Reliably Unreliable Wind: Are Renewables Viable and Is 100% Reliance Possible?
As of two weeks ago many Americans were oblivious to the fact that red states -- not blue states -- are effectively leading the left's existential climate crisis crusade against global warming through their implementation and increasing reliance upon clean and renewable energy -- namely wind -- as a significant and vital source of capacity for electric power grids. One might assume that if conservative-leaning states like Texas, Oklahoma, and Iowa are leading this initiative, wind turbine technology must have achieved an optimal state of reliability and financial viability.
Quick aside: unequivocally noteworthy at this moment in history is the American leftist cancelling of "offensive" Dr. Seuss children’s literature, while big tech oligarchies like Amazon are vanishing thoroughly researched, thoughtful, and science-based works like Ryan T. Anderson’s When Harry Became Sally: Responding to the Transgender Moment on a platform that serves 83% of the digital book market. And Democrat media sycophants like the Washington Post — owned by Amazon — are celebrating this digital book burning binge while simultaneously attempting to gaslight American citizens — who know fundamentally that this blight of unilateral censorship and cultural destruction carry all the marks of fascism common to the genocidal demagogues of the 20th century — into believing that erasing works of art and literature are perfectly liberal, democratic, and decent things to do when an unnamed "panel of experts" declare such items "offensive" or "racist."
So while you were likely distracted by this American left-wing fascistic cloud of oppression, or unless you live in Texas, you may have already forgotten that the Lone Star State experienced a devastating and unprecedented winter storm two weeks ago blanketing even its subtropical southeastern coast with snow, ice, and frigid temperatures. You would further be excused for failing to notice that the red states of Texas, Oklahoma and Iowa lead the nation with their significant and increasing reliance upon clean and renewable wind energy. Texas produces nearly 30% of the total wind-generated electricity in the United States. That Texas — the largest and most fossil fuel rich and producing contiguous state in the US — is relying so heavily upon wind energy and positioning itself to do so even more heavily in the future sparked this writer’s curiosity about the viability of wind energy. Surely if conservative-leaning states are investing in and relying heavily upon wind energy, and surely if the Biden administration believes the US electricity sector can achieve 100% clean and renewable energy in less than 15 years, wind energy must finally be a reliable and financially viable technology, right? Spoiler alert: not so fast.
Wind Turbine Investment & Maintenance Costs
Wind turbines are expensive to build and maintain. Not factoring in the cost of connecting to existing transport lines or building new transport lines, the typical cost of construction for a single wind turbine electricity generator ranges from $1,300,000.00 to up to $1,700,000.00 per megawatt (MW). One MW can serve approximately 800 homes, but this can vary based upon changes in demand. The cost of annual maintenance of these structures ranges from $40,000.00 to $50,000.00, and this annual cost can spike dramatically towards the end of the turbine’s lifespan. While wind turbines are often marketed as having lifespans up to 30 years, the typical wind turbine lasts between 14 and 20 years.
Let’s gain a command of wind energy costs by studying a hypothetical 4 megawatt (MW) on-shore wind turbine. While rated at 4 MW at 100% capacity, to achieve 4 MW — enough energy to power approximately 3,200 homes — there must be enough wind blowing (and blowing in the correct direction) to move the turbine blades 100% of the time. This, of course, is not reality. Wind, as they say, is reliably unreliable. In practice, wind turbines operate on average between 35% capacity for on-shore turbines and 65% capacity for off-shore turbines, tending towards the lower end of that range on land (30% to 40%), and, per Murphy’s Law, almost always erring towards zero when they are needed most — like when Winter Storm Uri enveloped the entire state of Texas from February 13 - 17, 2021, and wind turbine energy plummeted from providing 42% of the state's electricity in Texas on February 7, 2021 to only 8% on February 11, 2021 -- two days before the brunt of the winter storm would hit.
Let’s assume that we can negotiate reasonable construction costs and achieve really great output from our turbine, and now do some basic math (not factoring in present value, depreciation, spiking maintenance costs, etc.), where our 4 MW turbine was constructed at a cost of $6,000,000.00 ($1.5 million per MW), will last at least 18 years, carry an average annual operation and maintenance cost of $45,000.00, and produce on average 50% electricity output over its operation cycle, earning $0.02 per kWh (= ($80/hr x 24 hrs x 365 days) x .5) or $350,400.00 per year. Put another way, the total lifetime cost, not factoring in the cost of connection to or construction of transport lines, is the initial $6,000,0000.00 investment plus ongoing annual operation and maintenance costs ($45,000.00 x 18), totaling $6,810,000.00. The income generated by the turbine over 18 years would be ($350,400.00 x 18) or $6,307,200.00. Accordingly, this investment in one 4 MW wind turbine potentially results in a half-million dollar loss over 18 years. So why are red states and private interests investing in unprofitable wind turbines?
Investment Tax Credits & Production Tax Credits for Wind Energy
They are availing themselves of two lucrative federal subsidies that benefit mostly large institutional investors. The first is called an investment tax credit or ITC. Corporate entities that have begun construction prior to 2019 on wind turbines placed in service no later than 2023 can claim a tax credit totaling 30% of the cost of the initial investment. This credit as a percentage steps down in subsequent years, but a significant portion of this credit could very well be extended as it has been nearly every year since the mid-90s thanks to the lobbying efforts of a long line of Texas politicians, including both former presidents Bush. Therefore, if an institutional investor like JP Morgan invested $6,000,000.00 to construct our 4 MW wind turbine, it could claim a $1,800,000.00 ($6,000,000.00 x .30) investment tax credit that could be applied to any and all of its institutional tax liability and is capable of being rolled over into subsequent years if not exhausted during the year that it was earned.
The Price is Right announcer, George Gray.
“And that’s not all, Drew!” JP Morgan can also take advantage of an even more lucrative production tax credit or PTC. The PTC generates a credit per kWh of electricity produced by the wind turbine and regardless of market demand starting from the date when the turbine begins service and lasting 10 years. For example, let's assume that our JP Morgan capital-infused wind turbine became operational in 2014. There was a $0.025 PTC per kWh for wind turbines placed in service in 2014 (currently the PTC is $.018 per kWh). If JP Morgan’s 4 MW turbine was earning a $0.025 PTC per kWh (= ($100/hr x 24 hours x 365 days) x .5), it could claim an additional annual tax credit of $438,000.00 or $4,380,000.00 over 10 years, assuming the hypothetical 50% output over that 10 year timeframe.
Therefore, in our hypothetical, the available tax credits for a 4 MW wind turbine put in service in 2014 over a 10 year period total $6,180,000.00 ($1,800,000.00 + $4,380,000.00). Accordingly, institutional investors like JP Morgan stand to potentially recoup all or more of their initial investment via tax credits and further profit off the $6,307,200.00 worth of electricity produced by the turbine over the course of 18 years. In our case, it’s essentially a federally guaranteed method for doubling an institutional investor’s money over the functional lifespan of the wind turbine. Per the “Rule of 72,” the combination of ITC and PTC are tantamount to an investment account with a guaranteed 4% compound interest rate where the "initial deposit" that was used to build the turbine remains somewhat liquid, but only available for extinguishing the account holder's tax liability during the first 10 years of the existence of the "account."
This tax credit structure primarily benefits big business and institutional investors because the credits are currently non-refundable. Accordingly, only entities with large annual tax liabilities stand to benefit. A small private investor looking to break into wind energy renewables market, and who may have only thousands of dollars in annual tax liability may not experience the half-million dollar tax write-off over ten years required for an investment into a 4 MW wind turbine to break even, let alone the multi-million dollar tax write-off necessary for such an endeavor to be considered a profitable investment over the expected 14 to 20 operation cycle of the wind turbine.
Understanding the limited appeal of these tax credits, there are environmental lobbies and policy think tanks currently advocating for legislation that would render these tax credits refundable in order to increase the pool of potential renewable energy investors and thus expand the renewable energy market. If the federal government were to guarantee refund payments in excess of a small private investor’s tax liability over a 10 year period while these small investors profited off the sale of the electricity generated from their turbine investments, this would be a no-brainer for many private entities willing to invest a few million dollars to gain entry into the renewable energy market. These investors would, in relatively quick fashion, be able to recoup a significant and fully liquid portion of their initial investment in the form of tax refund payments. However, the proliferation of out-of-pocket government subsidized wind turbines would likely cost the American taxpayer dearly and lead to even more frequent and devastating power grid failures during extreme hot or cold weather events wherever renewables comprise significant portions of regional power grids. What happened in Texas two weeks ago is illustrative of this potentiality.
Lessons from Texas & Winter Storm Uri
Texas, unlike every other contiguous American state, operates nearly entirely on its own independent and privately run power grid managed by the Electricity Reliability Council of Texas (ERCOT). It is able to do so according to the US Energy Information Administration, because it significantly outproduces every other state in terms of electricity production. Texas produces two times more electricity than Florida — the most prolific energy producing state next to Texas. Furthermore, wind energy accounts for nearly all of electricity generated from renewable sources in Texas, which leads the country in wind-powered electricity generation. As previously mentioned, Texas alone produces nearly 30% of the total wind-generated electricity in the United States.
In large part due to the availability of ITC and PTC tax credits for renewable wind energy development made possible through the efforts of the renewables lobby and Texas politicians, Texas has led the vanguard of renewable wind energy development in the United States going on three decades. Naturally establishment media has largely been radio-silent as to the Lone Star State’s mighty climate-crisis slaying efforts during much of this timeframe. That is, until millions of households across the state lost power and dozens lost their lives during the historic February 2021 winter storm. Did reliance upon wind energy play a roll?
As previously mentioned, one week before Winter Storm Uri, conditions were such that wind turbines were able to meet 42% of the state’s electricity demand. However, because wind is fundamentally unreliable, ERCOT fashioned the Texas power grid such that wind-generated energy would be expected to meet only 10% of the grid’s winter capacity. However, in planning capacity for the power grid, ERCOT did not take into account an unprecedented state-wide winter storm capable of freezing even the southeastern coast of Texas while simultaneously decommissioning the state's non-winterized wind turbines located mostly in West Texas. Wind energy was already below ERCOT's planned 10% capacity two days before Winter Storm Uri began. In any event, the remaining 90% planned capacity allocated by ERCOT before having knowledge of the winter storm was to be handled by gas, coal, and nuclear, with gas-generated electricity to satisfy the lion’s share of the grid’s anticipated capacity.
However, as Texas had been improving its already impressive wind-generated electricity capacity for the last few decades, development of coal burning and nuclear plants have remained stagnant, and less development has gone into closed-cycle gas turbine plants than renewables. Gas turbine electricity plants are far less expensive per MW to develop than wind turbines, far more reliable, and are able to produce electricity at maximum capacity at a moment's notice. Due to the unprecedented cold weather across the entire state, commensurate demand for electric heating power not only surpassed ERCOT’s anticipated grid allocation, but the vast wind energy infrastructure completely collapsed. Likewise, an entire nuclear plant was rendered inoperable due to a sensor trip caused by cold-weather related failure of pressure sensing lines attached to feed water pumps. Despite many gas fuel wells and lines freezing, ERCOT was nonetheless able to leverage functioning coal-fired and gas turbine plants to increase energy production by 47% and 450%, respectively, to eventually meet the unprecedented state-wide demand and fill the void left by wind and nuclear.
As wind electricity generation dropped precipitously, gas-turbine plants were able to increase electricity production by 450%, despite gas fuel wells and pipelines freezing.
One lesson to take away from Texas is that a properly functioning power grid is impossible without sufficiently functioning fossil fuel backup generators. The beauty of gas turbine plants, especially with energy efficient combined-cycle plants that recycle heat generated by the gas turbine engine to create steam electricity, is that they are, again, less expensive per MW to develop than wind farms, virtually immune to weather, and can be utilized on demand up to their maximum electricity output. Natural gas is also the cleanest burning fossil fuel. Without close-cycle and combined-cycle gas turbine plants in Texas during Winter Storm Uri, power outages could have been longer-lasting and the death toll far worse.
Unfortunately, Texas is focusing 80% of its future energy infrastructure development on wind and solar energy with no future plans to develop additional coal or nuclear plants. Solar energy, even more so than wind, would have been useless during Uri's cloud cover. Hopefully future plans for Texas will include winterizing wind turbines and the existing gas infrastructure to prevent fuel from freezing. What should be alarming for the rest of the country is the Biden administration's push for 100% nationwide reliance upon renewable energy sources like wind and solar by 2035. This is doubtless a disastrous plan considering the current state of wind technology as, just like we witnessed in Texas, such a plan could leave millions of Americans without power throughout the year if fossil fuel energy sources are not also integrated alongside renewables as vital components of demand-scalable energy grids. That a red state provided us with a foretaste of the catastrophic potentiality of the Biden administration's overzealous and unrealistic plan for 100% reliance upon non-viable renewable energy sources is ironic...but those tax credits.