Here was an article debunking that IER propaganda BS. I'll highlight a few sections:
$this->bbcode_second_pass_quote('', 'A') new attack piece by a Koch front group, Institute for Energy Research, recycles their familiar attack playbook of starting with an inflated cost for wind energy and then mischaracterizing how the power system functions to argue that the real cost of wind is even higher.
Like the three other Koch-funded attack pieces before them, Thomas F. Stacy and George S. Taylor’s first trick in their paper “The Levelized Cost of Electricity from Existing Generation Sources” is using obsolete wind cost assumptions. Stacy and Taylor use an old government estimate to claim that the cost of wind energy is $80.30/MWh, or 8 cents per kWh, while more recent market data indicates actual wind energy costs are less than half that amount. Specifically, market data indicate the actual average purchase price for wind energy was $25.59/MWh in 2013, or well under $50/MWh if the impact of the Production Tax Credit (PTC) on long-term wind purchase prices is removed. As explained below, this cost is significantly lower than the benefits provided by wind energy, indicating that wind energy provides significant net benefits.
Stacy and Taylor’s cost estimate is even higher than the most recent government estimate, which puts the national average cost of wind at $73.60/MWh. Notably, this government estimate overstates actual wind costs because it assumes wind plants will be built evenly in all regions when in reality most wind plants are built in regions with wind resources that are far above average, and because it uses installed wind costs that are about 20 percent higher than the latest market data. As we’ve noted previously, it is strange that a group that claims to support free market principles relies on government cost estimates instead of price information provided by actual market data.
It adds a few new, seriously flawed attacksWith this already high, obsolete estimate of wind costs, the report then uses flawed assumptions and arguments to increase it with various cost multipliers and adders.
The EIA has already developed a quantitative method that accounts for all of the costs that Stacy and Taylor attempt to add to wind’s costs, and it comes up with a result that is a factor of 4 lower. EIA’s method accounts for differing levels of dispatchability (ability to change generation output) and capacity value (ability to meet peak electricity demand) among power plants. EIA’s calculation found that there is only a 10 percent difference, or a difference of about $7/MWh, between the value provided by a wind plant and a more dispatchable gas plant. This is much lower than the more than 40 percent cost adder that Stacy and Taylor attempt to add to their already inflated wind cost, and far less than the 100+ percent cost adder the other Koch reports have attempted to add to their inflated estimates of wind costs.
Most critically, EIA’s method shows that a MWh of wind energy has an average economic value of $64.60/MWh, much higher than the current cost of wind energy of under $50/MWh, indicating wind energy provides net benefits for consumers. Of course, this calculation ignores the many other benefits that wind energy provides relative to other energy sources, such as wind plants’ lack of fuel cost and fuel price risk, wind plants’ lack of air emissions, wind plants’ lack of water consumption and withdrawals, and others.
“Imposed costs” are actually “sunk costs”While most of Stacy and Taylor’s attack on wind is based on rehashing previously debunked Koch pieces, they do try to introduce the novel concept of “imposed cost.” However, the likely reason no one has previously made this argument is that it runs afoul of basic economic principles and realities of power system operations. First, the concept of “imposed costs,” as put forward by Stacy and Taylor, runs afoul of economics principles. The addition of wind does not require the addition of new capacity, and almost all regions of the U.S. have more than enough generating capacity, so in almost all cases wind is primarily displacing the output of existing power plants. As a result, Stacy and Taylor’s “imposed cost” is what an economist would refer to as a “sunk cost.” Sunk costs are exactly that – sunk – meaning that they have already been spent and cannot be recovered and therefore should not be factored into rational decision-making for the future. Said another way, there is no cost to society for building a power plant that is already built.
Stacy and Taylor fail to apply an “imposed cost” on existing coal and nuclear generators, which “impose” a many times greater impact on the dispatch of other generators than wind (as does electricity demand variability). As national laboratory experts have
explained, the presence of an inflexible baseload generator on a power system’s fleet is a primary factor forcing other generators to cycle their output and run at reduced capacity factors. In fact, one can see the same phenomenon in a nearly identical chart that appears on page 8 of Stacy and Taylor’s paper – if fewer baseload plants were present in their example, the mid-merit units could run at far higher capacity factors. Similarly, should “imposed costs” have been assigned to gas generators in 2012 when the fuel cost of many natural gas power plants dropped below that of many coal plants, forcing the coal plants to operate at reduced output? Stacy and Taylor’s argument that power plants that provide low-cost energy should be penalized for being too cheap while the more expensive power plants that are being displaced should be rewarded for being too costly is strangely perverse for a group that pretends to advocate for a “free market.”