy, and deadly to birds.
Wind does not kill birds in significant numbers, that is misinformation.
Offshore wind is many miles out to sea, so it hardly matters if they’re big, ugly or noisy. It also reduces the effect on birds from negligible to nonexistent. In practice they are a few dots on the horizon, if we really are not willing to put up with such a minor inconvenience we might as well give up now.
Not an ornithologist, but the sea birds I've observed seem to ride close to the water, within ground-effect it seems. As you say then these elevated wind turbines are unlikely to have a significant impact on birds.
>Only a decade ago, [US] nuclear reactors were cash cows. But a combination of low natural gas prices and a boom in solar and wind power has rendered them unable to compete in states with price competition for power. Five of the country’s nuclear plants have shut down in the past decade. Of the remaining 99, at least a dozen more may close in the next.
Also here in the UK the govenment is spending £20 bn to build the Hinkley Point reactor and "The National Audit Office estimates the additional cost to consumers (above the estimated market price of electricity) under the "strike price" will be £50 billion."
As a tax payer I'd rather they'd spent our £70bn on a few windmills.
"noisy" - I've gone right up to the base of farm-based wind turbines and don't remember any terrible noise. And they're never built right next to a house.
Price to build and run, followed by public perception. A good chunk of cost is safety regulation; until smaller and cheaper reactors are efficient (and with less catastrophic failure modes) come into play, natural gas will out-compete nuclear 9 times out of 10.
Sadly, too little research is going into nuclear, largely due to public perception; plants that use thorium or recycle waste have a ton of promise but little public interest. Meanwhile, Germany needs to find out what to do with about a third of their wind turbines in the next few years, as they're about to hit end of life and the parts are difficult or impossible to reuse and recycle.
Not to mention the environmental consequences of solar and wind production, but hey, chromium and cadmium poisoning doesn't sound as scary as a mushroom cloud irradiating half the country.
Because of 3 mile Island, Fukushima and Chernobyl.
If we had invested the same amount of effort in making Nuclear energy safe as we did in lobbying against it, we would probably have reduced our carbon footprint enormously already. Weirdest/Biggest missed chance for climate change.
Nuclear is unsafe for the same reason software is unsafe. Because absent obvious signs of lack of safety, there will always be a drive towards lower cost. It's sociology, not technology.
If you did that, you would end up with unbelievably expensive nuclear power plants, which is exactly what is happening (see Hinkley Point C). And that still does not solve the dismantling and long-term safe storage after the plants end of life, so you are pushing additional expenses to the future.
> so you are pushing additional expenses to the future.
Is that a necessarily bad thing? Serious question.
The nuclear waste that we generate is concentrated in the Nuclear Reactors and thus can be tracked and managed (I'm assuming a reasonable amount of competency and lack of natural disasters etc.). We could just store it locked away in concrete containers far from any human population centers.
Perhaps in the future we discover a use for all that waste. Or perhaps space travel becomes cheap enough that we start jettisoning the waste to the Sun, or any other low-cost orbital trajectory.
Right now, the CO2 generate from fossil fuels is just dumped into the environment and we know that is causing climate change and is a clear, immediate and existential threat to humanity.
Yes, I think that's a bad thing. Once you discover a better/cheaper way of generating electrical energy, you can stop a coal plant (this is happening right now). You can't do that with a nuclear plant.
My understanding is that renewable energy is curently cheaper than that from new nuclear power stations.
Also if you stop fossil fuel power plants, there are still many other sources of atmospheric CO2 and methane.
We could just store it locked away in concrete containers far from any human population centers.
No, we can't, because the spent fuel waste continuously generates heat. It has to be actively cooled to stop it from catching fire and emitting all those decay products into the atmosphere.
Immediately after being removed from the reactor, the spent fuel is stored in water tanks, in order to cool them enough to prevent the fuel rods from melting. After a few years, however, the radioactivity has decayed enough that the fuel can be stored in "dry casks", essentially big concrete containers, with no water or otherwise active cooling necessary.
A lot of commercial spent nuclear fuel is sitting around in such dry casks. They are expected to last 100 years or so; if we haven't figured out a better plan by then we can just shift the spent fuel into fresh dry casks.
In as much as they are often in windy areas (surprise) I tend only to hear the sound of wind in my ears — which would be there whether there were wind turbines or not.
As PG himself has pointed out, behind every significant news article is a submarine pushing public opinion[0]
http://www.paulgraham.com/submarine.html