The cost of wind: power when we don’t need it
September 25, 2010   John Spears
On a blustery Labour Day weekend this year, the wind turbines sprinkled across Ontario’s landscape set a record.   That Saturday, they pumped an average of 1,000 megawatts of power into the province’s grid over a seven-hour stretch, the biggest sustained wind output on record. It amounted to about 7 per cent of the power demand at the time.

That was the good news.
The sobering news was that the power flowed into the grid on a cool Saturday afternoon during a holiday weekend when there wasn’t much demand for it.
Despite the flaccid demand, wind generators were getting an average of 12 cents a kilowatt hour for their power, while conventional power producers subject to the wholesale market were getting 7.4 cents.
Not only does wind sometimes produce when it’s least needed – in hot summer weather it often fails to produce when it is needed.
Scroll back a few days from the Labour Day weekend to Aug. 30 – the hottest day of the year as measured at Lester B. Pearson Airport – and a different picture emerges.
As demand for air conditioning drove power demand sky-high, winds dropped. Wind turbines produced only about 100 megawatts of power through the crucial late afternoon hours, or about 0.4 per cent of total demand.
Despite wind’s patchy performance, Ontario is on track to quadruple wind capacity by 2015. That could take an investment of as much as $14 billion, according to the Ontario Power Authority.
Some critics wonder if the province is moving too fast.
A.J. Goulding of consulting firm London Economics says wind and other renewables have a place in the electricity grid, but the current approach to attracting generation does not sort the good projects from the marginal ones.
“People aren’t asking: How much wind would be appropriate for the system and then going out and procuring that,” he said. “Instead, we’re taking everything that shows up at the door.”
Ontario is currently paying small, on-shore wind producers that have access to transmission lines 13.5 cents a kilowatt hour. Offshore producers get 19 cents.
Ontarians might look south of the border – way south, to Texas – to see a different picture.
Texas has more wind capacity than any other jurisdiction in North America. But on a baking summer afternoon, with demand for power surging, Texas turbines typically churn out power for little more than half the Ontario price, or about 7.4 cents (U.S.) a kilowatt hour.
And a report by the U.S. Department of Energy shows that wind generators across the U.S. got an average of about 6 cents a kilowatt hour from the market for their production in 2009.
Renewable energy credits increase the effective price received by the generators by two to three cents a kilowatt hour, but the total is still below what’s being offered to new entrants in Ontario.
Ontario Power Authority projections call for installed wind capacity, now about 1,200 megawatts, to double by 2012 and double again by 2015.
Energy consultant Tom Adams says the issue is especially acute because forecasts show Ontario may actually have surplus electricity in the coming months – meaning the province may have to pay neighbouring jurisdictions to take it off our hands, even as we pay top prices for wind.
“We’ve got such a politicized atmosphere on power system planning that we’re really not able to have the kind of serious technical debate that we ought to be having,” says Adams.
Robert Hornung, president of the Canadian Wind Energy Association, has a different perspective.
He was pleased to see the Ontario production figures, calling it “a sign of the steady increase in the contribution wind can make.”
Hornung argues that wind prices going forward can’t be compared with current market prices, because any new form of generation is going to be more expensive than what we have today.
Hydro-Quebec is developing a hydro project that will cost 12 cents a kilowatt hour, he notes.
Meanwhile, Ontario walked away from bids for new nuclear plants because they were so high.
Natural gas plants are currently cheap to operate, but could rise significantly if carbon emission pricing arrives.
Wind, by contrast, has its major costs up-front. With zero fuel cost the over-all costs for a 20-year period can be predicted with much greater certainty.
Wind was the biggest source of new generation in Europe and the U.S. in 2009, he said.
“To be investing on that scale across all those regions clearly indicates people think there’s a strong economic rationale,” he says.
Others are skeptical. Adams, for one, argues that the timing of the push for wind is wrong.
As early as this December, and in a bigger way starting next spring, Ontario is actually going to be producing more power than it can consume at some times of day, Adams points out. (The forecast is contained in the latest outlook report of the Independent Electricity System Operator.)
While Ontario is encouraging wind development at a relatively high price, it will have to figure out ways of getting rid of surplus power. At times, during low-demand periods, it may even have to pay neighbouring jurisdictions like Quebec to take power off its hands.
Kristin Jenkins of the Ontario Power Authority said the problem of surplus power is addressed in the new contracts. Generators can be ordered to curtail production to keep a surplus off the grid. But in that case, they still get a payment – for not producing power.
The Ontario government says the high prices for wind, plus incentives offered to manufacturers, will kick-start a renewable energy sector with 50,000 jobs.
Goulding is not so sure, since high prices hurt those who pay them (although he concedes that Ontario’s prices are rising from a very moderate level.)
“There’s the potential for the vicious cycle,” he said. “As power costs rise, partially to pay for green energy, some manufacturing may become uneconomic, thus leading to job losses.”
Goulding questions the value of developing small, widely scattered turbines that will be expensive to plug into the grid.
Large-scale wind developments can be efficient, he says, and Ontario is lucky in that it has many other types of generation that can offset the variability of wind.
The problem with big wind developments, he notes, is that they engender opposition wherever they’re proposed.
Many object that the turbines will scar scenic landscapes, and will harm birds and bats. Others say living with the low-frequency sound emitted by the turbines damages human health.
A legal challenge is working its way through Ontario’s courts, arguing that the health and environmental impacts of wind energy developments haven’t been adequately addressed. If it succeeds, developers may not be able to get regulatory approval for new wind projects in Ontario – effectively halting growth of the industry. The case is to be heard early next year.
Rick Smith, executive director of Environmental Defence, says beating back the wind is a mistake.
He argues that focusing narrowly on the price being paid to generators is bad economics, because it fails to consider the cost of the alternatives.
The Ontario government is developing clean renewable power sources like wind in part so it can shut down dirty coal plants, whose emissions cause death and disease.
“We know that coal plants kill people,” Smith argues. “If you do a true accounting of all the costs associated with the energy choices in front of us, renewable energy – wind and solar and geothermal –comes out on top.”
The 13.5 cents a kilowatt hour that wind producers are currently being offered will come down as the industry grows, adds Smith.
And he argues that the Green Energy Act’s provisions requiring wind operators to source equipment in Ontario will produce jobs that will also benefit the province. (Environmental Defence has formed what it calls a “blue-green alliance” with the United Steelworkers to promote Ontario jobs.)
Adams says what’s needed to address the complexities is an integrated power system plan. But the Ontario Power Authority – which was supposed to produce one this year – hasn’t yet done so.
Wind by the numbers
Current capacity of wind generation in Ontario: 1,200 megawatts, according to Ontario Power Authority
Total generating capacity in Ontario: 35,781 megawatts
Average cost of installing one megawatt of wind capacity: $2.5 million on land; $4.5 million in water
Cost of adding 3,100 megawatts of wind generation by 2015: up to $14 billion, according to OPA
Number of household served by one megawatt of generating capacity: About 750; fewer on days when demand is high


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