Wind Power Is No Bargain For West Virginia

by William Yeatman on January 21, 2003

in Politics, Science, Small business

Glenn Schleede, the intrepid energy analyst, has done another bang-up job of identifying the weaknesses of yet another wind power project. This time his sights are set on West Virginia, and the prognosis is bleak.

One wind farm is already in operation in West Virginia, another has been approved by the Public Service Commission, and a third application is still pending. The amount of power produced from the three plants, assuming a generous 30 percent capacity factor, would equal a little over 1.6 billion kWh of electricity per year. The plants would occupy 30 to 40 square miles, yet only produce an amount of energy equal to 1.7 percent of the total amount of electricity produced in West Virginia in 2000. A new 265 MW gas-fired combined-cycle generating plant, on the other hand, would produce slightly more electricity on just a few acres.

Not only will these wind farms produce paltry amounts of electricity, the electricity produced will be of lower value due to the intermittent, volatile, and unpredictable nature of wind-generated electricity. To offset these characteristics and maintain the reliability of the grid, they will have to be backed up with dispatchable generating units. “Units serving this backup role must be on line (connected to the grid and producing electricity) and running below their peak capacity and efficiency, or in a spinning reserve mode (i.e., connected to the grid and synchronized but not putting electricity into the grid),” according to Schleede.

Electricity from wind farms also increases the cost of electricity by adding to the burden of keeping the grid in balance and makes it difficult to keep transmission lines from being overloaded. Moreover, mountaintop wind farms require additional transmission capacity, which will only be used between 25 to 35 percent of the time due to wind powers low capacity factors. All of these costs are part of the true cost of wind power, but are usually ignored when the projects are being sold.

Wind power receives generous subsidies from both federal and state governments. The subsidies available to the West Virginia wind farms include federal accelerated depreciation (5 years as opposed to 20 years for other electric generating facilities), production tax credits, a reduction in the West Virginia Corporate Net Income Tax (due to accelerated depreciation), an 87.5 to 93.75 percent reduction in West Virginias Business and Occupation Tax, and a 91.67 percent reduction in West Virginia property taxes.

These subsidies shift the tax burden to other taxpayers and electric customers. As Schleede notes, “The total of $69.7 million in tax liability that could be avoided by the wind farm in the first year, as well as the liability avoided in subsequent years represents a tax burden that would be shifted to remaining taxpayers.”

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