Michaels on the viability of wind as an economic choice for U.S. electrical future

Economist Robert J. Michaels from California State University provided this testimony before the U.S. House Committee on Science and Technology Energy and Environment Subcommittee in reference to renewable energy policy. Dr. Michaels expresses doubts that wind energy will have much of an impact on displacing fossil fuels, or that government subsidies for the wind industry will create jobs. A summary of his testimony is provided below. His full testimony can be accessed by clicking on one of the links at the bottom of the page.

Summary and Conclusions

The value of funding the changes that the Committee is considering depends critically on an assumption that requires far more thorough examination than it has thus far received – that wind power will be an economic choice for the nation's electrical future.  Almost all of the evidence points in the opposite direction.  There are two types of renewable resources:  ones like biomass, waste and geothermal generators that have long occupied a small niche in markets where they have long stood on their own.  The other resources, primarily wind, have yet to pass market tests and instead thrive because of subsidies and regulatory requirements that utilities purchase their output.  Official data show clearly that the costs of electricity from wind and solar units are well above those of every fossil fuel, and are expected to remain high.  We have seen wind's sensitivity to subsidies in the pattern of investments with and without its production tax credit, and in the statements of its trade association about  the importance of those subsidies.  Further, claims that all energy sources are subsidized can be quite misleading.  Looking at fuel actually consumed in power production, a megawatt-hour of wind power receives 90 times the subsidy of one produced from natural gas.  Most of wind's subsidy takes the form of tax breaks for producers rather than direct allocations of funds for research. 

Other problems are still matters for research, but as they arise they suggest that government think twice before it continues to rush electricity into heavier dependence on wind power.  Wind's useful contributions to capacity are weather dependent, and wind often produces the least when it is the most needed.  Integrating wind into regional markets will require substantial transmission investments, and preliminary results of work on wind power's actual impact on fossil fuel emissions are not encouraging.   Regional political factors and electrical geography may further render some planned operational changes difficult or impossible to implement.  Finally, as an engine of  "job creation," wind power is probably a poor choice.

It is always hazardous for a non-expert (or for that matter an expert) to predict policy trends.  Unfortunately, this Committee will have little choice but to do so when considering the GE / NREL study.  Public opinion is in flux, but absent national carbon control and / or renewables requirements, the value of implementing its recommendations will fall precipitously.  Markets are also changing in ways that bring up further questions.  Over the past few years wind power has grown strongly, largely fueled by subsidies and regulatory requirements.  Over that same period a revolution in fossil fuels has taken place, but without such subsidies or regulations.  The technologies to access natural gas in shales, tight sands and coal seams have come of age.  They can now reach hitherto unimagined volumes located all around the nation at current prices, and with what most agree are minor environmental impacts.  The nation's gas reserves are massively increasing, and the history of oil and other minerals strongly suggests that early estimates of reserves will turn out to have been far too low.     America can probably look forward to literally centuries of its own clean, safe, competitively produced, and truly secure fuel.  Looking forward also means looking backward.  Abundant gas means less need for power from coal and uranium, and from uneconomic renewables as well.  Gas-fired generation is cost-effective, fuel-efficient, environmentally acceptable almost everywhere, and already an integral part of almost every utility's power supply.  The future belongs to the efficient, and it is time to abandon the mistaken belief that efficiency and renewable are synonyms.

100613 Michaels Testimony Final

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JUN 16 2010
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