07/02/2013 06:52 EDT | Updated 08/19/2013 05:12 EDT

Alberta Wind Power Report Blows

The Canadian Wind Energy Association (CanWEA) has released a "windvision" plan for Alberta that, not-surprisingly calls for the province to build a lot more wind-power capacity. CanWEA suggests that while the province currently generates 1,100 Megawatts of wind-power, it could install nearly five times as much. Of course, they point out that Alberta's competitive energy system makes it hard to get wind-power construction financed. But they have a solution to that, calling on policymakers to institute a clean energy standard in Alberta, and asking them to hike Alberta's carbon tax. The new CanWEA plan is ostensibly a response to a "challenge" thrown at the wind industry by Alberta Energy Minister Ken Hughes, to develop policy options that would "green the grid."

But something leaped out at me when I read the windvision plan, when they talked about costs:

"A technical study commissioned by CanWEA and conducted by Calgary-based Solas Energy Consulting Inc., estimated the cost of various generating technologies in Alberta in 2016 and identified wind energy as the second most cost-effective option behind natural gas cogeneration. With about 5,000 MW of accessible wind energy available in Alberta at a levelized cost of $84/MWh, the analysis found, wind turbines can produce more energy more cheaply than simple cycle and combined cycle natural gas generators, advanced supercritical coal plants with or without carbon capture, and Alberta-based hydropower."

When I dug into the CanWEA study that estimated these "levelized" costs, I saw that electricity generated with combined-cycle natural gas was estimated not only to be more expensive than wind power, but quite a bit more expensive, at an estimated $114 per megawatt hour (or MWh): $30 more than wind per megawatt hour.

This struck me as a bit strange, as I've seen other levelized cost studies that show natural gas generation costs significantly less than wind power. The United States Energy Information Administration (EIA), for example, estimated levelized costs for a range of power production in 2018, and found that electricity produced from wind turbines would cost about $87 per megawatt-hour, while electricity produced by combined-cycle gas plants would cost only $67 per megawatt-hour. (levelized costs take into account variables that differ between types of energy production (such as the life-expectancy of a facility) in order to make an apples-to-apples (or megawatt-to-megawatt comparison possible).

So I decided to look into the assumptions in the CanWEA study to figure out why their estimates of levelized costs for wind vs. gas were diametrically opposed to those of the EIA, which is generally considered as an authoritative source of information on energy matters.

And it didn't take long to find out. The Solas study makes a few very interesting assumptions about power production in 2016. One of the most interesting assumptions it makes is about something called the "capacity factor" of power production. The capacity factor is basically a measure of how often a power-generation facility is able to run at its maximum power output. For some reason, Solas assumes that a combined-cycle natural-gas plant capacity factor is only 50 per cent. In other words, they'd only run at full output 50% of the time. That's odd, as the EIA estimates combined-cycle capacity factors in 2018 would be at 87 per cent.

And that's not all that seems off: the Solas study estimates a capacity factor for wind power of 40 per cent in 2016. EIA's 2018 estimate for wind-power capacity is only 34 percent, with an extra two years of technology development factored in. But in a recent study for the Fraser Institute, Senior Fellow Ross McKitrick (also an economics professor at the University of Guelph) pointed out that wind turbines in Ontario from 2006-2012 ran at only 27.5 per cent of their capacity on average. They ran at less than 20 per cent of capacity about half the time, and they ran near their full capacity only 1 per cent of the time. That's a fair distance from 40 per cent.

Another curiosity involved the life-expectancy of power plants. The Solas study gives wind turbines an estimated life expectancy of 35 years. But as the TimesOnline reports, a study that examined wind turbine performance in Europe in 2012 found that:

"Wind farms have just half the useful lifespan which has been claimed, according to new research which found they start to wear out after just 12 years. A study of almost 3,000 turbines in Britain - the largest of its kind - sheds doubt on manufacturers' claims that they generate clean energy for up to 25 years, which is used by the Government to calculate subsidies."

The Solas study further tilts the levelized cost playing field by only giving combined-cycle gas plants a life-expectancy estimate of 25 years. But in a submission to the Oklahoma Corporation Commission, turbine-maker GE points out that "Among the fleet of 6,600 GE heavy-duty gas turbines currently in service, there are 1,700 units that have been operating for over 30 years." In fact, they show that some combined cycle plants are still running at 50 years.

It was also in the Solas study assumptions listing that I found out what the proposed hike to Alberta's carbon tax would be: the calculations of future energy costs assume a $20 per tonne carbon tax that increases by 2% per year. In fact, their assumption that wind power plants would sell carbon offsets to coal power plants is one of the factors that brings the estimated price of wind power down in their estimates.

So where did all these assumptions come from? On page 30 of the technical report, we find this jaw-dropping admission:

"The assumptions used to complete this analysis are based on the industry experience of the authors. While the values have not been taken from specific projects they are consistent with assumptions used in recent projects."

What possible rationale could there be for choosing not to look at the real-world, and to use actual values from existing facilities to make these comparisons? Oh, wait. Under those circumstances, wind power looks like a clear loser compared to combined cycle natural gas power production. Minister Hughes, as well as the rest of the Alberta government, would be advised to take the CanWEA study not only with a grain of salt, but with a whole shaker full.