Equally consumers, we pay for electricity twice: once through our monthly electricity nib and a second fourth dimension through taxes that finance massive subsidies for inefficient air current and other free energy producers.

Most cost estimates for current of air power disregard the heavy burden of these subsidies on US taxpayers. But if Americans realized the full cost of generating free energy from wind power, they would be less willing to foot the bill – because it's more than most people think.

Over the past 35 years, current of air energy – which supplies just two% of US electricity – has received U.s.a.$thirty billion in federal subsidies and grants. These subsidies shield people from the uncomfortable truth of just how much wind power really costs and transfer money from average taxpayers to wealthy wind farm owners, many of which are units of foreign companies.

Proponents tend to claim information technology costs as little as $59 to generate a megawatt-hour of electricity from wind. In reality, the true price tag is more than two and a half times that.

This represents a waste of resources that could be better spent past taxpayers themselves. Fifty-fifty the supposed ecology gains of relying more on air current power are dubious because of its unreliability – it doesn't ever blow – significant a stable backup power source must e'er exist online to take over during periods of calm.

But at the same fourth dimension, the subsidies brand the Usa energy infrastructure more than tenuous because the artificially cheap electricity prices push more reliable producers – including those needed every bit backup – out of the market place. As we rely more than on wind for our power and its inherent unreliability, the risk of blackouts grows. If that happens, the costs will really soar.

Many government agencies are in the wind business these days.
GAO

Where the subsidies go

Many people may be familiar with Warren Buffet's claim that federal policies are the but reason to build air current farms in the US, but few realize how many of the companies that benefit most are foreign. The Investigative Reporting Workshop at American University constitute that, equally of 2010, 84% of total clean-free energy grants awarded by the federal government went to foreign-endemic wind companies.

More mostly, the beneficiaries of federal renewable energy policies tend to be large companies, non private taxpayers or pocket-size businesses. The peak five recipients of federal grants and tax credits since 2000 are: Iberdrola, NextEra Energy, NRG Energy, Southern Company and Summit Power, all of which have received more $1 billion in federal benefits.

Iberdrola Renewables lone, a unit of a Spanish utility, has collected $2.two billion in federal grants and allocated tax credits over the by 15 years. That's equivalent to well-nigh 6.7% of the parent company's 2014 revenue of $33 billion (in current US dollars).

President Obama's proposed 2016 budget would permanently extend the biggest federal subsidy for wind ability, the Production Tax Credit (PTC), ensuring that large strange companies proceed to reap nearly of the taxpayer-funded benefits for wind. The PTC is a federal subsidy that pays air current subcontract owners $23 per megawatt-hour through the first ten years of a turbine's operation. The credit expired at the end of 2013, just Congress extended it and then that all projects nether construction by the terminate of 2014 are eligible.

In all, Congress has enacted 82 policies, overseen by nine different agencies, to back up wind power.

I explained in Dec why Congress shouldn't revive the PTC, which expired at the end of 2014. In this commodity, I'm calculation up the true cost of current of air ability in the U.s.a., including the impact of the PTC and other subsidies and mandates. It'south part of a study I'1000 doing of other free energy sources including solar, natural gas, and coal to determine how much each ane actually cost us when all factors are considered.

As Warren Buffett has said, at that place wouldn't exist a air current industry without the PTC.
UCS, DOE, AWEA

Tallying the true costs of wind

Depending on which factors are included, estimates for the cost of wind ability vary wildly. On the low cease, the financial advisory firm Lazard claims wind costs $59 per megawatt-hour. On the high side, Michael Giberson at the Centre for Energy Commerce at Texas Tech University suggests the information technology'southward closer to $149. Our analysis in an upcoming report explores this wide gap in cost estimates, finding that nigh studies underestimate the genuine toll of air current because they overlook cardinal factors.

All estimates for wind ability include the toll of purchasing capital and paying for operations and maintenance (O&1000) of current of air turbines. For the studies we examined, capital costs ranged from $48 to $88 per megawatt-hr, while O&M costs ranged from $9.8 to $21 per megawatt-hour.

Many estimates, still, don't include costs related to the inherent unreliability of wind power and government subsidies and mandates. Since we can't ensure the current of air ever blows, or how strongly, coal and natural gas plants must exist kept on as backup to recoup when it'south calm. This is known as baseload cycling, and its cost ranges from $2 to $23 per megawatt-hour.

This too reduces the environmental friendliness of air current power. Because a coal-fired or natural gas power plant must exist kept online in example there's no wind, two plants are running to practice the job of one. These plants create carbon emissions, reducing the ecology benefits of air current. The amount by which emissions reductions are offset by baseload cycling ranges from 20% to 50%, according to a modeling written report past ii professors at Carnegie Mellon Academy.

While the fill-in plants are necessary to ensure the grid's reliability, their power to operate is threatened by air current subsidies. The federal dollars encourage wind farm owners to produce ability fifty-fifty when prices are low, flooding the market place with inexpensive electricity. That pushes prices downwards fifty-fifty farther and makes information technology harder for more reliable producers, such as nuclear plants, that don't get hefty subsidies to stay in business organisation.

For example, the Kewaunee Nuclear Plant in Wisconsin and the Yankee Nuclear Plant in Vermont both switched off their reactors in 2013. Dominion Energy, which endemic both plants, blamed the artificially low prices acquired by the PTC as one of the reasons for the shutdown.

As more reliable sources drib off and air current power takes their place, consumers are left with an electrical infrastructure that is less reliable and less capable of meeting demand.

Lost in transmission

Some other gene often disregarded is the extra cost of transmission. Many of America's air current-rich areas are remote and the turbines are oft planted in open fields, far from major cities. That ways new transmission lines must be built to behave electricity to consumers. The cost of building new transmission lines ranges from $15 to $27 per megawatt-hr.

In 2013, Texas completed its Competitive Renewable Energy Zone projection, calculation over 3,600 miles of transmission lines to remote wind farms, costing country taxpayers $seven billion.

Although manual infrastructure may be considered a stock-still cost that will reduce futurity transmission costs for wind power, these costs will likely remain of import. Today's wind farms are built in areas with prime number wind resource. If we go along to subsidize air current power, producers volition somewhen expand to sub-prime number locations that may be even further from population centers. This would feed demand for additional manual projects to transport electricity from remote air current farms to cities.

The concluding bill comes to…

Finally, federal subsidies and country mandates as well add significantly to the toll, fifty-fifty as many estimates claim these incentives actually reduce the cost of wind energy. In fact, they add to information technology as American taxpayers are forced to human foot the neb. According to Giberson, federal and land policies add an average of $23 per megawatt-hour to the price of wind power.

That includes the impact of state mandates, which stop upwardly increasing the toll of electricity on consumer power bills. California is one of the most aggressive in pushing so-chosen Renewable Portfolio Standards (RPS), requiring the land to swallow 33% of its electricity from renewables by 2020. Overall electricity prices in states with RPS are 38% higher than those without, co-ordinate to the Plant for Energy Research, a non-profit research grouping that promotes gratuitous markets.

The best estimate available for the full cost of wind power is $149 per megawatt-hour, taken from Giberson's 2013 report.

Information technology is hard to quantify some factors of the price of wind power, such equally the toll of country policies. Giberson's approximate, still, includes the most relevant factors in attempting to measure the true cost of producing electricity from current of air power. In future reports, Strata volition explore the true cost of producing electricity from solar, coal, and natural gas. Until those reports are completed, information technology is difficult to accurately compare the truthful cost of air current to other technologies, as true cost studies have non yet been completed.

Blowing in the wind

The high costs of federal subsidies and country mandates for air current power have not paid off for the American public. Co-ordinate to the Mercatus Eye at George Mason Academy, wind energy receives a higher percentage of federal subsidies than any other type of free energy while generating a very pocket-sized percentage of the nation'south electricity.

In 2010 the wind energy sector received 42% of total federal subsidies while producing just two% of the nation's total electricity. By comparison, coal receives ten% of all subsidies and generates 45% and nuclear is about fifty-fifty at about twenty%.

Wind gobbles up the largest share of subsidies yet produces little power.
EIA

But policymakers at the federal and country level, unfortunately, have decided that the American people will have renewable energy, no matter how high the costs. Equally a result, taxpayers will be stuck paying the cost of subsidies to wealthy current of air producers.

Meanwhile, electricity consumers volition be forced to purchase the more expensive ability that results from land-level mandates for renewable energy production. Although such policies may exist well intended, the real results will be limited freedom, reduced prosperity and an increasingly unreliable power supply.

Megan Hansen, a Strata policy analyst, co-authored this article.
The Conversation

This article is published in collaboration with The Chat. Publication does not imply endorsement of views by the Earth Economic Forum.

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Author: Randy Simmons is a Professor of Political Economy at Utah Country University.

Paradigm: Power-generating windmill turbines are seen near Port Saint Louis du Rhone, virtually Marseille, May 7, 2014. REUTERS/Jean-Paul Pelissier.