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Friday, 14 November, 2008
Introduction to Wind Power
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A key issue debated about wind power is its ability to scale to meet a substantial portion of the world's energy demand. There are significant economic, technical, and ecological issues about the large-scale use of wind power that may limit its ability to replace other forms of energy production. Most forms of electricity production also involve such trade-offs, and many are also not capable of replacing all other types of production for various reasons. A key issue in the application of wind energy to replace substantial amounts of other electrical production is intermittency; see the section below on Economics and Feasibility. At present, it is unclear whether wind energy will eventually be sufficient to replace other forms of electricity production, but this does not mean wind energy cannot be a significant source of clean electrical production on a scale comparable to or greater than other technologies, such as hydropower. Most electrical grids use a mix of different generation types (baseload generating capacity and peaking capacity) to match demand cycles by attempting to match the variable nature of demand to the most economic form of production; with the exception of hydropower, most types of production capacity are not used for all production (hydropower usage is limited by the presence of appropriate geographical sites). For example, nuclear power is effective as a baseload technology, but cannot be easily varied in short timeframes, and gas turbine plants are most economically used as peaking capacity; coal generation is primarily considered appropriate for baseload generation with some capacity to cycle to meet demand.

A significant part of the debate about the potential for wind energy to substitute for other electric production sources is the level of penetration. With the exception of Denmark, no countries or electrical systems produce more than 10% from wind energy, and most are below 2%. While the feasibility of integrating much higher levels (beyond 25%) is debated, significantly more wind energy could be produced worldwide before these issues become significant. In Denmark, wind power now accounts for close to 20% of electricity consumption and a recent poll of Danes show that 90% want more wind power installed.

Theoretical potential

Wind's long-term theoretical potential is much greater than current world energy consumption. The most comprehensive study to date found the potential of wind power on land and near-shore to be 72 TW (~54,000 Mtoe), or over five times the world's current energy use and 40 times the current electricity use. The potential takes into account only locations with Class 3 (mean annual wind speeds ≥ 6.9 m/s at 80 m) or better wind regimes, which includes the locations suitable for low-cost (0.030.04 $/kWh) wind power generation and is in that sense conservative. It assumes 6 turbines per square km for 77-m diameter, 1.5 MW turbines on roughly 13% of the total global land area (though that land would also be available for other compatible uses such as farming). This potential assumes a capacity factor of 48% and does not take into account the practicality of reaching the windy sites, of transmission (including 'choke' points), of competing land uses, of transporting power over large distances, or of switching to wind power.

To determine the more realistic technical potential it is essential to estimate how large a fraction of this land could be made available to wind power. In the 2001 IPCC report, it is assumed that a use of 4% 10% of that land area would be practical. Even so, the potential comfortably exceeds current world electricity demand.

Although the theoretical potential is vast, the amount of production that could be economically viable depends on a number of exogenous and endogenous factors, including the cost of other sources of electricity and the future cost of wind energy farms.

Offshore resources experience mean wind speeds about 90% greater than those on land, so offshore resources could contribute about seven times more energy than land. This number could also increase with higher altitude or airborne wind turbines.

To meet energy demands worldwide in the future in a sustainable way, many more turbines will have to be installed. This will affect more people and wildlife habitat. See the section below on ecology and pollution.

Economics and feasibility

Some of the over 6,000 wind turbines at Altamont Pass, in California. Developed during a period of tax incentives in the 1980s, this wind farm has more turbines than any other in the United States, producing about 125 MW.  Considered largely obsolete, these turbines produce only a few tens of kilowatts each.
Some of the over 6,000 wind turbines at Altamont Pass, in California. Developed during a period of tax incentives in the 1980s, this wind farm has more turbines than any other in the United States, producing about 125 MW. Considered largely obsolete, these turbines produce only a few tens of kilowatts each.

Wind energy in many jurisdictions receives some financial or other support to encourage its development. A key issue is the comparison to other forms of energy production, and their total cost. Two main points of discussion arise: direct subsidies and externalities for various sources of electricity, including wind. Wind energy benefits from subsidies of various kinds in many jurisdictions, either to increase its attractiveness, or to compensate for subsidies received by other forms of production or which have significant negative externalities.

Most forms of energy production create some form of negative externality: costs that are not paid by the producer or consumer of the good. For electric production, the most significant externality is pollution, which imposes costs on society in the form of increased health expenses, reduced agricultural productivity, and other problems. Significantly, carbon dioxide, a greenhouse gas produced when using fossil fuels for electricity production, may impose costs on society in the form of global warming. Few mechanisms currently exist to impose (or internalise) these external costs in a consistent way between various industries or technologies, and the total cost is highly uncertain. Other significant externalities can include national security expenditures to ensure access to fossil fuels, remediation of polluted sites, destruction of wild habitat, loss of scenery/tourism, etc.

Wind energy supporters argue that, once external costs and subsidies to other forms of electrical production are accounted for, wind energy is amongst the most cost-effective forms of electrical production. Critics may debate the level of subsidies required or existing, the "cost" of pollution externalities, and the uncertain financial returns to wind projects that is, the all-in cost of wind energy compared to other technologies. Intermittency and other characteristics of wind energy also have costs that may rise with higher levels of penetration, and may change the cost-benefit ratio.

  • Conventional and nuclear power plants receive substantial direct and indirect governmental subsidies. If a comparison is made on total production costs (including subsidies), wind energy may be competitive compared to many other sources. If the full costs (environmental, health, etc.) are taken into account, wind energy would be competitive in many more cases. Furthermore, wind energy costs have generally decreased due to technology development and scale enlargement. However, the cost of other capital intensive generation technologies, such as nuclear and fossil fueled plants, is also subject to cost reductions due to economies of scale and technological improvements.
  • Nuclear power plants generally receive special immunity from the disasters they may cause, which prevents victims from recovering the cost of their continued health care from those responsible, even in the case of criminal malfeasance. In many cases, nuclear plants are owned directly by governments or substantially supported by them. In both cases, nuclear plants benefit from a lower cost of capital and lower perceived risk, as governments take on the risk charge directly. This is a form of indirect subsidy, although the size of this subsidy is difficult to ascertain precisely.
  • To compete with traditional sources of energy, wind power often receives financial incentives. In the United States, wind power receives a tax credit for each kilowatt-hour produced; at 1.9 cents per kilowatt-hour in 2006, the credit has a yearly inflationary adjustment. Another tax benefit is accelerated depreciation. Many American states also provide incentives, such as exemption from property tax, mandated purchases, and additional markets for "green credits." Countries such as Canada and Germany also provide other incentives for wind turbine construction, such as tax credits or minimum purchase prices for wind generation, with assured grid access (sometimes referred to as feed-in tariffs). These feed-in tariffs are typically set well above average electricity prices.
  • Many potential sites for wind farms are far from demand centers, requiring substantially more money to construct new transmission lines and substations.
  • Intermittency and the non-dispatchable nature of wind energy production can raise costs for regulation, incremental operating reserve, and (at high penetration levels) could require demand-side management or storage solutions.
  • Since the primary cost of producing wind energy is construction and there are no fuel costs, the average cost of wind energy per unit of production is dependent on a few key assumptions, such as the cost of capital and years of assumed service. The marginal cost of wind energy once a plant is constructed is close to zero.
  • The cost of wind energy production has fallen rapidly since the early 1980s, primarily due to technological improvements, although the cost of construction materials (particularly metals) and the increased demand for turbine components caused price increases in 2005-06. Many expect further reductions in the cost of wind energy through improved technology, better forecasting, and increased scale. Since the cost of capital plays a large part in projected cost, risk (as perceived by investors) will affect projected costs per unit of electricity.
  • Apart from regulatory issues and externalities, decisions to invest in wind energy will also depend on the cost of alternative sources of energy. Natural gas, oil and coal prices, the main production technologies with significant fuel costs, will therefore also be a determinant in the choice of the level of wind energy.
  • The commercial viability of wind power also depends on the pricing regime for power producers. Electricity prices are highly regulated worldwide, and in many locations may not reflect the full cost of production, let alone indirect subsidies or negative externalities. Certain jurisdictions or customers may enter into long-term pricing contracts for wind to reduce the risk of future pricing changes, thereby ensuring more stable returns for projects at the development stage. These may take the form of standard offer contracts, whereby the system operator undertakes to purchase power from wind at a fixed price for a certain period (perhaps up to a limit); these prices may be different than purchase prices from other sources, and even incorporate an implicit subsidy.
  • In jurisdictions where the price paid to producers for electricity is based on market mechanisms, revenue for all producers per unit is higher when their production coincides with periods of higher prices. The profitability of wind farms will therefore be higher if their production schedule coincides with these periods (generally, high demand / low supply situations). If wind represents a significant portion of supply, average revenue per unit of production may be lower as more expensive and less-efficient forms of generation, which typically set revenue levels, are displaced from economic dispatch. This may be of particular concern if the output of many wind plants in a market have strong temporal correlation. In economic terms, the marginal revenue of the wind sector as penetration increases may diminish.

Intermittency and variability

Electricity generated from wind power can be highly variable at several different timescales: from hour to hour, daily, and seasonally. Annual variation also exists, but is not as significant. This variability can present substantial challenges to incorporating large amounts of wind power into a grid system, since to maintain grid stability, energy supply and demand must remain in balance.

While the negative effects of intermittency have to be considered in the economics of power generation, wind is unlikely to suffer momentary failure of large amounts of generation, which may be a concern with some traditional power plants. In this sense, it may be more reliable (albeit variable) due to the distributed nature of generation.

Grid management

Grid operators routinely control the supply of electricity by cycling generating plants on or off at different timescales. Most grids also have some degree of control over demand, through either demand management or load shedding. Management of either supply or demand has economic implications for suppliers, consumers and grid operators but is already widespread.

Variability of wind output creates a challenge to integrating high levels of wind into energy grids based on existing operating procedures. Critics of wind energy argue that methods to manage variability increase the total cost of wind energy production substantially at high levels of penetration, while supporters note that tools to manage variable energy sources already exist and are economical, given the other advantages of wind energy. Supporters note that the variability of the grid due to the failure of power stations themselves, or the sudden change of loads, exceeds the likely rate of change of even very large wind power penetrations.

There is no generally accepted "maximum" level of wind penetration, and practical limitations will depend on the configuration of existing generating plants, pricing mechanisms, capacity for storage or demand management, and other factors.

A number of studies for various locations have indicated that up to 20% (stated as the proportion of wind nameplate capacity to peak energy demand) may be incorporated with minimal difficulty. These studies have generally been for locations with reasonable geographic diversity of wind; suitable generation profile (such as some degree of dispatchable energy and particularly hydropower with storage capacity); existing or contemplated demand management; and interconnection/links into a larger grid area allowing for import and export of electricity when needed. Beyond this level, there are few technical reasons why more wind power could not be incorporated, but the economic implications become more significant and other solutions may be preferred.

At present, very few locations have penetration of wind energy above 5%, and only Denmark is in the range of this 20% penetration level. Discussion about the feasibility of wind penetration beyond the level of 20% is, at present, largely theoretical.

Energy storage

One potential means of increasing the amount of usable wind energy in a given electrical system (the penetration) is to make use of energy storage systems. Effectively, "surplus" wind energy would be used to store electricity in some usable form, such as pumped storage hydroelectricity. Storage of electricity would effectively arbitrage between the cost of electricity at periods of high supply and low demand, and the higher cost at periods of high demand and low supply. The potential revenue from this arbitrage must be balanced against the installation cost of storage facilities and efficiency losses.

Many different technologies exist to store usable electric energy, including battery technologies, flywheel energy storage, and others. For large energy grids, pumped storage hydroelectric has been implemented at large scale, but the number of sites suitable for such facilities is limited. Most other technologies are currently relatively expensive or unproven at large scale, although they are used in specialized applications and may prove feasible in future.

Other potential solutions in future may depend on the development and deployment of complementary technologies, such as plug-in hybrid vehicles and vehicle-to-grid technologies.

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