Wind power will be cheaper than electricity produced from natural gas within a decade, even without a federal tax incentive, according to a U.S. Energy Department analysis.
Cost reductions and technology improvements will reduce the price of wind power to below that of fossil-fuel generation, even after a $23-per-megawatt-hour subsidy provided now to wind farm owners ends, according to a report released Thursday. That may drive up demand for turbines from companies like General Electric Co. and Vestas Wind Systems A/S.
“Wind offers a power resource that’s already the most competitive option in many parts of the nation,” Lynn Orr, under secretary for science and energy at the Energy Department, said on a conference call with reporters. “With continued commitment, wind can be the cheapest, cleanest power option in all 50 states by 2050.”
Increasing wind energy to 35 percent of U.S. electricity supplies by 2050 will cause power prices to decline 2.2 percent and result in $400 billion in benefits related to reduced emissions of greenhouse gases. Wind energy provided 4.5 percent of U.S. power supplies in 2013.
Taller towers that can reach faster winds, bigger rotors and advanced control systems will drive down operating costs. The report assessed the costs and benefits of wind supplying 10 percent of U.S. power generation by 2020, 20 percent by 2030 and 35 percent in 2050. While power prices will increase by 1 percent in the first 15 years, expanding wind power will save Americans $149 billion in fuel and development costs through 2050.
The cost of operating a wind farm in breezy states like Iowa and South Dakota dropped by more than a third to $45 a megawatt-hour in 2013 from $71 in 2008. Costs will continue declining as tower heights increase by as much as 50 percent to 150 meters and capture more energy.
As utilities idle coal-fueled power plants, demand for wind energy will increase, said Dan Utech, an adviser to President Barack Obama for energy and climate change.
“Every year, wind becomes cost competitive in more states,” Utech said on the conference call. “As states design plans to reduce carbon pollution from power plants under the Environmental Protection Agency’s clean-power plan, wind energy is going to play an important role.”
The federal production tax credit that helped the U.S. become the world’s largest producer of wind energy in 2014 expired, again, Dec. 31. Developers who began construction before then will qualify for the incentive if they begin producing power by the end of next year.
The on-again-off-again status of the credit has made it difficult for the wind industry to make long-term plans. It expired at the end of 2012, was renewed days later at the start of 2013, then lapsed again at the beginning of last year, only to be revived for a brief window at the end of 2014.
Renewing the tax credit is main focus of the American Wind Energy Association, a Washington-based industry group. Obama has asked for a permanent extension.
The power industry will use 23 percent less water if wind power meets 35 percent of U.S. electricity demand by 2050. Other benefits include adding 600,000 jobs related to wind energy, and avoiding 23,000 premature deaths due to air pollution.
Making the PTC permanent would “provide the kind of stability that’s needed, not only for developers to move forward and put more wind turbines up and get more wind on the grid, but also for manufacturers to make decisions to locate their facilities here in the U.S.,” Utech said.