Report: Wind power less expensive than coal and natural gas

Report: Wind power less expensive than coal and natural gas

There are two major arguments about using renewable resources over fossil fuels to produce energy: reliability and cost. According to a Bloomberg New Energy Finance report, one of those reasons no longer applies.

The cost to produce wind power in the U.S. is now on par with the price of using coal and natural gas. According to Bloomberg, a major factor for this is the widespread implementation of wind and solar energy, which has made renewable energy more accessible.

Capacity factors
Once the wind and solar farms are built, the cost of production is essentially free. Coal, oil and natural gas, on the other hand, require continued payments. Power companies are choosing renewables more frequently because of this, resulting in a lower capacity factor for fossil fuels.

The capacity factor is a comparison of how much an energy source can produce to how much it actually did produce. As the capacity factor goes down, the cost to produce energy goes up. The more it costs to use these sources, the more power companies will rely on the less expensive option - onshore wind farms.

"Our report shows wind and solar power continuing to get cheaper in 2015, helped by cheaper technology but also by lower finance costs," Seb Henbest, head of Europe, Middle East and Africa at Bloomberg New Energy Finance, said in a press release. "Meanwhile, coal and gas have got more expensive on the back of lower utilisation rates, and in Europe, higher carbon price assumptions following passage of the Market Stability Reserve reform."

Emily Williams, the American Wind Energy Association's manager of industry data and analytics, told the New York Times she noticed the decreased cost of wind energy particularly in the region from North Dakota to Texas already last year. She explained that in some cases, utilities were able to pay 2.1 cents per kilowatt-hour, five cents lower than five years ago.

Worldwide wind power
If the pattern continues, Bloomberg estimates that wind power could be cheaper than fossil fuels without the help of government subsidies in the next 10 years. In other countries, government subsidies aren't needed to bring the cost of wind lower than fossil fuels anymore.

The U.K. and Germany both are seeing this. Last year, Denmark announced the same news: Wind power is the cheapest form of energy produced in the country overall, according to The Climate Group. Once wind turbines come online in 2016, the price will be 50 percent of the cost of coal and natural gas plants.

While wind and solar are clearly making progress toward becoming a bigger part of the world's energy production, there is still a way to go before it can become the major energy producer. Bloomberg's report stated that China's wind power was less costly than its natural gas plants, but coal was still cheaper than both.

Ignoring government subsidies for renewable energy in the U.S., at $65 per megawatt-hour, coal and natural gas would still be $15 per mwh cheaper than wind and $42 per mwh cheaper than solar.

For more information about wind energy's future, visit PennEnergy's research area.

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