The power industry is in a fundamental transition, its ultimate shape to be determined by technology, markets, and regulation. The economics is straightforward: intermittent renewable power, primarily wind and solar, is a major disruptive influence on operations and investments, and some of its costs are not being borne by those responsible for causing them. The laws and regulations that affect intermittent power (at both federal and state levels) make it difficult to estimate the costs and benefits of the new sources. The benefits of power produced without fuel are seemingly persuasive, but a growing body of research shows that wind power’s advocates in Texas have, at best, overstated their case.

Mix intermittent generation with politics and federal, state, and local renewable subsidies, and you are unlikely to arrive at an economically rational outcome. Wind power is a technology that appears manifestly unsuited for most electricity users due to its randomness and the costs of storage or attempts to back up production. To meet consumers’ desires, utilities must offer them both affordability and reliability, which is almost impossible to accomplish if the energy is produced by intrinsically intermittent generators. The fact that air is “free” says nothing about the commercial advantages of wind turbines that do not need purchased fuel. Whatever its engineered (“nameplate”) capacity, a generator’s economic value depends on the value of its output and not its technology. Wind power is locationally specific, and the capacity of a wind turbine depends in large part on technical factors that may severely limit generation options. A fossil-fuel power plant can be located where its total cost (capital, labor, fuel, transmission) is minimized, but the location of an intermittent power source such as a wind turbine is constrained by wind availability. If windy areas are remote from consumers, as in Texas, reaching a wind generator may require dedicated radial transmission that cannot be used to deliver power from alternative sources; its isolation from most of the energy grid also means that it contributes little to reliability.

Key Points:

  • Intermittent renewable power, primarily wind and solar, is a major disruptive influence on operations and investments, and some of its costs are not being borne by those responsible for causing them.
  • The benefits of power produced without fuel are seemingly persuasive, but a growing body of research shows that wind power’s advocates in Texas have at best overstated their case.
  • If windy areas are remote from consumers, as in Texas, reaching a wind generator may require dedicated radial transmission that cannot be used to deliver power from alternative sources; its isolation from most of the energy grid also means that it contributes little to reliability.
  • Ratemaking practices for transmission that pass costs through to consumers take important intermittency risks away from wind generators and throw them on to non-wind producers and captive ratepayers.