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New Energy Economics: Wind Energy Myths

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Cole Gustafson, NDSU Biofuels Economist Cole Gustafson, NDSU Biofuels Economist
Some people have false impressions about wind energy and its potential.

By Cole Gustafson, Biofuels Economist

NDSU Extension Service

In the last six months, I have devoted most of my time to wind energy because of all the recent development activity in the region. Part of my program entails delivering seminars and workshops on the topic. It always surprises me the false impressions or myths that some people have about wind energy and its potential.

Here is a list of some of the more common misconceptions I encounter:

  • Wind Energy Is Free – Naive wind investors often fail to consider the total economic costs of a potential wind investment. It is true that the wind, which powers the turbines, is free. However, costs that usually are overlooked are full investment and ongoing repair costs.
  • My Utility Will Buy Power Back At The Same Rate I Pay – In most cases, utilities only pay a fraction of what consumers pay for power. They incur additional costs for managing any new wind power that is generated, as well as new investment costs in transmission lines to get the power to consumers.
  • Wind Provides Constant Power – Electricity only is generated when the wind blows. Moreover, turbines are designed to operate in a range of relatively narrow wind speeds. Unless the tower is in an ideal wind area, the turbine will provide power only about 25 percent to 30 percent of the time. A second complication is that farm and home energy demand varies considerably within a day. This demand is rarely highest at midday when the wind is strongest. Other energy sources must be utilized for storage or as backup.
  • Wind Towers Last Forever – Wind turbine technology is changing constantly and wind turbines do wear out. For example, gearboxes generally need to be rebuilt every eight to 10 years. Consequently, a turbine’s economic life is finite. Investors often fail to budget for removal costs. North Dakota has instituted a decommissioning policy that requires new wind projects to set aside sufficient capital to remove old towers when they no longer are utilized.
  • A Wind Tower Only Affects Me – While a wind tower may be on your property and a considerable distance from the neighbors, the neighbors most likely will be affected by seeing the tower, noise or restrictions placed upon them. Often overlooked is aerial crop spraying. If the tower is closer than 2,000 feet to a neighbor, pilots may resist spraying a portion of the neighbor’s crop.
  • If a Wind Investment Is Good for My Neighbor, It Is Good for Me – People have differing investment goals, time horizons, risk preferences and discount rates. Everyone needs to perform an individual financial analysis.
  • Wind Energy Provides Renewable Energy and Carbon Credits – While both are generated, current legislation allows the wind industry to claim only one credit, either for renewable energy or carbon. In our present economic environment, the renewable energy credit is more valuable. However, if the federal government adopts carbon cap and trading, it is likely that the carbon credit would be more valuable.
  • Signing a Wind Easement Won’t Affect My Credit – Landowners must read any wind easement carefully and have it reviewed by a knowledgeable attorney before signing. In a recent New York case, lenders to a wind company in default did go back to the landowners for additional collateral, which compromised the landowner’s credit.
  • Wind Energy Requires Federal Subsidies to be Economical – This is true, but every energy source receives a significant federal subsidy. It isn’t fair to expect wind energy to compete in a marketplace without the federal benefits enjoyed by other established energy technologies.

NDSU Agriculture Communication

Source:Cole Gustafson, (701) 231-7096, cole.gustafson@ndsu.edu
Editor:Rich Mattern, (701) 231-6136, richard.mattern@ndsu.edu
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