New England Wind Has Potential to Reduce Electricity Costs by $1 Billion Per Year

In March 2013, an interim update from ISO New England calculated the annual wholesale electricity cost to consumers (LSE Energy Expense) with 892 MW of wind on the system, which is very close to what is installed today and estimated to produce about 2510 GWh/year, to be $7.955 billion. If all wind resources active in ISO New England interconnection development queue at the time of the study were also built, which would bring the total wind capacity in New England to 3927 MW and estimated to produce 11565 GWh/year, it would drop total wholesale electricity costs to consumers to $6.881 billion. This represents a $1.074 billion/year savings compared with the amount of wind now on the ISO New England system. That is equivalent to savings of $354,000/year per additional MW of wind installed or $119/MWh of additional wind generation. Wind with its “free fuel” can lower wholesale energy prices. Some transmission system upgrades will be needed to achieve the level of savings and wind deliverability seen in the study but the costs of these upgrades should be considered against the energy cost reductions and reliability benefits created by completing these upgrades. For example, the $5 – $8 billion transmission cost estimate given in the 2010 NEWIS study was for a transmission build out that the NEWIS study found would be sufficient to integrate as much as 7 GW of wind (page 118 of the NEWIS report), meaning much less transmission should be needed to integrate 4 GW of wind.

The final Economic Study Report on page 75 (figure 6-53) and page 69 (Figure 6-22) shows the LSE Energy Expense to be essentially the same as the numbers given above. (The draft report gives the results in figures instead of tables, so the precise values can’t be determined, but appear to be the same as the above numbers.)

These numbers all assume natural gas prices between $4 and $5/MMbtu (lower for summer, higher for winter, (Figure 4-3). These gas prices reflect what was seen in 2011, but gas prices that year were the anomaly. Since 2011, we’ve seen much higher gas prices in the colder months. In December 2013, natural gas prices in New England averaged about $14/MMbtu (ISO New England Chief Operating Office report, January 10, 2014, slide 75). In February 2013, gas prices averaged about $17.50/MMbtu. When gas prices (and marginal electricity prices) go up, the savings from wind should also go up as increasingly expensive energy is displaced as depicted in the attached slide.

RENEW addressed these issues in a 2013 op-ed co-written with the Maine Wind Energy Association.