Price of wind energy at an all-time low

Photo © sumikophoto - Fotolia

But most consumers have seen electric rates rise this year

The price of oil isn't the only energy source that's going down. A new Department of Energy report, prepared by the Lawrence Berkeley National Laboratory, has found that wind energy prices have hit an all-time low.

While oil is rarely used any longer to generate electricity, energy prices in general tend to move together. The Berkeley Lab report found that the prices offered by wind projects to utility purchasers averaged under 2.5¢ per kilowatt hour (kWh) for projects negotiating contracts in 2014, which increased demand for wind energy.

“Wind energy prices—particularly in the central United States—have hit new lows, with utilities selecting wind as the low cost option,” Berkeley Lab Senior Scientist Ryan Wiser said. “Moreover, enabled by technology advancements, wind projects are economically viable in a growing number of locations throughout the U.S.”

A growing part of the grid

As we reported in March, the U.S. Energy Information Administration (EIA) expects electric utilities to add more than 20 gigawatts (GW) of utility-scale generating capacity to the grid this year, with the largest increase – 9.9 GW – provided by wind power. Natural gas is expected to increase by 6.3 gigawatts while solar should add another 2.2 GW.

The Berkeley Lab report shows the U.S. added about 4.9 GW of wind power capacity in 2014. Wind has made up about 33% of all new U.S. electric capacity additions since 2007.

Engineers have been able to increase wind performance through turbine scaling. Since 1998-99, the report says average nameplate capacity of wind turbines installed in the United States has increased by 172% , reaching 1.9 MW in 2014.

To date, wind energy makes up only 5% of the nation's power grid, but policymakers are pushing it, and other alternative energy sources, at the same time they are taking cheaper energy sources like coal offline.

Electric rates are up

Still, lower costs for wind energy will come as good news to consumers, who have almost uniformly seen their electricity rates per kWh rise this year over last.

In its Short-term Energy Outlook, released Tuesday, the EIA notes U.S. electricity consumption is on the rise this summer, driven primarily by air conditioning demand. EIA estimates that the typical residential electricity customer will use 3,134 kWh of electricity during the months of June, July, and August this year, which is 4% more than in the same months in 2014.

The report says renewable energy makes up 55% of the new electricity capacity the U.S. has added so far this year. Texas leads the nation in adding to the grid's capacity, with the new power about evenly split between wind and natural gas.

Most of the costs of wind energy lie in the infrastructure expense, mainly the wind turbines. The Berkeley report says this is where the savings are occurring. It says wind turbine prices have fallen 20% to 40% from their highs back in 2008.

Lower project costs should lead to less upward price pressure on utility rates for consumers, and falling turbine prices will make future wind projects less costly. Wind projects built in 2014 had an average installed cost of $1,710/kW, down almost $600/kW from the peak in 2009 and 2010.

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