Good
Economics Gives the Earth Summit Some Success
The
Earth Summit in Johannesburg has, predictably, put "renewable
energy" back in the headlines. Europe's Greens spent last
week lobbying delegates on behalf of an agreement to produce
15% of the world's energy through solar, wind and other eco-friendly
sources by the end of the decade.
As
a political movement, this effort has not surprisingly ground
to a halt in Johannesburg. A Bush administration that has walked
away from the Kyoto Protocol is not about to sign on to its stepson.
But even if such an agreement could be reached, could it be implemented?
And what would it cost?
There
have been myriad of schemes to generate electricity with less
pollution, from tapping the Earth's geothermal energy, to harnessing
the power of water through wave and tidal power, none of which
have ever proven themselves economically. Even the perennial
"green," solar, has had a hard time of it. In 1990
it was predicted that solar-energy costs would be below EUROS
0.10 per kilowatt by the year 2000. Unfortunately the millennium
has come and gone, and costs are still in excess of EUROS 0.50.
Given that this is more than 10 times what most Europeans pay
for electricity, solar seems destined to be the wonder drug that
failed clinical trials. In short, none of these alternative power
sources have come close to generating electricity at a cost close
to that available from a gas-fired power plant.
This
leaves wind energy. While there remain serious questions about
the aesthetics and some of the practicalities of electrical generation
by wind, it is becoming increasingly apparent that wind is the
only "green" alternative with the potential to pay
its way. And wind energy is very "green": barring nuclear,
wind power has the lowest carbon dioxide output of any power-generation
source. Research will of course continue into solar and geothermal
power, but any near or medium-term move away from fossil fuels,
such as that envisioned by the Johannesburg delegates, will necessarily
involve wind.
Skeptics cite three principal drawbacks to wind power. First,
where do you get electricity when the wind does not blow? Second,
the windmills themselves are noisy and ugly. And most critically,
wind power depends upon a subsidy for its very survival.
Obviously,
the wind has to blow for turbines to generate electricity. And
even on good sites, the "right" amount of wind only
blows about 30% of the time. What's more, the wind is famously
uncooperative about matching its schedule with the daily or seasonal
peaks in energy usage. But electricity demand varies by approximately
30% over the course of a year and by up to 300% over the course
of a day. Modern electricity grids are designed to be able to
bring on new power sources and to call on (fossil fuel) alternatives
to meet this highly variable demand. At present, wind power supplies
2% of European electricity. Above about 20%, wind variability
would start causing potentially serious disruptions. But below
that number, provided adequate nonwind generating capacity was
kept ready to come online, wind could still be one of the suppliers
of Europe's electricity.
If
there is one complaint about wind power that resonates with the
public at large, it is that the wind turbines themselves are
noisy and ugly. This concern is why as many as nine in 10 wind
farms fail to obtain local planning permission, despite encouragement
of wind power from national governments. In an effort to overcome
planning objections, wind turbines are being placed offshore,
where they won't keep their neighbors up at night. But offshore
construction and operation costs are expected to be 40% above
similar land-based facilities, a cost differential that ruins
the ability of wind to compete without a subsidy.
The
truth that must be faced is that there is no such thing as an
aesthetic method of generating electricity; whether whirring
windmills or smog-sputtering coal-fired generators are a worse
blight on the landscape is for communities to decide. But, aesthetics
aside, what of the last objection? Can wind power compete on
the economics?
Europe leads the world in the development of wind power. However,
the country where wind power is most advanced, Germany, is not
a particularly good advertisement for wind power's potential.
German wind-power projects typify the image many people hold
of wind power; it generates more in subsidies for the producer
than it does electricity for the consumer. In Germany, electricity
in general can be generated at 0.5-0.6 cents per KW, but because
of "feed-in tariffs," stipulating that electricity
companies buy all renewable power produced, the average cost
of wind power is around nine cents per KW.
As
a result of these subsidies, many German wind turbines are built
in areas where the wind blows adequately only 15% of the time--just
half the European average for utilization. It is this sort of
inefficiency that raises some quite justifiable doubts about
the true viability of wind power. But Germany's market-distorting
subsidies also mean that wind has not been given a chance to
show what it is capable of.
Technically,
wind turbines have come a long way in the past twenty-five years.
In the early 1980s, wind turbines had 15-meter rotors and were
capable of generating 55KW of electricity; frequent breakdowns
meant they were operational about 60% of the time. Thus if the
wind blew when the turbine was operational, each wind turbine
could power 65 homes.
Today,
the average newly installed windmill has rotors of over 70M in
length, can generate well over 1,000 KW and has a 98% availability
rate, allowing it to provide power to 2,765 homes. As for the
future, manufacturers are testing windmills with 115 meter rotors
that will generate 5,000KW, allowing a single wind turbine--at
peak operation--to provide power to over 9,000 households.
Given
the change in scale, it is hardly surprising that the cost of
electricity generated has fallen from 45 cents per kilowatt in
1980 to 2-5 cents per kilowatt today, and looks set to drop further.
Meanwhile coal power is costing between three to fifteen cents
per kilowatt, and that is before any of the subsidies or externalities
are taken into consideration.
Construction
and operating costs for wind power are also competitive. The
United States Department of Energy has calculated the costs of
building and maintaining various forms of electricity. Gas-fired
electricity plants remain the most economical to build. But from
a building-costs point of view, next in line is wind--better
than coal, nuclear and a host of other renewable technologies
including biomass, geothermal and solar.
While
overall wind remains more expensive than natural gas, its most
efficient fossil-fuel competitor, the cost difference has narrowed
substantially in recent years. Wind will never supply all of
our electricity needs, owing to the difficulty of coordinating
the wind's schedule with our power needs and the difficulty of
storing unused electricity in large amounts. But at the same
time, wind power is no longer the pie-in-the-sky proposition
it once was, and that most of its "renewable" competitors
remain.
The
fact that wind power can compete without subsidies, but still
receives them, may strike many as odd, even indefensible. But
on the other hand, electricity generation is riddled with subsidies:
for coal alone, last year the European Union paid out €6.9
billion in subsidies to coal producers, two thirds of it going
to Germany. The arguments for eliminating all electricity subsidies
are quite strong, but until that happens, to expect the most
efficient green energy to compete alongside some of the most
polluting forms of subsidized electricity generation, sends out
an equally ludicrous message.
Mr Sproule is head of research at Augusta & Co and a visiting fellow at the London School of Economics. |
