The electricity costs of wind energy and natural gas are virtually identical when the price of carbon emissions is included, according to a new study on the federal tax credit for wind power. Researchers at Syracuse University and the University of California found that the true cost of electricity for wind is 9.2 cents per kWh compared to 8.85 cents per kWh for gas. Without a pricing mechanism for carbon emissions through a carbon tax or cap-and-trade scheme, the researchers argue that the recently-expired Production Tax Credit (PTC) levels the playing field for the American wind industry.
Image via Eric B. Walker
“The true cost of electricity from wind power and natural gas are effectively indistinguishable, yet because the cost of carbon emissions is not included in the market price of gas, wind has not been a competitive form of energy use in most of the United States, without government pricing support,” said Jason Dedrick, associate professor at Syracuse University’s School of Information Studies (iSchool).
The study, titled “Visualizing the Production Tax Credit for Wind Energy,” used a 20 year period for its analysis — the length of a typical wind contract. Besides carbon emissions, the study also factored in the costs of wind intermittency and natural gas volatility to reach the conclusion that the true cost of wind is only .35 cents per kWh higher than gas. The current Department of Energy national average estimates for wind is 8.7 cents per kWh and 6.6 cents for gas.
The federal wind tax credit “is actually compensating for a market failure to price the future cost to society of carbon emissions. In the absence of a carbon tax, the PTC can serve as a stand-in to make the market reflect the true costs of energy,” said Greg Linden, senior research associate at the University of California, Berkeley.
The PTC has been renewed and allowed to expire several times since it was created in 1992, which has given the wind market much uncertainty over the years. President Obama’s fiscal-year 2015 budget proposal calls for permanently extending the PTC.
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