1 Mar 2017

The cost of wind energy

Defne writes:*

Nowadays due to the increasing population our natural resources for energy are in danger. The energy sources that we are using today such as coal, gas and oil (fossil fuels) are finite and will be depleted someday. Furthermore, fossil fuels are very harmful for the environment as they release carbon dioxide and greenhouse gasses, which leads to problems such as global warming. Due to the environmental effects of fossil fuels it has become crucial to find alternative sources of energy. That is why renewable energy is becoming more and more important everyday. Even though some countries have renewable energy sources they still have problems and it does not seem like they will be able to replace fossil fuels with renewables in the near future. The Netherlands, for instance, is still relying on fossil energy for over 90% of its energy demand. One of the main obstacles that make it difficult to transform to renewable energies are the costs.

Wind energy is one of the most highly demanded sources of renewable energy. Nonetheless, the costs of infrastructure, maintenance, operation of a generating plant, noise, the threat for wild life, and the transmission of energy leads to problems and oppositions from the locals and investors. One key issue is the amount of energy the wind farm uses and the amount of energy that is sold back to public service. Due to the low energy prices, the wind turbines that are operating in the Netherlands are in danger. The maintenance cost of those turbines exceeds the energy that the turbine generates. This problem is caused due to the subsidies that are no longer cost efficient. Especially smaller wind turbines are in danger as the payback period of small turbines are longer. Furthermore, people who are living close to a wind farm are disturbed by the noise as well as the aesthetics. Additionally, the value of the surrounding properties are most likely driven down due to the presence of a wind energy facility. The decrease in the value of the properties leads to a loss of tax revenue. So the incentive of the local residents to pay a tax for wind energy decreases. Moreover, locals are more likely to oppose since they believe that wind farms spoils the countryside. Another obstacle is that there is not always wind and when there is no wind there has to be a backup power source. Furthermore, policies also make it difficult for investors, as there are many uncertainties. There is not much political and policy ambition for renewable energy, therefore the implementation of renewables is more difficult.

Investing in technological advances can diminish some of the costs of wind energy. Furthermore, with the support of the government it is also possible to overcome some of the policy uncertainties. For the sustainability of our planet we need renewable resources. Even though there are some costs, with long-term investments on wind technology, wind energy can become affordable.

Bottom line: it is important to make financial analysis before making investment. It is more difficult to make predictions about wind energy as wind fluctuates; however with investments in technology and appropriate policies it is possible to overcome some of the challenges.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.

1 comment:

  1. Hey Defne! First of all, interesting post!
    I googled a bit more about the topic, and I found the common distinction between onshore and offshore wind farms (which I'm sure you might have come across), and found each type has different costs and benefits, and so I thought it should be interesting for you to examine the differences between these 2 types, as they might come in handy for your cost-benefit analysis. Here is the link that clarified this distinction for me: [https://sites.google.com/site/lcaofwind/onshore-vs-offshore-wind]

    Moreover, you mentioned that high costs of the turbines represent a big issue. Here is a study that suggests cost reduction possibilities for offshore wind energy sector. [http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.196.6382&rep=rep1&type=pdf]

    Also, this link [https://www.rvo.nl/sites/default/files/2015/03/Offshore%20wind%20energy%20in%20the%20Netherlands.pdf] provides information about The Offshore Wind Energy Law, which tries to tackle higher efficiency and cost reduction, so you could actually look at that as part of the policies implemented to tackle the issue.

    Overall, I understood from what I have read that there is more potential to offshore wind energy than onshore, and that in the Netherlands, there are very favorable conditions for offshore wind energy. Therefore, I suggest you explore this type of wind energy further, and where it currently stands in the Netherlands.

    Lastly, I recommend you also look at other countries who manage to have more successful experience with wind energy. For example, a couple of sources suggested that Scotland has a successful experience with wind energy, and that "In 2015, wind power produced the equivalent of 97 percent of the country's household electricity needs." [source: https://www.climaterealityproject.org/blog/follow-leader-how-11-countries-are-shifting-renewable-energy] Therefore, you could check this example, or another country's example, and compare how they handle the issue of energy subsidies versus cost, for instance, that you mentioned in your post.

    Best of luck!

    ReplyDelete

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