Adding More Wind Power Would Lower Midwest Electricity Prices, But More Transmission Is Needed

Posted by NAW Staff on May 23, 2012 No Comments
Categories : New & Noteworthy

Adding more wind power to the electric grid could reduce wholesale market prices by more than 25% in the Midwest region by 2020, finds a new analysis conducted by Synapse Energy Economics on behalf of Americans for a Clean Energy Grid.

According to the report, wind power could drive down the wholesale price of power by $3/MWh to $10/MWh in the near term and up to nearly $50/MWh by 2030. Those savings would be passed along to consumers, resulting in a reduction of $65 to $200 in electricity prices for the average consumer.

In order for the Midwest to fulfill its wind power potential, however, new transmission will need to be added in the region, the study found.

Notably, the investment required to build this new transmission would be small compared to the savings it would ultimately reap, providing more than a 2 to 1 return on investment in various scenarios.

"This analysis illustrates a basic fact about our power system – building transmission to unleash cheaper, domestic resources makes strong economic sense," says John Jimison, managing director of the Energy Future Coalition and Americans for a Clean Energy Grid. "Transmission makes up the smallest sliver of the electricity bill but can make power markets more competitive and drive down costs for everyone.

"Midwestern states – where some of the most valuable and abundant wind power can be found – have a real opportunity to capitalize on these findings and continue investing in the infrastructure they need to facilitate additional generation of clean power," he adds.

Wind as an electricity supply resource has been getting steadily cheaper, and its performance characteristics continue to improve as larger turbine sizes and higher hub heights capture economies of scale, the report notes.

Simultaneously, the projected cost of coal-fired power has begun to climb. These trends are particularly relevant in the Midwest Independent Transmission System Operator (MISO) territory, where more than half of the generating capacity consists of coal-fired units.

Furthermore, the effect of introducing greater levels of wind resources into MISO would depress the average annual market price relative to a baseline case of no additional wind generation beyond the existing 10 GW in place in MISO today, the study found. Because wind energy's "fuel" is free, once projects are built, they displace fossil-fueled generation and lower the price of marginal supply, thus lowering the energy market clearing price.

According to the report, these market price declines will lead to reduced overall energy costs. In one scenario, prices were $3.9 billion to $7.9 billion per year lower than baseline costs with the addition of 20 GW of wind, and $6.1 billion to $12.2 billion per year lower than baseline costs with the addition of 40 GW of wind.

These cost savings will exceed the annual costs of transmission improvements needed to integrate this level of wind power, the report claims. When including the effects of transmission, the net savings ranges from $3 billion to $6.9 billion per year for the 20 GW wind addition scenario, and $3.3 billion to $9.4 billion per year for the 40 GW wind addition scenario.

However, the inadequate capacity of many segments of MISO's transmission grid, coupled with the inflexibility of much of the baseload generation, has given rise to operational complexities and system constraints. This leads to costly congestion and uneconomic curtailment of available wind.

To relieve the bottlenecks and capture the economic and environmental benefits of more electricity from wind, investments need to be made in the region's transmission system, the report states.

The MISO region recently developed a new type of transmission project, labeled Multi-Value Projects, to address reliability, economic and policy needs. These projects address congestion on the transmission system, reliability constraints and clean energy mandates.

In order to efficiently operate wind turbines that produce lower-priced power, the Midwest must invest in transmission infrastructure to move this electricity from where it is produced to where it is used, Synapse concluded.

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