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We come back to what is undoubtedly the critical element of wind economics in Kansas: the significant uncertainty that surrounds it. At this time there is considerable uncertainty regarding (1) future installation costs, (2) annual capacity factors, (3) Kansas-specific wind integration costs, (4) Kansas-specific wind O&M expenses, (5) the influence of wind energy production on the utilities' wholesale market transactions, (6) the utilities' capacity expansion paths, (7) the cost of network transmission upgrades required to accommodate investment in Kansas wind facilities, and (8) the prospects for a carbon tax.
If the current escalation of wind installation costs continues, which for a number of reasons seems likely, then the economic viability of wind energy is reduced. The same holds if wind capacity factors turn out to be lower than originally forecast (based on untested design specifications), which also seems likely. Because Kansas utilities are relatively dependent on baseload-type generators and fuels, the wind integration cost may be close to two or three time higher than the amount used in this study, again diminishing the economic prospects for wind energy. At this time there is very little data available per actual wind O&M expenses at Kansas locations. Absent any sort of historical track record, it is difficult to forecast what those expenses may be. To forecast O&M expenses for wind equipment that is 10 years or older is an even greater challenge. If Kansas wind energy production ends up being sold primarily to non-Kansas utilities (or ratepayers) in the wholesale electric market, then Kansas wind energy production may not deliver the estimated external cost savings to Kansans. Instead, those savings may be realized in other states. However, if Kansas utilities pursue capacity expansion through greater reliance on natural gas-based generation (in an attempt, perhaps, to steer clear of new baseload coal units), then the economic prospect for wind energy is likely to improve. At any rate, there are numerous, different capacity-expansion paths available to utilities, and it is difficult to forecast which paths will be taken. Some of those paths may include greater reliance on nuclear energy, and, if those paths are followed, the economic viability of wind energy could be significantly diminished (depending on the possible resolution of waste storage and/or recycling issues). The inclusion of network transmission upgrades required to maintain system reliability standards while accommodating new wind facilities will only add to the cost of wind energy.
Lastly, a carbon tax would certainly improve the economic prospect for wind energy development. Indeed, in order to preserve the relative attractiveness of the Kansas business environment, it may be advisable to temper wind development initiatives depending on the actual implementation of carbon legislation.
0.90 Final Observation
While we have identified the conditions under which meeting the 2015 Wind Challenge is likely to be cost effective, it remains the case that those conditions remain far from stable. When it comes to forecasting the net benefit of Kansas wind energy, there is and there will likely remain a high degree of forecast error. The success of wind energy development policies is subject to a real degree of risk.
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