Winds of Good News: Cost of Wind Energy Falls

While global wind energy capacity continues to increase around the world and demand for wind power grows, the price of generating electricity from the wind is falling—making this renewable energy option even more attractive. On Monday Bloomberg New Energy Finance reported the price of wind energy has fallen to its lowest levels since 2005. It now costs one million euros or $1.4 million to generate a megawatt of electricity from wind, down from 1.21 million euros in 2007 and 2008.

In the years since 2005 wind prices were driven up slightly by steadily growing demand for wind energy in both industrialized and developing nations. However as technologies have improved and wind companies found new ways of reducing costs, the price has gone down again. Wind power is now cost competitive with coal in some parts of the world, including the United States. Further, while the price of electricity from wind is likely to go down even more over time, the cost of coal will increase as supplies run out and more countries implement tighter pollution control standards. In short wind energy is looking like a better investment every day.

In countries like the US, Brazil, Mexico, and Sweden, the price of wind is now at $68 per megawatt hour. Coal energy in these regions costs about the same amount of money, but comes with environmental and public health costs ranging from climate change to childhood asthma. The US Environmental Protection Agency is finalizing new pollution rules that protect public health and are expected to increase the costs to energy companies of burning coal, and the fossil fuel industries are unsurprisingly pressuring policymakers to make the new rules as weak as possible. However rather than fight to protect coal at the expense of public health, maybe Congress would to better to get serious about investing in wind and other renewables. Wind is proving itself a competitive energy source able to hold its own against fossil fuels.

Yet in the United States wind energy suffers from a case of on-again off-again support from Congress, which has a habit of passing tax incentives and other programs meant to encourage wind energy for a little while, then after a year or two changing the rules again and upsetting the plans of wind installers. This has made it difficult for the wind industry to get comfortable in the US, as it is hard to predict how much support wind will get in the long term. This state of affairs contributed to new US wind installations actually decreasing in 2010 as compared with 2009, and allowed China to surpass the US as the global leader in wind power generation.

It is time for policymakers, investors, and anyone else with interest in energy policy to see the writing on the wall: wind has arrived as a cost-competitive energy source, and the time has come to embrace this reality with open arms.

Photo credit: Nick Engelfried