Welcome to the website for the
New Mexico Citizens Alliance for Responsible Energy and Sustainability
Information and opinions on the economics of Industrial Wind
Thanks for this go to Windtoons.com (unfortunately, now defunct).
The Gas Is Greener
By ROBERT BRYCE
The New York Times, June 7, 2011
IN April, Gov. Jerry Brown made headlines by signing into law an ambitious mandate that requires California to obtain one-third of its electricity from renewable energy sources like sunlight and wind by 2020. Twenty-nine states and the District of Columbia now have renewable electricity mandates. President Obama and several members of Congress have supported one at the federal level. Polls routinely show strong support among voters for renewable energy projects - as long as they don't cost too much.
But there's the rub: while energy sources like sunlight and wind are free and naturally replenished, converting them into large quantities of electricity requires vast amounts of natural resources - most notably, land. Even a cursory look at these costs exposes the deep contradictions in the renewable energy movement.
Consider California's new mandate. The state's peak electricity demand is about 52,000 megawatts. Meeting the one-third target will require (if you oversimplify a bit) about 17,000 megawatts of renewable energy capacity. Let's assume that California will get half of that capacity from solar and half from wind. Most of its large-scale solar electricity production will presumably come from projects like the $2 billion Ivanpah solar plant, which is now under construction in the Mojave Desert in southern California. When completed, Ivanpah, which aims to provide 370 megawatts of solar generation capacity, will cover 3,600 acres - about five and a half square miles.
The math is simple: to have 8,500 megawatts of solar capacity, California would need at least 23 projects the size of Ivanpah, covering about 129 square miles, an area more than five times as large as Manhattan. While there's plenty of land in the Mojave, projects as big as Ivanpah raise environmental concerns. In April, the federal Bureau of Land Management ordered a halt to construction on part of the facility out of concern for the desert tortoise, which is protected under the Endangered Species Act.
Wind energy projects require even more land. The Roscoe wind farm in Texas, which has a capacity of 781.5 megawatts, covers about 154 square miles. Again, the math is straightforward: to have 8,500 megawatts of wind generation capacity, California would likely need to set aside an area equivalent to more than 70 Manhattans. Apart from the impact on the environment itself, few if any people could live on the land because of the noise (and the infrasound, which is inaudible to most humans but potentially harmful) produced by the turbines.
Industrial solar and wind projects also require long swaths of land for power lines. Last year, despite opposition from environmental groups, San Diego Gas & Electric started construction on the 117-mile Sunrise Powerlink, which will carry electricity from solar, wind and geothermal projects located in Imperial County, Calif., to customers in and around San Diego. In January, environmental groups filed a federal lawsuit to prevent the $1.9 billion line from cutting through a nearby national forest.
Not all environmentalists ignore renewable energy's land requirements. The Nature Conservancy has coined the term "energy sprawl" to describe it. Unfortunately, energy sprawl is only one of the ways that renewable energy makes heavy demands on natural resources.
Consider the massive quantities of steel required for wind projects. The production and transportation of steel are both expensive and energy-intensive, and installing a single wind turbine requires about 200 tons of it. Many turbines have capacities of 3 or 4 megawatts, so you can assume that each megawatt of wind capacity requires roughly 50 tons of steel. By contrast, a typical natural gas turbine can produce nearly 43 megawatts while weighing only 9 tons. Thus, each megawatt of capacity requires less than a quarter of a ton of steel.
Obviously these are ballpark figures, but however you crunch the numbers, the takeaway is the same: the amount of steel needed to generate a given amount of electricity from a wind turbine is greater by several orders of magnitude.
Such profligate use of resources is the antithesis of the environmental ideal. Nearly four decades ago, the economist E. F. Schumacher distilled the essence of environmental protection down to three words: "Small is beautiful." In the rush to do something - anything - to deal with the intractable problem of greenhouse gas emissions, environmental groups and policy makers have determined that renewable energy is the answer. But in doing so they've tossed Schumacher's dictum into the ditch.
All energy and power systems exact a toll. If we are to take Schumacher's phrase to heart while also reducing the rate of growth of greenhouse gas emissions, we must exploit the low-carbon energy sources - natural gas and, yes, nuclear - that have smaller footprints.
Robert Bryce, a senior fellow at the Manhattan Institute, is the author, most recently, of "Power Hungry: The Myths of 'Green' Energy and the Real Fuels of the Future."
Realtor Notification, July 2010TO THE LAS VEGAS BOARD OF REALTORS
We are writing you as a group of concerned citizens regarding a proposed industrial wind facility on Bernal mesa in San Miguel County that could profoundly impact real estate values here and beyond.
Since October 2008, we have worked with our County Commissioners to adopt an ordinance that would establish responsible guidelines and healthy setbacks to protect residents, their health and property values.
On Tuesday, August 3, 2010 there will be a special County Commissioners meeting in Las Vegas (500 West National Avenue, 1:30pm) to review, hear public comment and possibly vote on this ordinance. Particularly critical is the request for a three (3) mile setback from any residence, village or historic site. This safety distance was considered defensible by an independent study performed by Los Alamos National Laboratory. The wind facility company, Invenergy LLC based in Chicago, will be requesting a one (1) mile or even possibly a fifteen hundred foot (1,500') setback.
Our county's vote could set a precedent for the rest of the state. It may be in the interest of our realtors to attend the upcoming San Miguel County Commission meetings so they will know what may be on the horizon, as it will certainly affect their ability to make residential sales in the Pecos Valley area and, eventually, beyond. Disclosure of the potential facility on the Bernal Mesa has already caused two or three serious buyers to back out and non-disclosure has already resulted in one potential lawsuit.
It is our hope that you will send this message to all your licensed realtors and please address this issue at your next meeting.
To learn more about our research, please visit our website at: www.newmexicocare.org
The Economics section shows studies of financial impact to properties near industrial wind facilities.
Thank you for your consideration,
New Mexico Citizens Alliance for Responsible Energy and Sustainability
Given that your firm represents, or in the future may represent, buyers or sellers of potentially impacted property, for reasons of disclosure we inform you that the New Mexico State Land Office has given a two-year option (ending mid-September 2010) to an industrial wind turbine facility for specified State lands on top of the mesa located just south of Starvation Peak and the town of Bernal and which runs south down the eastern edge of the Ribera valley. In addition, some landowners on the mesa have been offered contracts to permit industrial wind turbine and/or power transmission line installation on their property, and some have signed these contracts.
Based on the possibility of the turbines being located near the mesa's edge and the size of the newer generation turbines which may be deployed for the facility, there exists the possibility that properties along Interstate 25 from Pecos east almost to Tecolote, as well as the area bordering State Highway 3 running south from I-25 through Ribera and Villanueva, will have the turbines and/or transmission lines used by the facility in their views.
Effects pertinent to property owners may proceed from the following:
a) Typical industrial wind turbines of a 1.5 MW size stand approximately 400 feet tall to the blade tip, making them visible for miles. The turbines are 40 stories tall - taller than any building in New Mexico and almost as high as the mesa.
b) Turbines make audible noise and produce low frequency sound. Reports contend that there are negative health impacts of low frequency sound, which are dependent on factors such as wind direction and distance of setback from a residence or point on a property where the sound would be heard or felt.
c) Red lights are typically installed on top of the wind turbines for aviation safety. These lights strobe at night, sometimes in unison.
d) Turbines often sit on mesa edges, which can be preferred sites due to wind flow patterns.
e) Erection of transmission lines and towers connecting the facility to the power grid would also be necessary to convey the power. The exact location of these transmission lines, towers and their size is unknown at this point.
To learn more about the potential wind turbine facility and its current status, contact:
Les Montoya, County Manager for San Miguel County
500 W. National Ave. Suite 200, Las Vegas, NM 87701
New Mexico Citizens Alliance for Responsible Energy and Sustainability
Certified appraiser Michael S. McCann submitted this testimony to the Adams County Board, Adams County, Illinois, on June 08, 2010, in reference to the impact of industrial scale wind energy development on residential property. Mr. McCann's testimony provides a detailed explanation of the impacts he has found and his recommendations to avoid harm to adjacent property when siting projects.
SUMMARY OF OPINIONS AND RECOMMENDATIONS
1. Residential property values are adversely and measurably impacted by close proximity of industrial-scale wind energy turbine projects to the residential properties, with value losses measured up to 2-miles from the nearest turbine(s), in some instances.
2. Impacts are most pronounced within "footprint" of such projects, and many ground-zero homes have been completely unmarketable, thus depriving many homeowners of reasonable market-based liquidity or pre-existing home equity.
3. Noise and sleep disturbance issues are mostly affecting people within 2-miles of the nearest turbines and 1-mile distances are commonplace, with many variables and fluctuating range of results occurring on a household by household basis.
4. Real estate sale data typically reveals a range of 25% to approximately 40% of value loss, with some instances of total loss as measured by abandonment and demolition of homes, some bought out by wind energy developers and others exhibiting nearly complete loss of marketability.
5. Serious impact to the "use & enjoyment" of many homes is an on-going occurrence, and many people are on record as confirming they have rented other dwellings, either individual families or as a homeowner group-funded mitigation response for use on nights when noise levels are increased well above ambient background noise and render their existing homes untenable.
6. Reports often cited by industry in support of claims that there is no property value, noise or health impacts are often mischaracterized, misquoted and/or are unreliable. The two most recent reports touted by wind developers and completed in December 2009 contain executive summaries that are so thoroughly cross-contingent that they are better described as "disclaimers" of the studies rather than solid, scientifically supported conclusions. Both reports ignore or fail to study very relevant and observable issues and trends.
Click this link or the link above for an extended excerpt of his testimony. The full testimony (5-mb pdf) can be downloaded here.
Recent Study Confirms Wind Facility Impact On Property Values
Derry Gardner, a real estate appraiser in Texas, gave THIS PRESENTATION (4-Mb pdf file) at the South Plains Agriculture Wind & Wildlife Conference, in Lubbock, Texas on February 13, 2009. He kindly permitted the presentation to be posted on the windaction.org website.
Numbers from the State Land Office
March 10, 2009 - Land Commissioner Pat Lyons, in the State Land Office's Winter 2009 bulletin, reports that "The potential combined earning power from the operating wind farms and optioned land will surpass $55 million in the course of their anticipated 35-year terms." (statewide). This figure barely exceeds our most conservative estimate (below) of the loss to our property values here in the valley alone, not to mention the combined losses around the other facilities statewide.
In the SLO's description of the Caprock Wind Ranch it says, "The lease payment is $32,000 annually ...The beneficiaries earning revenue from the Caprock Wind Ranch lease are Public Schools (41.30%) and New Mexico Institute of Mining and Technology (58.70%)." So from this one wind energy facility of 80 turbines, the state is receiving $13,216 annually for public schools. That is not a lot of money.
As for the state-wide anticipated income of $55 million over 35 years, that works out to about $1.6 million per year for the entire state school system. Now, that might sound like a lot of money until you actually look at real budget and student numbers. It works out to $4.85 (yes, four dollars and eighty-five cents) per student per year in the New Mexico public school system. (see http://www.ped.state.nm.us/IT/fs/05/08.09.enroll.dist.pdf for student numbers.)
We fail to see how this can be of any real benefit to our state.
Cost to the community as a whole
We have been trying to determine what this wind farm project
might cost our community as a whole.
If we figure that the proposed facility will affect an area along I-25 about ten miles long (from Bernal to San Juan) and two miles wide, or 20 square miles, and another area of similar size running down NM3 from Ribera to Villanueva, another 20 square miles, for a total of 40 square miles, the affected area equals 25,600 acres. If one uses a standard market rate of $10,000 per acre, a 20% loss in property value would equal $2,000 per acre, times 25,600 acres, for a total loss to the community of $51,200,000.
(comment from GG) When we bought an acre from BLM to cure an encroachment, it appraised and we paid $15,600 an acre. You might recalculate.
Figuring $15,000/acre, then, a 20% loss equals $3,000/acre, times 25,600 acres, totaling $76,800,000.
(comment from BD) I have just studied the visual impact along I-25 and the facility would be visible from the 309 to 335 mile marker at least, more like 25 miles.
Expanding the area along I-25 to twenty-five miles by two miles equals 50 sq.mi., plus the 20 sq.mi. along Rt.3 equals 70 sq.mi., or 44,800 acres, times a $3,000 depreciation equals a loss to the community of $134,400,000.
If the higher 30%-loss figure is used, at a starting value of $15,000/acre, the loss would be $4,500/acre, times 44,800 acres, totaling to a loss of $201,600,000.
It is argued that we are a poor community, and so should embrace the opportunity for the few jobs and lease incomes the project would create. Can those jobs and incomes come anywhere close to offsetting such losses to the community as a whole? We think they cannot.
Would such an impact to our properties not make us even poorer? The figures above clearly indicate that it would.
We wonder who stands to gain so much from this project that we citizens should be forced to accept such huge losses to our community. We believe there is no possible justification for allowing this project to continue.
We think the county should be held responsible for any diminution in value of properties adversely
affected by an industrial wind facility. That is, can a property owner claim compensation from the county
when the action of the county in approving the wind facility results in adjoining property being
In constitutional law this is known as a "taking". Under the 5th Amendment, government cannot take property without just compensation. This theory has been expanded in recent years by a number of cases. Please see this page.
New Mexico's "Wind Farm" Follies
by Glenn R. Schleede
This memo responds to requests for comments on the article, "Many Utilities Embrace Wind
Energy," distributed on October 24, 2002, by Utilipoint (formerly a SciTech Company), which
can be found here.
The Utilipoint article apparently was stimulated by the recent announcement of FPLEnergy's intention to add more windmill capacity and, particularly, its plan to build a 204 MW "wind farm" in New Mexico and sell the power to Public Service Company of New Mexico.
As some of you have detected, the article is full of errors, omissions and misconceptions - probably due to the author(s) lack of familiarity with the facts about "wind energy," rather than a deliberate attempt to mislead. Among the problems with the article are the following:
1. Few utilities own "wind farms." Contrary to claims in the article, very FEW electric utilities are becoming owners of windmills. Instead, almost all "wind farms" are being built by a few unregulated entities (such as FPLEnergy), who then sell the output to regulated utilities that are either:
(a) forced to buy the output by renewable portfolio standards,
(b) pressured by regulators or politicians, or
(c) trying to appear "environmentally concerned."
Without stopping to count, I'd guess that less than a dozen regulated utilities have become windmill owners. Most utilities do not like wind energy because they do not like:
(a) Paying the higher costs of electricity from "renewable" sources.
(b) Passing extra costs along to customers.
(c) Bearing the extra costs and burden of providing backup generating capacity, transmission, and grid management associated with the intermittent, variable and largely unpredictable output from "wind farms."
2. Why "wind farms" are being built. "Wind farms" ARE being built in the US for five principal reasons:
(a) "Windfall profits" for "wind farm" owners due primarily to the extremely generous federal and state subsidies that shift costs from "wind farm" developers and owners to taxpayers and electric customers. Subsidies that shift cost to taxpayers include:
(.1) The federal Production Tax Credit (now $0.018 per kWh - not $0.015 stated in the article). (FYI, the federal PTC will permit "wind farm" owners to avoid over $100 million in federal income taxes in 2002, and the amount will grow as "wind farms" are added.)
(.2) Federal 5-year double-declining-balance accelerated depreciation. (FYI, this subsidy will permit wind farm owners to shelter over $500 million in 2002 income from federal income taxes.)(3) State subsidies such as New Mexico's $0.01 per kWh state-tax credit for electricity from "wind farms" and industrial- development bond financing. The value of the above subsidies to "wind farm" owners probably will exceed the income they receive from the sale of the electricity produced by the "wind farm"!
(b) Renewable Portfolio Standards (RPS) in 15 states, which are probably the most insidious way that legislators and regulators have found to shift costs from "renewable" energy companies to electric customers -- and hide those costs in monthly electric bills. (Few "wind farms" are being built in states that haven't succumbed to RPS.)
(c) Mandated "Green Energy" programs in 4 states that force distribution utilities to buy electricity from "renewable" energy sources and make it available to their customers.
(d) "Green Energy" pricing in 25 states, which permit distribution utilities to charge a premium price for electricity from "renewable" sources when a customers volunteers to do so. Apparently fewer than 2% of customers that were offered the "opportunity" chose to pay the premium prices. This undoubtedly reflects:
(.1) Consumers' wise decision to hold down electric bills, and/or
(.2) Recognition that any real environmental value of these programs is miniscule. The premium prices help utilities cover the higher cost of the electricity they buy from "renewable" energy facilities and for the utilities' costs of administering "green" energy programs. However, the premiums are unlikely to cover the full costs, thus making it necessary for utilities to pass along unrecovered costs to customers or shareholders.
(e) "Public relations" purposes, often called "green-washing," in the sense that providing some electricity produced from "renewable" energy shows "environmental" concern.
3. Fossil energy displacement, Diversity and emissions. The quotes in the article attributed to the CEO of PNM Resources and data on PNM's web site about displacing fossil-fueled generation, diversity and emission avoidance are a real stretch. For example:
(a) PNM claims that the "wind farm" will produce the 594,206,000 kWh of electricity per yr. That would be equal to 3% of the 19,832,797,000 kWh of electricity PNM sold during 2001 (according to PNM's annual report). The claimed 594,206,000 kWh from the wind turbines would equal 1.7% of all the 33,994,000,000 kWh of electricity (EIA data) produced in New Mexico in 2000. (PNM's output claim assumes a 33% capacity factor for the "wind farm." That is a courageous assumption. "Wind farms" seldom produce at the level claimed by developers.)
(b) Contrary to claims in the article, wind energy does NOT add to fuel "diversity," and wind energy does not add to system reliability." Since wind turbines produce electricity only when the wind blows, generation powered by traditional energy sources (in NM, most likely natural gas, coal or oil) must be immediately available to back up the windmills. Because of its intermittence, high variability and very limited predictability, wind energy tends to work in opposition to energy source diversification.
(c) Very little fossil-fired electricity will be displaced and few emissions will be avoided because fossil-fueled units (operating at less than their peak capacity and efficiency or operating in "spinning reserve" mode) must be kept immediately available to supply electricity when the output from wind turbines drops because wind speed slows or falls below minimums required to power the turbines. Units serving this backup role continue to emit when serving in a backup role. Kilowatt-hours produced by wind turbines CANNOT be assumed displace the emissions associated with an equal number of kWh from fossil-fueled generating units.
4. Meaningless cost data. The cost data in the article are meaningless (as is most cost data on electricity from "wind farms" that is published by DOE, NREL and the wind energy industry) because:
(a) Neither the source of the estimates nor the underlying assumptions are revealed.
(b) Calculations of costs for wind energy are highly dependent on assumptions about facility lifetime. Calculations often assume 20 or 30 years when no one has experience with actual life of today's wind turbines or their O&M, repair and replacement costs over 20-30 year periods.
(c) The author apparently assumes naively that the huge federal subsidies for wind facilities (which merely shift cost from "wind farm" owners to taxpayers and electric customers and hide them in tax bills and monthly electric bills) are not a part of the true costs.
(d) The cited costs for electricity from wind apparently do not take into account the cost of providing backup generation or the extra costs of transmission and grid management.
5. Transmission capacity and costs. The article makes the useful point that lack of transmission capacity is a barrier to wind energy. The intermittent and highly variable output from "wind farms" makes inefficient use of transmission capacity and cannot by itself justify the costs of adding new transmission capacity. When transmission capacity is added to serve "wind farms," the costs should be counted as part of the full cost of the wind-generated electricity. The wind industry is seeking to avoid these costs by getting regulators to roll them into base rates, thus shifting the costs from "wind farm" developers to all electric customers. (Such a case involving over $100 million is underway in Minnesota.)
Alleged Economic Benefits. Not mentioned in the article but cited on PNM's web site are the alleged economic benefits to New Mexico including, annually, $450,000 in payments in lieu of taxes, $550,000 in land rental payments, and $500,000 in compensation for 12 employees who will operate the "wind farm" when completed. When making these claims, PNM failed to note that:
(1) The annual total of $1.5 million claimed as "economic benefits" is equal to about 12.6% of the $11.88 million in EXTRA costs loaded on electric customers each year if the full, true costs of the electricity from the "wind farm" were only $0.02 per kWh above the cost of electricity from other sources (i.e., 594,206,000 kWh x $0.02 per kWh = $11,884,120).
(2) New Mexico legislators have decided (according to the Albuquerque Journal) to exempt wind generation equipment from NM's gross receipts tax in addition to providing the wind-farm owner a $0.01 per kWh state income-tax credit for the first 400,000,000 kWh of electricity produced during each of the first 10 years, and authority to use industrial development bonds. Once again, tax burden is shifted from "wind farm" developers to remaining taxpayers.
In effect, it appears that New Mexico has decided to export about $10 million of its citizen's wealth annually to an out-of-state "wind farm" owner.
Due to a rate freeze recently accepted by PNM, its customers may be protected from some of the extra costs of electricity from the wind farm until the "freeze" ends (but apparently not from any voluntarily accepted "premium" rates for "green" electricity or if NM adopts a "Renewable Portfolio Standard"). Taxpayers will not be protected.
The Utilipoint article also refers to wind energy development in other parts of the US, including 1,800 MW in the Northwest "to meet the demands of the Bonneville Power Administration." Apparently the authors aren't aware that the ambitious plans announced by Bonneville in 2001 have been reduced sharply. Also, the authors didn't note in the article the growing opposition to the siting of "wind farms" that has sprung up across the US, including in Maine, Massachusetts, New York, Pennsylvania, Michigan, Illinois, Wisconsin, Kansas, California, and Washington. A growing number of people are realizing that wind is not the environmentally benign energy source that DOE, NREL, the wind energy industry, and other advocates have claimed.
More on "Wind Farm" Owners' WindFall Profits. Few people outside the wind industry seem to recognize the extent to which "wind farm" owners profit from their ventures, particularly due to the subsidies. Consider the following:
(1) Federal Production Tax Credit. If FPLEnergy's wind farm produces the estimated 594,206,000 kWh per year, the company will get an annual tax credit of $0.018 per kWh each year for 10 years of $10,695,708 (i.e., 594,206,000 kWh x $0.018). (2) State Production Tax Credit. $0.01 per kWh for the first 400,000,000 kWh produced during each of the first 10 years or $4,000,000.
(3) Income from sale of electricity. The price has not been disclosed. However, assuming it is $0.025 per kWh, PNM will be paying FPLEnergy $14,855,150 each year (i.e., 594,206,000 kWh x $0.025)
(4) Under the generous federal 5-year double declining-balance accelerated depreciation allowed for capital investments in commercial wind-electric facilities, FPLEnery (or its parent company) will be able to shelter significant income from federal taxation. Specifically, assuming the $200,000,000 capital investment estimate is correct, these amounts could be sheltered:
First year: 20% $40,000,000
Second year: 32% $64,000,000
Third year: 19.2% $38,400,000
Fourth year: 11.52% $23,040,000
Fifth year 11.52% $23,040,000
Sixth year: 5.76% $11,520,000
Totals 100% $200,000,000
I hope these few comments are responsive to your requests and will place the article in context.
* * *
This analysis is provided as a public service and without charge by Glenn R. Schleede, Energy Market & Policy Analysis, Inc. PO Box 3875, Reston, VA 20195-1875; Phone: 703 709-2213; Email: EMPAInc@aol.com. Schleede is semi-retired after spending more than 30 years on energy matters in the federal government and private sector. He now spends part of his time on self-financed analysis and writing about: (a) Government policies, programs and regulations that are detrimental to the interests of consumers or taxpayers.(b) Government or private programs and projects that are presented to the public, media, Congress and other government officials in a false or misleading way. The views presented in this analysis are provided in Schleede's role as a citizen, consumer and taxpayer and are not on behalf of any client or other interest.
By Michael J. Trebilcock, Financial Post, April 08, 2009
There is no evidence that industrial wind power is likely to have a significant impact on carbon emissions. The European experience is instructive. Denmark, the world's most wind-intensive nation, with more than 6,000 turbines generating 19% of its electricity, has yet to close a single fossil-fuel plant. It requires 50% more coal-generated electricity to cover wind power's unpredictability, and pollution and carbon dioxide emissions have risen (by 36% in 2006 alone).
Flemming Nissen, the head of development at West Danish generating company ELSAM (one of Denmark's largest energy utilities) tells us that "wind turbines do not reduce carbon dioxide emissions." The German experience is no different. Der Spiegel reports that "Germany's CO2 emissions haven't been reduced by even a single gram," and additional coal- and gas-fired plants have been constructed to ensure reliable delivery.
Indeed, recent academic research shows that wind power may actually increase greenhouse gas emissions in some cases, depending on the carbon-intensity of back-up generation required because of its intermittent character. On the negative side of the environmental ledger are adverse impacts of industrial wind turbines on birdlife and other forms of wildlife, farm animals, wetlands and viewsheds.
Industrial wind power is not a viable economic alternative to other energy conservation options. Again, the Danish experience is instructive. Its electricity generation costs are the highest in Europe (15¢/kwh compared to Ontario's current rate of about 6¢). Niels Gram of the Danish Federation of Industries says, "windmills are a mistake and economically make no sense." Aase Madsen , the Chair of Energy Policy in the Danish Parliament, calls it "a terribly expensive disaster."
The U.S. Energy Information Administration reported in 2008, on a dollar per MWh basis, the U.S. government subsidizes wind at $23.34 - compared to reliable energy sources: natural gas at 25¢; coal at 44¢; hydro at 67¢; and nuclear at $1.59, leading to what some U.S. commentators call "a huge corporate welfare feeding frenzy." The Wall Street Journal advises that "wind generation is the prime example of what can go wrong when the government decides to pick winners."
The Economist magazine notes in a recent editorial, "Wasting Money on Climate Change," that each tonne of emissions avoided due to subsidies to renewable energy such as wind power would cost somewhere between $69 and $137, whereas under a cap-and-trade scheme the price would be less than $15.
Either a carbon tax or a cap-and-trade system creates incentives for consumers and producers on a myriad of margins to reduce energy use and emissions that, as these numbers show, completely overwhelm subsidies to renewables in terms of cost effectiveness.
The Ontario Power Authority advises that wind producers will be paid 13.5¢/kwh (more than twice what consumers are currently paying), even without accounting for the additional costs of interconnection, transmission and back-up generation. As the European experience confirms, this will inevitably lead to a dramatic increase in electricity costs with consequent detrimental effects on business and employment. From this perspective, the government's promise of 55,000 new jobs is a cruel delusion.
A recent detailed analysis (focusing mainly on Spain) finds that for every job created by state-funded support of renewables, particularly wind energy, 2.2 jobs are lost. Each wind industry job created cost almost $2-million in subsidies. Why will the Ontario experience be different?
In debates over climate change, and in particular subsidies to renewable energy, there are two kinds of green. First there are some environmental greens who view the problem as so urgent that all measures that may have some impact on greenhouse gas emissions, whatever their cost or their impact on the economy and employment, should be undertaken immediately.
Then there are the fiscal greens, who, being cool to carbon taxes and cap-and-trade systems that make polluters pay, favour massive public subsidies to themselves for renewable energy projects, whatever their relative impact on greenhouse gas emissions. These two groups are motivated by different kinds of green. The only point of convergence between them is their support for massive subsidies to renewable energy (such as wind turbines).
This unholy alliance of these two kinds of greens (doomsdayers and rent seekers) makes for very effective, if opportunistic, politics (as reflected in the Ontario government's Green Energy Act), just as it makes for lousy public policy: Politicians attempt to pick winners at our expense in a fast-moving technological landscape, instead of creating a socially efficient set of incentives to which we can all respond.
Michael J. Trebilcock is Professor of Law and Economics, University of Toronto. These comments were excerpted from a submission to the Ontario government's legislative committee On Bill 150.
FAQ -- Economics
(unabashedly borrowed from National Wind Watch)
How much does it cost to build a wind power facility?
Construction of a wind power facility costs between $1 million and $2 million per megawatt of capacity.
How much subsidies do wind power developers get?
At the federal level, the production tax credit and double-declining accelerated depreciation can pay for two-thirds of a wind power project. Additional state incentives, such as guaranteed markets and exemption from property taxes, can pay for another 10%.
Is wind energy subsidized more than other forms of electricity?
In absolute dollars, the support of wind energy is small compared to other forms of electricity. That is because the contribution of wind energy is minuscule. Per unit of energy, however, the subsidies for wind seem to be much greater. It could be argued that it is worth it if it helps clean the air, but there is no evidence that wind power does so.
What is the Production Tax Credit (PTC)?
The federal production tax credit (PTC) currently provides 1.9 cents for every kilowatt-hour of a privately owned wind turbine's production for ten years.
What is a Renewable Portfolio Standard (RPS)?
A renewable portfolio standard (RPS) is a state mandate that utilities buy a certain percentage of their power from renewable sources as they are defined by the statute. The RPS typically sets up a lucrative artificial market in "green credits." The industry is working hard to impose a national RPS.
What is a green tag, or renewable energy certificate (REC)?
Renewable portfolio standards usually include a provision to allow buying "green tags," also called renewable energy certificates or credits (or renewables obligation certificates, ROCs, in the UK), instead of actual "green energy."
The theory is that if there is not a local source of renewable energy, a utility can thus support renewable sources elsewhere. The weakness of such a system is that the renewable generator sells its energy twice, once as real energy and again as a green tag (or credit). The buyer of the green tag is therefore not in fact reducing the use of "nongreen" energy. It may not surprise the reader to learn that green tags was a scheme invented by Enron.
Since the wind is free, will wind power reduce my electric bill?
The wind is free, but the turbines and their maintenance aren't, not to mention the transmission infrastructure that must be overbuilt to support them. Subsidies are designed to keep the price competitive with other sources but not lower. And if the price is indeed lower, as with all of our energy it's because more of your taxes are going to the wind power companies.
Do wind turbines affect property values?
A survey of property assessors in the UK found that a nearby wind power facility lowers property values by up to 15% a year for two years, after which the effect starts to level out. In the US, neighboring residences are often bought by the wind power company, which then rents them to people who agree not complain about the noises and vibration.
In the discussion of property values, it must be remembered that in most places they generally increase steadily. So any slowing down of that normal rise because of the construction of wind power facilities is in fact a loss of value.
Common sense says that given two otherwise identical properties, the one that is not next to an industrial wind power facility or whose view does not include such a facility is likely to be considered more valuable.
For more on this issue, please see the article above.
How much taxes do wind power facilities pay to communities?
The usual arrangement is arranging "payment in lieu of taxes" (PILOT), so that the wind power company controls what it pays. When they are forced to pay their fair share in taxes, they typically contest it, forcing communities to spend lots of money in legal fees.
In many cases if a community does get a "windfall" from the company, the state adjusts its payments so that the financial gain is largely cancelled.
In addition, the presence of a wind power facility is likely to drive down the value of surrounding properties, thus causing a loss of tax revenue that cuts into the possible gain.
How many jobs does a wind power facility create?
Construction of a wind power facility creates a lot of jobs for roadwork, excavation, and cement hauling, but they are temporary. The specialized work of installing the turbines is typically done by people the turbine manufacturer brings in from outside of the community. After the turbines are connected, one permanent, typically low-paying, job per 10-20 megawatts of capacity is the average.
Who Needs Wind Farms?
Wind Subsidies (Illustration by Mark Alan Stamaty)
Colonial Exploiter Mentality
Invenergy is a business entity operating in the spirit of the Hedge Funds and others responsible for the "high math" instruments that have had distinctive contributions to the world's current economic meltdown and malaise. Their books are "private" and their operations are geared towards the maximum use of tax allowances/offsets, tax credits, carbon credits and the duping of municipalites into using the municipalities' credit to finance their deal making. Further, for the promise of jobs that will not be sufficient to pay personal income taxes to offset the property tax break they'll be getting from the County for their constructed behemoths, they offer lower property values for the area residents, again at a loss to the County in property taxes.
On balance, a decline in the County's financial health resulting from lower property values and property taxes, the probable negative impact on the health of County residents, and an aesthetic eyesore is what Invenergy has offered. It is a classic fit into the "colonial exploitation model" refined by Kenneth Lay.
Too many of us refuse to see that tax credits and tax breaks are taking away from those of us who have to pay the taxes that are being given away. But the good old local colonial exploitation/exploited union, overlord/scrap-taker-from-the-table mind set, thinks that these financial bonanzas floating to the Hedge Funds and other financial sharpies is a good thing because it is cloaked in the mantle of "renewable energy". Not so when the "full cost" approach is used in the evaluation of the proposals. Common sense, which rural residents tend to have in abundance, clearly tells anyone who wants to listen that, if the deal requires tax breaks to make it fly, it is not a self-sustaining economic opportunity. If it is a genuine, non-colonial exploiter mentality business opportunity, the economics of the proposal will stand without the tax gimmicks.
The modern economic colonialization model :
- Have "rented" legislators enact innocent-sounding feel-good legislation that offers tax incentives to those who will help out the nation/state/county/city/town/village/homestead. (It used to be you had to "buy" politicians...not anymore, you just have to "rent" them now. Sort of like changing cell service providers...)
- From a distance, encourage a few local business people with the usual myopic view of life to support the taking of the local resources, while tossing a few sops to the local politicians and a few residents.
- Offer "jobs". (Don't ask to whom and at what pay.)
- Feed into the presumed expectation of manna from above by some local residents, as evidenced by their not seeing the decline in the tax base that will affect them as well as the tax giveaways resulting in less Federal and State monies being available for genuine self sustaining economic development of their County.
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