The Economics of Wind Power

Posted: 11 Oct 2016

Date Written: October 2016

Abstract

Many countries have incentivized wind power projects to reduce their reliance on fossil fuels for generating electricity. As shown in this review, the benefits and costs of integrating electricity from an intermittent wind source into a preexisting electricity grid depend on the operating protocols of the electricity system, the preexisting generation mix, wind profiles, and the nature of economic incentives. Electricity systems are discussed from generation through transmission and distribution to retail demand, including how wind energy impacts investment in marginal (peak time) generating assets. The discussion also examines issues that could limit the usefulness of wind power at the high penetration rates now envisioned: the inability to store electricity, the need for fast-responding backup-generating capacity, network instability, low-capacity factors, and inappropriate incentives. Overall, this review finds that the costs of wind power likely exceed the benefits and that there may be limits to the proportion of electricity that can be generated by wind.

Suggested Citation

van Kooten, G. Cornelis, The Economics of Wind Power (October 2016). Annual Review of Resource Economics, Vol. 8, Issue 1, pp. 181-205, 2016. Available at SSRN: https://ssrn.com/abstract=2850923 or http://dx.doi.org/10.1146/annurev-resource-091115-022544

G. Cornelis Van Kooten (Contact Author)

University of Victoria - Economics ( email )

Victoria V8W Y2Y, BC
Canada

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