Scalability

A key issue debated about wind power is its ability to scale to meet a substantial portion of the world’s energy demand. There are significant economic, technical, and ecological issues about the large-scale use of wind power that may limit its ability to replace other forms of energy production. Most forms of electricity production also involve such trade-offs, and many are also not capable of replacing all other types of production for various reasons. A key issue in the application of wind energy to replace substantial amounts of other electrical production is intermittency; see the section below on Economics and Feasibility. At present, it is unclear whether wind energy will eventually be sufficient to replace other forms of electricity production, but this does not mean wind energy cannot be a significant source of clean electrical production on a scale comparable to or greater than other technologies, such as hydropower.

A significant part of the debate about the potential for wind energy to substitute for other electric production sources is the level of penetration. With the exception of Denmark, no countries or electrical systems produce more than 10% from wind energy, and most are below 2%. While the feasibility of integrating much higher levels (beyond 25%) is debated, significantly more wind energy could be produced worldwide before these issues become significant. In Denmark, wind power now accounts for close to 20% of electricity consumption and a recent poll of Danes show that 90% want more wind power installed.

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Theoretical potential

Wind’s long-term theoretical potential is much greater than current world energy consumption. The most comprehensive study to date found the potential of wind power on land and near-shore to be 72 TW (~54,000 Mtoe), or over five times the world’s current energy use and 40 times the current electricity use. The potential takes into account only locations with Class 3 (mean annual wind speeds ≥ 6.9 m/s at 80 m) or better wind regimes, which includes the locations suitable for low-cost (0.03–0.04 $/kWh) wind power generation and is in that sense conservative. It assumes 6 turbines per square km for 77-m diameter, 1.5 MW turbines on roughly 13% of the total global land area (though that land would also be available for other compatible uses such as farming). This potential assumes a capacity factor of 48% and does not take into account the practicality of reaching the windy sites, of transmission (including ‘choke’ points), of competing land uses, of transporting power over large distances, or of switching to wind power.

To determine the more realistic technical potential it is essential to estimate how large a fraction of this land could be made available to wind power. In the 2001 IPCC report, it is assumed that a use of 4% – 10% of that land area would be practical. Even so, the potential comfortably exceeds current world electricity demand.

Although the theoretical potential is vast, the amount of production that could be economically viable depends on a number of exogenous and endogenous factors, including the cost of other sources of electricity and the future cost of wind energy farms.

Offshore resources experience mean wind speeds about 90% greater than those on land, so offshore resources could contribute about seven times more energy than land.This number could also increase with higher altitude or airborne wind turbines.

To meet energy demands worldwide in the future in a sustainable way, many more turbines will have to be installed. This will affect more people and wildlife habitat. See the section below on ecology and pollution.

Economics and feasibility

Wind energy in many jurisdictions receives some financial or other support to encourage its development. A key issue is the comparison to other forms of energy production, and their total cost. Two main points of discussion arise: direct subsidies and externalities for various sources of electricity, including wind. Wind energy benefits from subsidies of various kinds in many jurisdictions, either to increase its attractiveness, or to compensate for subsidies received by other forms of production or which have significant negative externalities.
Most forms of energy production create some form of negative externality: costs that are not paid by the producer or consumer of the good. For electric production, the most significant externality is pollution, which imposes costs on society in the form of increased health expenses, reduced agricultural productivity, and other problems. Significantly, carbon dioxide, a greenhouse gas produced when using fossil fuels for electricity production, may impose costs on society in the form of global warming. Few mechanisms currently exist to impose (or internalise) this external cost in a consistent way between various industries or technologies, and the total cost is highly uncertain. Other significant externalities can include national security expenditures to ensure access to fossil fuels, remediation of polluted sites, destruction of wild habitat, loss of scenery/tourism, etc.

Wind energy supporters argue that, once external costs and subsidies to other forms of electrical production are accounted for, wind energy is amongst the most cost-effective forms of electrical production. Critics may debate the level of subsidies required or existing, the ‘cost’ of pollution externalities, and the uncertain financial returns to wind projects — that is, the all-in cost of wind energy compared to other technologies. Intermittency and other characteristics of wind energy also have costs that may rise with higher levels of penetration, and may change the cost-benefit ratio.

Conventional and nuclear power plants receive substantial direct and indirect governmental subsidies. If a comparison is made on real production costs, wind energy may be competitive compared to many other sources. If the full costs (environmental, health, etc.) are taken into account, wind energy would be competitive in many more cases. Furthermore, wind energy costs have generally decreased due to technology development and scale enlargement. However, the cost of other capital intensive generation technologies, such as nuclear and fossil fueled plants, is also subject to such ‘learning-induced’ cost reductions.

Nuclear power plants receive special immunity from the disasters they may cause, which prevents victims from recovering the cost of their continued health care from those responsible, even in the case of criminal malfeasance. In many cases, nuclear plants are owned directly by governments or substantially supported by them. In both cases, nuclear plants benefit from a lower cost of capital and lower perceived risk, as governments take on the risk charge directly. This is a form of indirect subsidy, although the size of this subsidy is difficult to ascertain precisely.

To compete with traditional sources of energy, wind power often receives financial incentives. In the United States , wind power receives a tax credit for each kilowatt-hour produced; worth 1.9 cents per kilowatt-hour in 2006, the credit has a yearly inflationary adjustment. Another tax benefit is accelerated depreciation. Many American states also provide incentives, such as exemption from property tax, mandated purchases, and additional markets for ‘green credits’ Countries such as Canada and Germany also provide other incentives for wind turbine construction, such as tax credits or minimum purchase prices for wind generation, with assured grid access (sometimes referred to as feed-in tariffs). These feed-in tariffs are typically set well above average electricity prices.

Many potential sites for wind farms are far from demand centers, requiring substantially more money to construct new transmission lines and substations.

Intermittency and the non-dispatchable nature of wind energy production can raise costs for regulation, incremental operating reserve, and (at high penetration levels) could require demand-side management or storage solutions.

Since the primary cost of producing wind energy is construction and there are no fuel costs, the average cost of wind energy per unit of production is dependent on a few key assumptions, such as the cost of capital and years of assumed service. The marginal cost of wind energy once a plant is constructed is close to zero.

The cost of wind energy production has fallen rapidly since the early 1980s, primarily due to technological improvements, although the cost of construction materials (particularly metals) and the increased demand for turbine components caused price increases in 2005-06. Many expect further reductions in the cost of wind energy through improved technology, better forecasting, and increased scale. Since the cost of capital plays a large part in projected cost, risk (as perceived by investors) will affect projected costs per unit of electricity.

Apart from regulatory issues and externalities, decisions to invest in wind energy will also depend on the cost of alternative sources of energy. Natural gas, oil and coal prices, the main production technologies with significant fuel costs, will therefore also be a determinant in the choice of the level of wind energy.

The commercial viability of wind power also depends on the pricing regime for power producers. Electricity prices are highly regulated worldwide, and in many locations may not reflect the full cost of production, let alone indirect subsidies or negative externalities. Certain jurisdictions or customers may enter into long-term pricing contracts for wind to reduce the risk of future pricing changes, thereby ensuring more stable returns for projects at the development stage. These may take the form of standard offer contracts, whereby the system operator undertakes to purchase power from wind at a fixed price for a certain period (perhaps up to a limit); these prices may be different than purchase prices from other sources, and even incorporate an implicit subsidy.

In jurisdictions where the price paid to producers for electricity is based on market mechanisms, revenue for all producers per unit is higher when they produce when prices are higher. The profitability of wind farms will therefore be higher if their production schedule coincides with these periods (generally, high demand / low supply situations). If wind represents a significant portion of supply, overall revenues may be lower as more expensive and less-efficient forms of generation, which typically set revenue levels, are displaced from economic dispatch. This may be of particular concern if the output of many wind plants in a market have strong temporal correlation. In economic terms, the marginal revenue of the wind sector as penetration increases may diminish.