Addendum On Preferential Electric Rates for Industry

My posting of 26 Nov. 2013 on preferential electric rates for industry did not address the question of which industries  are heavily sensitive to electric rates. A 209 report from the Pew  Center on  Climate Change*  identifies the industries where costs are  heavily reliant on electricity. Electricity costs more than about five percent for about ten percent of industries. For about two-thirds of industries the cost is two percent, or less.  The Pew report provides a guide to which industries really need electric-rate relief.

* J.E. Aldy &  W.A. Pizer, “The Competitiveness Impacts of Carbon mitigation Policies”, May 2009

True Cost of wind-Generated Electricity

The levelized cost of electricity, annually reported by the Energy Information Administration (EIA) [1], is often regarded as providing the best estimate of the true cost of generating electricity using wind power [2]. Until recently there has been no good independent check of the EIA value.

The Michigan Public Utilities Commission has tracked the cost of wind-generated electricity in that state and has reported costs very different from EIA in recent years [2, 3]. There is a simple reason for the difference – the Michigan costs are real, while the EIA costs are predictions five years in advance (i.e., the 2013 cost is an estimate for 2018). Clearly EIA has not included in its estimates the drastic cost reductions of wind energy that have occurred.

Levelized Electricity
Cost, $/MWh
Year             MI-PUC          EIA
2009               113             140
2010                84              110
2011             61-64             97
2012            52-53              96
2013            50-60             87

Table 1. Costs of Generating Electricity from Wind

(data from Refs. [1] – [3])

 

References:

  1. EIA– Annual Energy Outlook
  2. Michigan Public Service Commission “Readying Michigan to Make Good Energy Decisions”, 2014
  3. Michigan Public Service Commission, Report on the implementation of the P.A.295 renewable energy standard and the cost-effectiveness of the energy standards, issued annually