How much will a clean environment cost? That question dominates debate about renewable energy. Many environmentalists maintain that if we reckon the value of things that energy prices usually ignore — for instance, protection from fluctuations in the price of fossil fuel, cleaner air, less radioactive waste and a lower chance of catastrophic climate change — renewables may save us money. Equally important, communities that develop indigenous renewable energy resources and encourage renewable energy equipment manufacturing can create jobs and retain some of the money they would otherwise spend on imported coal, oil and gasoline. Skeptics dismiss such claims as malarkey, and warn that large-scale renewable energy development would cripple the economy.

The following analysis suggests that ambitious wind energy development could prove astoundingly cheap. To be specific, installation of 3,050 megawatts in Texas translates to seventy-five cents per month for an average household in the Lone Star State. That’s the cost of a cup of coffee. It’s less money than most families lose in between their couch cushions. It’s only nine dollars a year!

Care should be taken with these numbers, of course. For example, the analysis does not discuss transmission costs for windpower in detail, due to current regulatory uncertainty and regional idiosyncrasies. Nevertheless, the calculations include very generous margins for error, and, in the case of the Texas example, the authors estimate that transmission might raise costs by around 15%. Yet, even if this study misses the mark on transmission costs by 100%, the resultant impact on electricity bills would still be “noise” in the average family budget. However you count it, it comes up cheap.

Not only is wind energy development cheap, but Texans — and presumably many other Americans — seem ready and willing to pay for it. According to The Economist, residents of Houston participating in a 1998 “deliberative poll” initially declined to spend a penny more on renewable energy. After spending a weekend questioning a panel of objective experts, the group said they would gladly pay an extra $6.50 per month. Similar surveys in Corpus Christi and Beaumont, TX generally echo these results.

The analysis presented in this paper demonstrates the crucial importance of group solutions to social problems. The authors’ Texas case study assumes that regulators spread the cost of large-scale wind development among all customer classes and individual customers on a per-kilowatt-hour basis. For instance, policy makers might apply a systems benefit charge of the type adopted in California and other states as they restructure their electric systems. Given that the environmental and economic benefits of wind development accrue on a broad regional basis, this assumption of evenly distributed costs seems reasonable. If, on the other hand, the costs were borne only by altruistic families that cared enough about the environment to pay a premium to protect it, for example through a voluntary “green pricing” program of the type increasingly contemplated by utilities and regulators, the per-family costs would soar.

That’s the message: Talk is cheap, but so is windpower. Everyone benefits — if everyone does their part.

Roby Roberts, Executive Director
Adam Serchuk, Research Director and Executive Director of the Research Report series
Virinder Singh, Research Associate
J. Bernard Moore, Research Associate

October 21, 1998