Koch-Funded Professor Strikes Out on Wind Energy

Please note that Newsweek did later provide a disclaimer, noting Mr. Simmons’ clear bias and conflicts of interest.

Newsweek recently did a major disservice to its readers by publishing – apparently without any fact checking – an error-ridden opinion piece by Randy Simmons, the “Charles G. Koch Professor” at Utah State University. Newsweek also failed to disclose that Simmons is a major recipient of funding from the fossil fuel industry billionaires, and that this attack follows Simmons’s two other thoroughly discredited attacks on wind energy in the last month. Below I go line-by-line to point out the false claims and obvious factual errors in the Koch professor’s latest attack.

1. Fact checking: The attack piece begins with an obvious factual error: “…wind energy – which supplies just 2 percent of US electricity….” A quick glance at Department of Energy data reveals that wind energy provided 4.44 percent of electricity last year. Moreover, that figure that is expected to grow to around 6 percent once under construction and recently completed wind projects produce power for a full year. Wind energy is growing quickly and is making major contributions to providing America with a cleaner, more diverse portfolio of energy resources.

2. Wind’s incentives are a drop in the bucket compared to those for other energy sources: The Koch professor next paints a very misleading picture of federal energy incentives by ignoring the far larger subsidies for conventional energy sources. The nuclear industry’s own tally shows that all renewable resources accounted for less than 10 percent of federal energy incentives provided over the period 1950-2010, with fossil resources receiving more than 70 percent. Additional data from other sources is provided here.

Simmons’s next line of attack is inconsistent with basic economic principles, with his criticism that some wind project development is done by U.S. subsidiaries of multinational corporations particularly peculiar for an economist who claims to support free markets. The reality is that the federal renewable production tax credit (PTC) directly reduces the cost of wind energy sold to U.S. consumers, with expert analysis confirming that virtually the full value of the credit is reflected in lower consumer electricity costs. The same could not be said for incentives for other energy sources whose price is set on the global market. Moreover, the majority of the economic development and job creation associated with wind project development occurs in the U.S.

Finally, Simmons attempts to greatly exaggerate the number of federal programs that are benefitting wind energy by rehashing a misleading attack that has been used by other fossil-funded groups.

3. Technology improvements have reduced wind’s costs below what Simmons claims: Before incorrectly adding a number of supposed costs onto the cost wind energy, Simmons compounds that error by starting with a cost that is too high by putting words in the mouths of wind “proponents” about what wind energy actually costs. He writes: “[Wind] proponents tend to claim it costs as little as $59 to generate a megawatt-hour of electricity from wind.” Later, he writes: “On the low end, the financial advisory firm Lazard claims wind costs $59 per megawatt-hour.” [link in original] First, Lazard actually states that the lowest cost wind projects come in at a cost of $37/MWh. Second, Lazard is not a “wind energy proponent,” but rather a “financial advisory firm” as Simmons himself admits later in his attack piece.

Regardless, the best information on what wind energy costs can be obtained from market data. Once again, it is peculiar for someone who purports to be a free market economist to use cost estimates instead of market price data. Data on the price of utility contracts to purchase wind energy, compiled by the Department of Energy (DOE), show that the average price was $22/MWh in 2013, which if the PTC were not in place would correspond to a cost of just over $40/MWh. In short, Simmons is behind the times on both wind’s share of the electricity mix as well as wind energy’s technology improvements.

More perplexing is that Simmons references Lazard’s analysis, but fails to use its results when they contradict his claims. Simmons states that “For the studies we examined, capital costs ranged from $48 to $88 per megawatt-hour, while O&M costs ranged from $9.80 to $21 per megawatt-hour.” However, Lazard’s analysis shows wind’s capital cost at between $30/MWh and $66/MWh, and O&M costs at between $8-15/MWh, significantly below the range claimed by Simmons. DOE’s data also indicate an average O&M cost of $9/MWh for recently installed wind projects.

4. Wind energy’s grid integration cost is actually lower than that of conventional generation: Next, Simmons runs through a series of thoroughly debunked claims about how wind energy is integrated onto the power system, essentially regurgitating the discredited line of attack used by another Koch-funded group back in 2013. The reality (as explained in Chapters 3 and 5 here) is that all power plants are backed up by other plants. Moreover, grid operator data indicate that the cost of integrating wind is actually lower than the cost of integrating large conventional power plants. This is because changes in wind output are gradual and predictable, while large fossil and nuclear plants fail instantaneously and without warning. Calculations made using data from the Texas grid operator indicate that the cost of integrating wind energy is only about $0.37/MWh, while the cost of integrating conventional power plant failures is nearly twice as high on a per-MWh basis, and more than 17 times higher on a total cost basis. Based on the Texas data, wind’s actual integration cost is 6-70 times lower than claimed by Simmons, and he totally ignores the larger integration costs for fossil and nuclear power plants.

Simmons then gets even more confused about how the power system operates, claiming that using a power plant to provide reserves requires the plant to be operating and therefore affects emissions. The reality is that any increase in reserve need caused by wind is often met by power plants that are not online but can start up quickly in the rare event they are needed, as changes in wind output are gradual and predictable. Regardless, any energy provided by any power plant providing reserves must directly displace energy that would have been provided by another power plant, as the laws of physics dictate that energy cannot be destroyed.

Simmons also repeats the conclusively rejected myth that wind affects the efficiency of power plants by causing them to change their output. Real-world emissions data confirm that wind energy produces 99.8% of the expected emissions reductions. Simmons claims an earlier study found a different result, but that analysis was a simple modeling effort that failed to use wind’s true impact on system reserve needs, which are a fraction of what it assumed as most changes in wind output are canceled out by opposite changes in electricity demand or deviations at other power plants. For more detailed discussion of this topic and citations to the studies that have debunked this myth, see Chapter 14 here.

Next, Simmons misunderstands that transmission upgrades that help integrate wind have a number of other benefits, so these lines more than pay for themselves and should be viewed as a benefit, not a cost. In addition to saving consumers money, these upgrades improve electric reliability, make electricity markets more competitive, protect consumers against fuel price fluctuations, and other benefits. For example, transmission lines primarily added to help integrate wind in Texas have improved electric reliability around Dallas and San Antonio, while also facilitating the development of oil and gas production in West Texas. Regardless, DOE calculates that even if transmission is viewed as a cost that should be attributed to wind, it would only be a cost of $3.2/MWh, which is not drastically higher than the transmission cost for other energy sources.

In sum, each of Simmons’s attempts to add a cost to wind has actually highlighted a benefit of wind. Wind energy’s integration cost is actually lower than that for conventional generators, and transmission added to primarily integrate wind more than pays for itself by providing large net benefits.

5. Wind energy benefits consumers: Next, Simmons tries to use obsolete analysis from another Koch-funded group to claim that states with pro-renewable policies have higher electricity prices. While many factors affect the price of electricity so correlation does not prove causality, regardless the data actually support the opposite conclusion if one uses data that is more current than the outdated data used by the Koch group that Simmons cites. Last month, independent expert DBL Investors analyzed the data and found that states with the most use of renewable energy have lower electricity prices, while also observing that states with pro-renewable policies have seen lower electricity price increases than other states. Such a finding makes sense, as stably-priced wind energy helps to protect consumers against increases in the price of other fuels.

Simmons then seemingly contradicts himself by claiming that wind energy is reducing electricity prices so much that it is making it harder for other energy sources to compete. The claim that wind energy is having an undue impact on other energy sources has been thoroughly rejected by a number of experts, including former Federal Energy Regulatory Commissioner John Norris.

6. Once errors are corrected, Simmons’s math shows wind provides major net benefits: Each time Simmons attempts to attack wind energy, he actually highlights a benefit of wind. Whether it is the fact the total incentives received by wind energy are far smaller than those that have been given to fossil and nuclear energy, or wind’s lower grid integration cost, or wind’s actual cost, Simmons’ arguments fall flat when the full comparative picture is revealed. Of course, had Simmons looked at metrics such as impact on public health and the environment, or protection against fuel price increase risk, he would have found even more reason to like wind energy. Simmons claims that his article is “part of a study I’m doing of other energy sources including solar, natural gas, and coal to determine how much each one actually cost us when all factors are considered.” If you think the Koch professor will actually take a fair look at the negative externalities for public health costs for each resource, or the total incentives that each has received, or the value of fuel price stability, or the cost of integrating each resource onto the grid, or even what each energy source actually costs, don’t hold your breath.