Wind power represents an increasingly attractive option for generating electricity. Deploying wind turbines instead of conventional fossil-fired or nuclear plants can avoid numerous harmful environmental impacts. A strong wind energy sector can also bring substantial local economic benefits. Skeptics of wind power often assume that wind development costs too much to contemplate. In fact, using a conservative model that tends to overstate the cost, we estimate that a robust, ten-year program of wind power development would add only a few dollars per year to the electricity bill of a typical family — in the case of those living in the state of Texas, perhaps 75 cents per month, or nine dollars per year.

This paper describes a model to evaluate the impacts of adding 10,000 megawatts (MW) of wind-generated power to the national generating mix over ten years. The added capacity from wind-driven generators would be equivalent to 0.7 percent of the nation’s 1996 electricity consumption. This would supplement the nation’s 1,750 MW of existing wind-driven generating capacity, resulting in 11,750 total MW in place by the end of 2006.

Our model predicts appreciable economic gains from adding the new wind turbine capacity:

• $7 billion in direct economic activity from manufacturing wind turbines, constructing windfarms, and supplying parts and components over ten years. Most, but not all, of this activity would benefit the domestic economy.

In addition, revenue from three sources would flow to the local economy, rising during the installation period to the following levels in the year 2007, and continuing throughout the life of the windfarms:

• $863 million in annual revenue from the sale of 21.6 billion kilowatt-hours (kWh) of electricity, once all the turbines are installed.

• $17 million per year in land-use easement payments to the owners of the land on which the windfarms are situated, once all the turbines are installed.

• $89 million per year from maintenance and operations, once all the turbines are installed.

Although we do not calculate their economic value here, deployment of wind power has other benefits. Local governments may collect increased tax revenues. The incorporation of wind generating capacity can benefit utilities and other energy suppliers by, for example, mitigating fuel-price and regulatory risks; deferring new conventional capacity additions, and; reducing construction finance costs due to con-ventional capacity additions. In some cases, wind-powered generators may be deployed in distributed systems so as to defer the costs of line extension, reconductoring or voltage support. In addition, this added capacity may enable utilities and other energy suppliers to serve growing demand for environmentally clean electricity. To be sure, wind power development can have negative impacts (e.g., bird mortality) or subjectively judged ones (e.g., visual presence). Yet these can often be managed and limited. The public will certainly benefit from reductions in several negative environmental impacts of conventional electricity generation, including air pollution, emissions of greenhouse gases, production of radioactive waste, and land and water degradation from mining.

To illustrate the potential economic effects of investing in wind energy, we apply our model to the state of Texas. Based on Texas’ very large wind resource — second best in the nation — and high electrical energy consumption, we assume that the state hosts 3,050 MW of new wind turbines, increasing the state’s total electric energy generating capacity by nearly 5 percent. We assume the same gradual ten-year installation profile used in assessing the impacts of the 10,000- MW national wind-generation total. Upon installation of the state’s full complement of 3,050 MW, we find that a Texas family using 1,000 kWh per month would pay an additional 75 cents per month, or about 9 dollars annually, to offset the investment in wind energy.

The model predicts four additional economic impacts for Texas:

• $2.14 billion in economic activity associated with manufacturing, construction, and supply of parts and components;

• $263 million per year in energy sales revenues after complete installation;

• $5.2 million per year in easement payments to landowners after complete installation, and;

• $27 million per year in maintenance and operations activities after complete installation.

In both the national analysis and the Texas example, we make some simplifying assumptions for the sake of clarity. Because the economic, environmental and employment benefits of wind power development accrue on a broad regional basis, we assume that regulators would spread the costs equally among all customer classes and individual customers, for example through a non-bypassable system-benefit charge on electricity sales levied on a per-kilowatt-hour basis. While several states have taken this approach to support renewable energy and other public benefits, it might not be the case universally.

In addition, we do not calculate transmission costs, which could increase the cost of incorporating wind energy into the electric system, particularly where such resources are far from population centers. On the other hand, we make a number of conservative assumptions that tend to overestimate the rate impact of deploying wind turbines, and probably offset the additional cost of transmitting wind energy, compared to the cost of transmitting energy from conventional non-wind resources. In our example, the average residential price of electricity is approximately 2.5 times the wholesale price. We use this multiplier to reckon the increase in retail rates should the wholesale price of wind exceed the conventional wholesale cost. Yet this multiplier likely overstates the effect of wind-generated electricity on retail rates, since many of the components of the retail rate are either fixed or would not rise as fast as the wholesale rate. In the case of Texas, we estimate that transmission costs calculated under current regulations could add about 15% to the cost of wind power. We stress that this figure results from a regulatory environment specific to Texas today, and might not be illustrative of other regions now or in the future. Still, we conclude that development of wind-powered electricity facilities might easily levy a more modest household cost than we estimate here.

In sum, our analysis supports the following points:

• The United States harbors more than enough windy land to boost wind generating capacity dramatically without interfering with other land uses;

• Wind development would likely bring substantial benefits to local economies, and;

• The cost per household of wind energy development is modest.

Abstract A Message from the Staff of the Renewable Energy Policy Project Article