G – Wind Plant Funding

The total funding required for industrial wind plants is very high. In Ontario the plan is to implement almost 5,000 MW of wind power. Assuming that this is almost completely industrial wind plants, over the 20 year “expected” life of these structures, the total funding will be about $25 billion (yes billions). The funding is not just the capital costs of wind plant construction, which will largely be financed through private sector borrowing. This financing will be funded by high rates for wind plant electricity, about 11 cents per kilowatt-hour (KWh), that our electricity system operations organizations will pay over 20 year contracts. This is approximately double the wholesale costs of generating electricity from other means. In addition the federal government also supplies a subsidy of one cent per KWh.

Not included in the $25 billion are the added costs for grid upgrades that will be necessary because of the presence of wind plants. This is largely because the wind production will typically be in rural areas distant from areas of greatest demand, and the existing grid was not designed to support production in these scattered areas. Although wind plants produce about 20 per cent of their total capacity on average over a year, they sometimes produce at, or close to, 100 per cent. As a result, the local grid must be robust enough to handle these higher levels. An alternative, which is growing in use, is the practice of shutting down wind plants when they are in high production mode. Think about all this for a minute.

Who pays for all this, regardless of considerations of initial borrowings by private-sector wind plant development companies? Ultimately all the electricity system customers, who will get the higher costs passed on to them eventually, if not right away, and all tax payers.

Further, our total credit system will be impacted by the large borrowings involved. There are predictions that the emerging alternative energy boom, especially wind power, along with infrastructure needs, will turn out to be the next investment bubble. It is projected to be a bigger crisis than the current sub-prime fiasco. In Canada alone, the wind industry is calling for 55,000 MW of wind capacity in Canada, which would be a capital cost of $132 billion and overall funding of about $250 billion over 20 years. Think of what this will eventually “cost” us all.

Returning to our current situation, the funding for the Ontario’s $25 billion will be spread over 33 years considering a ramping up of implementations and a gradual retirement of wind farms after 20 years.

Just think about how this funding might be otherwise directed to health care, education, municipal government funding, other social needs and environmental programs. Here are some simple calculations that illustrate the point. These are not intended to be recommended programs, but indications of the value that might be achieved through re-direction of wind power funding.

The Texas Public Policy Foundation has just released a report that shows the costs for 11,000 MW of wind power in that state would be at least $60 billion over 17 years.

The Director of the German Energy Agency (DENA) was quoted in the German daily newspaper Die Tageszeitung as saying that the price of cutting one tonne of CO2 with wind power (between 41 and 77 euros a tonne) [this is at the low end of estimates that other countries have found] was indeed “a lot” relatively speaking. Energy-saving in housing would be a lot cheaper, he said. But he emphasised that both increasing the share of renewables and cutting down consumption with energy-saving measures in housing were needed at the same time. The last sentence is included for the sake of completeness. I suggest that it should be regarded as a politically correct comment.

All these considerations apply to any country, state or province.

Last updated November 5, 2008

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