The economics of large-scale wind power in a carbon constrained world

The environmental impacts of fossil-fueled electricity drive interest in a cleaner electricity supply. Electricity from wind provides an alternative to conventional generation that could, in principle, be used to achieve deep reductions (> 50%) in carbon dioxide emissions and fossil fuel use. Estimates of the average cost of generation-now roughly 4 cent/kWh-do not address costs arising from the spatial distribution and intermittency of wind. The greenfield analysis presented in this paper provides an economic characterization of a wind system in which long-distance electricity transmission, storage, and gas turbines are used to supplement variable wind power output to meet a time-varying load. We find that, with somewhat optimistic assumptions about the cost of wind turbines, the use of wind to serve 50% of demand adds similar to 1-2 cent/kWh to the cost of electricity, a cost comparable to that of other large-scale low carbon technologies. Even when wind serves an infinitesimal fraction of demand, its intermittency imposes costs beyond the average cost of delivered wind power. Due to residual CO2 emissions, compressed air storage is surprisingly uncompetitive, and there is a tradeoff between the use of wind site diversity and storage as means of managing intermittency. (c) 2004 Elsevier Ltd. All rights reserved.