Guest post by Larry F. Brown, PhD
Various commenters pointed out to me that I made an error in my calculations.
First, the maintenance man told me the turbines were designed to produce 2.3 MW but only produce an average of 1.3 MW. I then reduced the 1.3 by about 80% because I found that the average wind machine nationwide only produces power about 18-19% of the time. Using the reduction from 2.3 to 1.3 and then additionally reducing that by 80+% is apparently wrong.
Next, I have been informed that a capacity factor of 1.3/2.3 = 57% (told to me by the maintenance man) is probably way high. Multiple comments quoted other capacity factors, all of which were lower.
Some commenters were unhappy with the units I used – i.e., MW/hr vs the MWhr . I choose to ignore these comments because they are nit-picky. I’m wrong – my mistake – they are correct – but my meaning and intent are perfectly clear to all readers. Let’s move on for goodness sake.
A few commenters wondered which facility I was evaluating – it is immediately outside Monticello, UT.
A few commenters objected to calling these things farms – mmmmm —— they are called wind farms.
I have redone the calculations and using the following adjustments:
· Based on the comments, and assuming the maintenance man was being overly generous in his estimate, I have reduced the capacity factor from 57% to 40%, even though most who commented on this indicated it should probably be even lower.
· I eliminated the 80+% reduction for wind.
· And I raised the annual maintenance costs to $1 million from $750,000. Three-quarters of a million sounds very low. $1 million is a little more realistic.
Again, I pay about $.11/kWh for my electricity here in western Colorado. So, beginning the process of calculating the profitability of these things, each tower, using a capacity factor of 40%, will produce at 920 kW which, at $.11/kW, provides an income of about $101/hr = $2,430/day = $887,000 of electricity/year. Sounds good – so far.
The $.11/kWhr I pay includes all the distribution costs, etc. The wind farm is not paid $.11/kWhr for their electricity. According to the ISO Wholesale Power Market Prices, this site sells electricity for about $.03/kWhr. So instead of grossing $887,000, they might gross about $242,000 per year per turbine.
It gets lots more complicated when you consider that the wind farms are being subsidized by the government with the Production Tax Credit (PTC). A tax credit should not be confused with a tax deduction. A deduction reduces the amount of taxes you pay. A credit is money back. And the PTC is a “Refundable Tax Credit” which means the company actually gets paid by the government even if it does not owe any taxes.
The PTC subsidy has been in effect now for 27 years. Congress has adjusted the PTC many times through the years but today the subsidy is about $.02+/kWhr. So, the power company gets money back in the form of a subsidy for roughly 67% of what they produce – i.e., the company gets money back to the tune of $.02/kWhr after it sells the electricity for $.03/kWhr. If the company sells $3 million of electricity they get the $3 million, plus a PTC subsidy of $2 million. That is a huge subsidy! In fact, I think it is the biggest subsidy ever given for anything.
However, the economics get worse – much worse. The maintenance man said the towers cost about $2 million each to install. Each tower probably did cost $2 million to install, but there are many other development costs associated with a project such as land and right-of-way leases, power line construction, road construction, fencing, runoff control, revegetation, bonding for dismantle, etc. Newspaper articles reported that this particular wind farm cost about $130 million, which, for 27 turbines, is about $4.8 million per turbine. The income of $242,000/yr/turbine would about pay the interest on a 5% loan to construct the towers. But, there is more.
There are other peripheral costs associated with such a project. I assume the maintenance cost for this wind farm (manpower on call 24 hours, office rental, trucks/fuel, electric consumption, security, snow removal, replacement parts, etc.) to be at least $1 million/year.
Additional expenses of this particular wind farm are the $1 million paid in taxes to the local government and the $1,000/tower/month rent to the landowners. These three expenses total $2,324,000/year = about $86,000/turbine/year, so the income goes down from $242,000 to $156,000/turbine/year – which is probably not enough to pay the interest on a loan and certainly not enough to show a net profit.
Even with my error in the original calculation, my conclusion remains: Companies are making money on these things, but the source of the profit is only (or at least mainly) coming from the Production Tax Credit – the subsidy paid by our government with our tax money for these projects. It’s obvious that T. Boone Pickens and Warren Buffett were right. Without the PTC (for the past 27 years) these things would not exist.
I think we should stop building these wind farms — yesterday.
Larry F. Brown, PhD
Palisade, CO
Dr. Brown – does the $0.11 you pay per KwH include the cost of delivery – typically $0.03 to $0.04/KwH?
Greg – yes, the $.11 I pay includes everything.
I believe this is an important topic, but the approach is too casual to be very useful. It would be much more informative to analyze the actual financial statements of an existing utility. But we need to be careful because everyone’s financials are wrong. The cost of providing backup to wind power deserves to be counted as part of the cost of the wind power, but utilities don’t do it that way.
The challenge is to adjust the cost accounting methodology to something that reasonably shows the true cost of wind power. The cost to generate electricity from wind turbines is not the relevant cost. And because power may be dumped, the amount of power generated is not the relevant denominator. We need to know the cost of the “wind power system” that includes the cost of the backup supply.
Cost per unit is the amount produced divided by total cost. Utilities divide the power generated by the wind turbines (for a period) by the total cost of the wind turbines (for the same period). That sounds right, but it understates the cost of power. We need to include the cost of generating backup power as part of the wind power system. The unit costs need to be determined by taking total power SOLD, divided by total system costs.
Another useful metric would be the incremental cost of wind power. You would determine that by dividing the incremental costs of adding the wind turbines to a power generation system, and dividing that by the incremental amount of usable power generated. You need someone with cost accounting skills to do this because there are other issues to consider, such as unused capacity, reserves for end-of-life demolition, and so on.
Steve O – The simple reason I did these calculations is because of the fact, as you point out, that everyone does them differently and comes up with widely different values. Hence, I wanted to do a simple basic calculation that I (and hopefully everyone) could understand. Years ago everyone had a different value for the cost of owning and driving a car – so, I kept track of every penny I spent on a couple of cars throughout their life and came out with an unassailable number that I knew was correct. That is basically what I was trying to do here – realizing of course, that it’s impossible to be 100% accurate without getting exact values from the company, etc. I asked a couple of representatives of the company to review my numbers a couple of times. They did not respond and it’s pretty clear now why they didn’t respond – the numbers are terrible.
AS far as these things not existing, government interference is not limited to the PTC. Not nearly.
I think I missed org article, cannot seem to find it either. there a link or was it removed?
dmacleo – on the WattsUpWithThat site, find the search box and search for “Wind Farm Back of the Envelope Economic Analysis”.
please disregard my last post I found link to org article
https://wattsupwiththat.com/2019/07/21/wind-farm-back-of-the-envelope-economic-analysis/
Please will some kind soul produce a profit/loss flow from this post. Many who cannot grasp the enormity of waste will then understand.
No it is not knit picking and you still don’t seem to have done the BASIC research to understand what you are writing about. It is neither MW/hr nor the MWhr. Production is either in MW or GW or alternatively MWh per year. The figure you used suggested it was 2.3 MW. ( The knit pick would be point out that despite multiple folks correcting you and explaining the units, you are still using hr instead of h as the abbreviation for hour. )
You still don’t bother to explain what site you were talking about so anyone can sort out the mess you posted.
I did try to find what seemed to be the wind farm in question and got the figures for capacity factor , you are still blindly pulling figures out of the air:
more blindly pulling figures out of the air, trying to compensate for other errors ??
Doing an honest assessment of the cost and viability of wind power is legitimate and important. Sadly, we only seem to have evangelical warmists or equally biased opponents of wind power.
He did call it a “back of envelope” assessment. I agree it is nit picking…. we all knew what he meant. OMG he used hr instead of h??? The horrors!
Greg – You put your foot in it by still wondering which site this is. You have to read the post before you criticize it.
I know I’m “knit-picking” but the term is “nit-picking”. Be sure you have all your bases covered when you’re criticizing others. Otherwise you will look silly and wrong.
By all means the subsidy for wind power should be eliminated, so that wind power competes with other energy sources on a “level playing field”. There are some windy areas (such as New Zealand, pointed out by come commenters) where wind power is competitive or cheaper than other energy sources, but without subsidies, investors will be more selective about where wind farms should be located.
The main problem with wind power is its intermittent nature, while consumers usually want power to be available whenever they turn on a switch or an appliance. Demand for electric power also fluctuates by season and time of day, but existing power companies know how to manage the grid so that power goes where it is needed, and the power output of a fossil-fuels plant can be adjusted up or down (within limits) to account for demand.
Wind farms could have their usefulness if they could sell their power into an existing grid to power companies at the price the power company charges consumers (for the specific time of day according to demand), which would enable the power company to “turn down” their generators and consume less fuel during the time their grid is receiving power from a wind farm. But the rules need to be established so that neither wind farms nor fossil-fuel generating plants have an unfair advantage.
Per the EIA, the lowest cost New Electricity Generation technology is Onshore Wind. This is after taking into account any subsidies.
https://www.eia.gov/outlooks/aeo/pdf/electricity_generation.pdf
Here’s an article that speaks to weaknesses of the EIA paper: https://wattsupwiththat.com/2014/02/16/the-levelized-cost-of-electric-generation/
re: “This is after taking into account any subsidies.”
So, unicorns. (IOW, the answer is “free money” from someone else; i.e. unicorns.)
They need a sugar-daddy because they can’t ‘cut’ it on their own … so, why are we being ‘dinged’ as taxpayers on this again?
Something I did – I’m NOW to pay a penance for some – what – perceived sin?
If this isn’t penance I’m paying, it’s just plain, straight-away highway robbery then.
Peter being robbed to pay off Paul.
I don’t see anything in there about crane rental for repair and maintenance or the hourly cost of labor working in high places. Did I miss that somewhere?
Resource Guy – I have no clue what the maintenance cost is – but had to put in something – so put in $1 million a year for all 27 turbines.
This isn’t so very much unlike my plugin hybrid.
One reason that it is cheaper to charge the hybrid via the power company and not just drive it as a hybrid is that the electrons I buy to charge it have a very low tax, unlike the gasoline. If I had to pay the equivalent tax on the electrons, charging the car wouldn’t make economic sense. Just drive it as a hybrid.
If it were not for the tax credits, almost $10,000 on my car, it would not make economic sense to buy a hybrid rather than just buy a pure gasoline version.
So, this fellow is just demonstrating in wind power that the govt has tipped the economic playing field to a particular type of technology. That will work as long as the govt can keep paying those subsidies.
My take: Just take the govt money. You might as well get some, too.
Save the outrage. I don’t make the law.
Meanwhile … is ANYONE looking at the ‘stranded assets’ problem that will loom on the horizon in the not so distance future?
Let’s pretend for a moment that someone invents a ‘box’, a box about the height and width of a refrigerator, maybe a bit shorter, that can be parked just outside the garage on a small concrete slab (like an A/C condenser) and can produce, oh, say, ~25kW for 1/2 hr periods and ~20 kW continuous, and requires just a Liter a day in fuel?
Would this thing have a market?
Would this thing, if sold in volume, affect the consumption, that is reduce consumption ‘off the grid’?
Would this thing, if sold in sufficient numbers, eventually result in reduced need for a ‘grid’ at the HV interconnected transmission and substation level?
Consider the above questions 20 years AFTER the fielding of such a device.
Removing subsidies would be good but only if the mandates and grid priority is also ended. Do that and wind and solar would be down and out. Hand wringing over nickel dine issues like PTC pennies is a fools errand. Wind and solar is worth less than nothing providing off spec electricity at the wrong time and in the wrong amount. Germany has proven how damaging this grid poison can be. In Germany solar and wind provides a “substitution factor” of 5%. ..adding 1000 Mw nameplate of RE allows for the removal of 50 Mw of “FF”.
Video: Lightning hits wind turbine.
https://www.google.com/amp/s/www.fifetoday.co.uk/news/weather/video-lightning-hits-wind-turbine-in-fife-1-4970963/amp
BTW, How much does it cost (and how long does it take) to get a 2500 ton ton crane in to repair/ replace a turbine?
https://www.thevanguard.ca/news/local/fire-damaged-wind-turbine-to-be-removed-in-august-336319/
re: “BTW, How much does it cost (and how long does it take) to get a 2500 ton ton crane in to repair/ replace a turbine?”
Does it depend on soil moisture content (are you driving on mud) and how fast a road bed can be laid down?
4th GE wind turbine collapse in 6 months.
https://www.smart-energy.com/industry-sectors/distributed-generation/fourth-ge-turbine-collapse-in-americas-in-less-than-6-months/
Legislature opposes wind farm on Lake Erie.
https://www.observertoday.com/news/page-one/2019/07/legislature-opposes-wind-turbine-farms-on-lake-erie/
The 2 cent per KWH production tax credit would pay the entire operations and maintenance budget for just about any nuclear plant in America. It is a HUGE amount of money.
News from Ontario Canada. Wind and solar are not effective for reducing C02 emissions.
Reference: “Ontario’s Electricity Dilemma – Achieving Low Emissions at Reasonable Electricity Rates”. Ontario Society of Professional Engineers (OSPE). April 2015.
https://www.ospe.on.ca/public/documents/presentations/ontarios-electricity-dilemma.pdf
Page 15 of 23. “Why Will Emissions Double as We Add Wind and Solar Plants ?”
– Wind and Solar require flexible backup generation.
– Nuclear is too inflexible to backup renewables without expensive engineering changes to the reactors.
– Flexible electric storage is too expensive at the moment.
– Consequently natural gas provides the backup for wind and solar in North America.
– When you add wind and solar you are actually forced to reduce nuclear generation to make room for more natural gas generation to provide flexible backup.
– Ontario currently produces electricity at less than 40 grams of CO2 emissions/kWh.
– Wind and solar with natural gas backup produces electricity at about 200 grams of CO2 emissions/kWh. Therefore adding wind and solar to Ontario’s grid drives CO2 emissions higher. From 2016 to 2032 as Ontario phases out nuclear capacity to make room for wind and solar, CO2 emissions will double (2013 LTEP data).
– In Ontario, with limited economic hydro and expensive storage, it is mathematically impossible to achieve low CO2 emissions at reasonable electricity prices without nuclear generation.