3Center or American Progress | Wind Power Helps to Lower Electricity Prices
Tis eec o wind power driving down wholesale prices is known as “price suppres-sion” or he “meri order eec,” and is benes are well known. gA recen sudy o heMidwes Independen Sysem Operaor, or example, ound ha large amouns o windcould save consumers $200 per year.
While he benes or consumers are clear, exising generaors lose some pros. In heoriginal scenario, he nuclear reacor—le’s say i’s owned by Exelon—was making $40per megawat-hour more han heir operaing cos. (Tis isn’ echnically “pro,” sincesome o his $40 goes oward covering xed coss.) In he later scenario, he reacor isonly making $20 more han heir operaing coss.O course, while Exelon makes $20 less, consumers save $20 on heir power bill.
The production tax credit is not “distortionary”
Exelon knows ha saying wind power is bad because i saves money or consumers ishardly a winning argumen, so hey’ve made a slighly dieren argumen o avoid hereal issue. Tey are now ouing a Sepember repor by he NorhBridge Group, whichconcludes ha “[producion ax credi]-driven negaive prices direcly conic wihhe perormance and operaional needs o he elecric sysem and wih ederal energy policies supporing well-uncioning compeiive wholesale markes.”
Wha hey mean by his: Wind arms are paying grid operaors o ake heir power, which is reporedly disoring elecriciy prices in wholesale markes.
Note: This is a hypothetical example for illustrative purposes and is not intended to represent any particular power system.
$50/MWh$30/MWh$20/MWh$10/MWh$0/MWh3,000 MW500 MW
500 MW500 MW
$30/MWh$20/MWh$10/MWh$0/MWh3,000 MW500 MW
Adding more wind power reduces prices in electricity markets
In the frst example (on the let), the market clearing price is $50. In the second example (on the right), more wind pushes the mostexpensive plants out o the mix, and the clearing price is reduced to $30.