THE COMPETITIVENESS OF WIND, 2

Learning From Kansas: Why Utilities Are Embracing Wind Energy, Part 2 (continued from Wednesday) Alan Claus Anderson, Britton Gibson, Luke Hagedorn & Scott W. White, 20 November

2012 (North American Windpower

“One of the benefits that renewable energy sources - such as wind and solar - provide is price certainty. When utilities add renewable energy generation to their portfolios, they can lock in power supply at a known price for up to 20 years…Eighty percent of the overall cost of wind power is incurred up front, due to the procurement of the turbines and the construction of the generation facility. Only about 10% of the levelized cost is incurred during operations and maintenance.

“…[A] utility is able to lock in a price for the electricity for the term of the agreement, regardless of any fluctuations in the ongoing project costs…The benefit of having the bulk of wind facility costs incurred up front is that because the costs are accrued early in the project’s development, it becomes easier to accurately estimate the extent of those costs.”

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“…[T]he total costs for these projects are likely to decrease over time as technology becomes more widely utilized…A May 2012 study conducted by the National Renewable Energy Laboratory for the International Energy Agency…found about a 20% to 30% reduction in the LCOE of wind energy generation by the year 2030…[and] because wind as a “fuel” is free, so there is no exposure to volatile fuel prices or fluctuating fuel transportation costs.

“…[T]he costs of wind are relatively predictable…[T]he costs of coal and natural-gas generation facilities can fluctuate significantly over time due to the costs associated with fuel prices, as well as increasingly stringent environmental regulations…[And] coal exports are on a record pace this year, so new demands will…likely [increase demand and] drive prices upward…Despite recent developments in hydraulic fracturing and horizontal drilling, natural-gas prices [also] remain subject to [price volatility]…”

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