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The Economics of Wind Power

Author

Listed:
  • G. Cornelis van Kooten

    (Department of Economics, University of Victoria, Victoria, British Columbia, V8W 2Y2 Canada)

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

  • G. Cornelis van Kooten, 2016. "The Economics of Wind Power," Annual Review of Resource Economics, Annual Reviews, vol. 8(1), pages 181-205, October.
    • Handle: RePEc:anr:reseco:v:8:y:2016:p:181-205
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    File URL: http://www.annualreviews.org/doi/10.1146/annurev-resource-091115-022544
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    Citations

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    Cited by:

    1. Jon Duan & G. Cornelis van Kooten & A. T. M. Hasibul Islam, 2023. "Calibration of Grid Models for Analyzing Energy Policies," Energies, MDPI, vol. 16(3), pages 1-21, January.
    2. van Kooten, G. Cornelis & Withey, Patrick & Duan, Jon, 2020. "How big a battery?," Renewable Energy, Elsevier, vol. 146(C), pages 196-204.
    3. Bahramian, Pejman & Jenkins, Glenn P. & Milne, Frank, 2021. "The displacement impacts of wind power electricity generation: Costly lessons from Ontario," Energy Policy, Elsevier, vol. 152(C).
    4. Do, M. Hung & Söffker, Dirk, 2021. "State-of-the-art in integrated prognostics and health management control for utility-scale wind turbines," Renewable and Sustainable Energy Reviews, Elsevier, vol. 145(C).
    5. López Prol, Javier & Zilberman, David, 2023. "No alarms and no surprises: Dynamics of renewable energy curtailment in California," Energy Economics, Elsevier, vol. 126(C).
    6. van Kooten, G. Cornelis & Lynch, Rachel & Duan, Jon, 2016. "Carbon Taxes and Feed-in Tariffs: Using Screening Curves and Load Duration to Determine the Optimal Mix of Generation Assets," Working Papers 236443, University of Victoria, Resource Economics and Policy.
    7. G. Cornelis van Kooten, 2016. "California Dreaming: The Economics of Renewable Energy," Working Papers 2016-05, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.
    8. G. Cornelis van Kooten, 2020. "Climate Change and Agriculture," Working Papers 2020-01, University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group.

    More about this item

    Keywords

    climate change; intermittent energy; electricity market deregulation; peak load pricing; electricity storage; demand management; fossil fuel externalities; generating-capacity investment;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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