◊ Part of the ‘wind energy’ series of articles ◊
To complete the picture, you should know what the cost of fuel would have been for providing the equivalent wind energy by some other means such as natural gas. That represents one measure of the value of wind energy.
In a 2014 wind energy presentation the Ontario Society of Professional Engineers determined the fuel cost of natural gas used to generate electrical energy was 3 cents/kWh. In a simplified analysis, wind energy saves the fuel cost for natural gas. Note that I call this a simplified analysis as operationally this case isn’t quite possible – but we have to start with a base case.
Using the estimated 3 cents/kWh cost of natural gas (without any escalation) and assuming one-to-one wind energy displacement the fuel cost savings would be:
| Year | 2014 | 2015 | 2016 | 2017 | 2018 |
| Fuel Cost Avoided ($M)
base-case |
204 | 270 | 279 | 276 | 321 |
Note that this table represents the ‘high-bar’ of displacement saving since every kWh of wind energy doesn’t displace a kWh of natural gas generation. It represents a base-case only.
Regardless of the source of energy, some form of constraint compensation is paid to the alternate supplier. The system effectively pays for both gas and wind energy resources at the same time even though one is idle.
Considering the cost saving from fuel, in a third pass you could say that the unit cost of wind energy drops to 12.9 cents/kWh.
The true fuel avoided cost would take some serious analytics to determine and would be less than 3 cents/kWh. It would be dynamic as the hourly generation mix and fuel costs vary.
Derek
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