THE UNSEEN COSTS OF WIND-GENERATED ELECTRICITY
This research explores both explicit and implicit factors that influence the cost of producing electricity from different sources. The explicit, or seen, costs of electricity include the costs of power plant development and construction, operation & maintenance, and transmission infrastructure. Often overlooked, however, are the implicit, or unseen, costs of electricity caused by government subsidies, mandates, and regulations that distort the electricity market. These unseen costs have real impacts on American consumers and taxpayers.
The Institute for Political Economy at Utah State University produced a report exploring the unseen costs of producing electricity from wind power. Unseen costs include subsidies to the wind energy industry funded through taxes and government debt, costs associated with regulation, and the environmental impacts of wind-generated electricity. The report focuses on often overlooked aspects of wind energy that result in underestimating the cost of producing electricity from wind.
Accurate cost estimates of wind power must account for the cost of massive government subsidies and mandates to incentivize development and production of renewable energy. It must also include the costs of building transmission lines to the often-remote locations where wind power is plentiful. Wind power also reduces reliability in the electricity grid because tax incentives distort the market and allow wind to drive out more reliable sources like natural gas and coal. Finally, cost estimates must include opportunity costs paid by taxpayers, whose money could have been spent more productively if left for them to use as they saw fit.
An accurate assessment of the cost of wind power to the American public must account for the following factors:
- The federal Production Tax Credit (PTC), a crucial subsidy for wind producers, has distorted the energy market by artificially lowering the cost of expensive technologies and misdirecting taxpayer money to the wind industry. This subsidy is so lucrative that operators will often pay utilities to take their electricity so they can claim the subsidy, which is known as negative pricing.
- States have enacted Renewable Portfolio Standards (RPS) that require utilities to purchase electricity produced from renewable sources, which drives up the cost of electricity for consumers.
- Wind resources are often located far from existing transmission lines. Expanding the grid, whether by private or public funding, is expensive, and the costs are ultimately passed paid by US taxpayers and consumers.
- Because wind power is unreliable, conventional generators must be kept on call as backup to meet demand when wind is unable to do so. This drives up the cost of electricity for consumers, as two plants are kept running to do the job of one
Billions of taxpayer dollars are used to subsidize the wind industry. Allowing consumers to pick which energy to use, based on price, would result in greater economic effciency than allowing government to decide how the resources of consumers should best be allocated.