Where Is Wind Energy Cheaper than Natural Gas?

, senior energy analyst, Climate & Energy Program | October 18, 2013, 1:10 pm EST
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Answer: The gas-rich states of Oklahoma, Texas, and Colorado. This week, utility Public Service Co. of Oklahoma announced that it tripled its planned purchase of 200 MW of wind energy, to 600 MW, because of the immediate savings to its customers and the 20-year guaranteed stable pricing.

credit; L. Davis Roper

credit: L. Davis Roper

Two weeks ago, the consumer-owned cooperative utility Tri-State increased its purchases from a wind farm in northeast Colorado. In September, Austin Energy in Texas made a $1.4 billion commitment to add more wind to its supply, also at a fixed price.

But wait, there’s more. For states that have long been energy importers, wind purchases are showing up as bargains as well. Alabama and Georgia are buying wind energy from Oklahoma and Kansas, and New England states just announced wind that is cheaper than conventional, gas-fired alternatives.

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  • Jeff Crunk

    I am intrigued with the changes we’ve seen in TX over the last five years. I live in Austin and am an Austin Energy customer. To add to the point, the 25-year wind contracts Austin just signed are between 2.3-3.3 cents a kilowatt-hour. To put that in context, Austin Energy’s average fuel price is .06-.07 cents for kilowatt-hour. With the price of natural gas edging upward again, no newly constructed fossil fuel generation in TX can compete with wind in the current market environment. Not even gas. Nor will it likely do so in the future. ERCOT, the state grid authority, released a Long Term System Study last January that showed wind and solar out-competing all other fuels for electricity between now and 2020 under most scenarios. So one can expect to see wind go from 10 percent of annual state electricity in 2013 to 15-20 percent between say 2016 and 2020, with some significant solar coming on even without a state or federal production tax credit.

    Interestingly, Luminant, one of the state’s largest operators of coal, just successfully appealed to the state’s grid authority to shutter three large (and older and dirtier) coal plants because, as they said plainly in their press releases, those coal plants put power on the wholesale market at a loss throughout half the year. That owes to all the cheap wind power flooding onto the grid fall-spring. Negative pricing for the coal operators. But as a ratepayer wanting a lower bill, and a parent wanting cleaner air and more water in a drought for something other than steam, this is a happy change of events. If TX utility operators get hold of competitively priced energy storage systems, the last piece of the puzzle, don’t be surprised if the next Spindletop moment is again in Texas with solar.

    • This is what we are talking about. Texas started down this path with a Renewable Portfolio Standard. Once started, the state met and exceeded its targets, and keeps on expanding windpower use. Plenty of windpower proposals compete, keeping the downward pressure on prices. Texas has taught the country (and the world) a number of things about development of wind. Years ago I predicted that this could happen because of the state’s history as an energy producer, dating back to the discovery of oil at Spindletop. You are right about the coal plant closings, the cleaner air, and the reduced use of water for electricity production that follow from this. (I think you do have a decimal in the wrong place for the prices you typed. I think you meant the wind contracts are around 3 cents and the average fossil-fuel energy prices are around 6 cents, not 100 times lower.)
      Folks should also know that the day-to-day operations of the grid in Texas with all this wind has been managed by ERCOT, despite the long-standing practice in Texas to prohibit power flows from ERCOT to neighboring areas that could make balancing the supply and demand easier. Thanks for the comment!

  • Mr. Jacobs, your claims specific to New England and Alabama are embarrassingly inaccurate. Since when is $78 per mwh for wind cheaper than $45 per mwh for gas? Hopefully, your readers will do more than scan the press titles to get to the truth about wind.

    • Lisa-
      Thank you for raising this question. The last time windfarm prices nation-wide were $78 per mwh was in 2009.
      We are surprised, as you are, that wind in the Great Plains is sucessfully competing with low natural gas prices. Windfarm construction costs are lower in the Plains than in New England, so windfarm energy contracts across the country in 20012 were “around $40/MWh nationwide.” See the most recent annual report on costs and performance.
      As for the claims about New England and Alabama, we are reporting the approvals made by state regulatory agencies. In these litigated cases, the long-term prices were approved by New England and Alabama state regulatory commissions on the basis of lowering costs to consumers.
      We care about the accurate reporting on these issues. UCS made an extended analysis of press coverage of climate change.