Attacks on wind energy ignore reality of costs and subsidies

» By | Published 17 Jan 2012

By EWEA Communication Director Julian Scola

In recent months there have been many media articles claiming that wind energy is more expensive and less reliable than other power sources, and that it receives heavy government subsidies. Such claims damage the perception of this cheap and clean form of energy.

The reality is that wind energy, and renewables in general, are successful because investors see that onshore wind is increasingly competitive with new gas and coal and is cheaper than nuclear, in an environment in which governments have made commitments to reducing carbon emissions, and where the public wants a safer, cleaner world without constant fluctuations in energy prices. Current data from Bloomberg New Energy Finance says that “funding of green energy projects rose by 5% last year” to $260bn worldwide. Another Bloomberg quote says “the best wind farms in the world already produce power as economically as coal, gas and nuclear generators; the average wind farm will be fully competitive by 2016”.

In a telling commentary on nuclear energy, Citibank has said “We don’t see new nuclear in the UK being commercially economic for public market investors unless the UK Government is willing to fully underpin construction, power price, and operational/safety risk – something the government so far is looking to avoid”. The bank touches on several important factors financiers consider when looking at the energy market – government subsidies, construction cost, power price and operational safety/risk.

On the construction costs of wind energy, Steve Sawyer of the Global Wind Energy Council recently told Recharge magazine that “Downward price pressure on wind turbines will continue and with the rise of just about everything else, wind power will be directly cost-competitive with new-build for any other technology in an increasing number of markets. This will occur despite the absence of a global price on carbon, despite conventional technologies not having to price their water consumption, water pollution, air pollution and land degradation; and despite conventional technologies continuing to receive hundreds of billions in government subsidies”.

The reality about subsidies is that they are a massive advantage for non-renewable energy sources, and create equally large market distortions against renewables. According to the International Energy Agency’s 2010 World Energy Outlook, “Fossil-fuel consumption subsidies amounted to $312 billion in 2009”, while renewable energies received just $57 billion of “government support”. In other words, renewables got just $1 for every $5-6 given to fossil fuels. Right now in Spain, the “harmful and illegal application” of Spain’s controversial subsidies for power producers using domestic coal has boosted CO2 emissions and led to a surge in coal imports, according to NGO Ecologistas en Acción.

On energy price, a major advantage of renewables, and wind energy in particular, is that costs are predictable. The wind itself is of course free, and 75% of wind energy costs come from the costs of the turbine, the foundation, electrical equipment, grid connection etc. This one-time investment is very different from a natural gas power plant, for example. There, 40-70% of costs are operation and maintenance, including the price of fuel.