Cheap Energy is Blowing in the Wind

Wind Turbines in a Wheat Field

By Maura Forrest

October 23, 2014

It turns out that onshore wind energy may actually be cheaper than coal or natural gas.

That’s one of the findings of a new study from the European Commission that looked at the full cost of different energy sources in the European Union (EU), including external factors like climate change and human health impacts.

The study found that electricity generated from onshore wind power costs roughly $150 per Megawatt hour (MWh), while natural gas and coal cost about $230 and $330 per MWh, respectively.

The major external costs that drive up the full price of fossil fuel energy are climate change, the depletion of energy resources, and air pollution from particulates.

Energy demand in the EU costs roughly $700 billion at wholesale prices, according to the report. But those external costs drive up the real price by almost $300 billion, with fossil fuels and nuclear energy accounting for about 70 per cent of the additional expense. 

There is some evidence that these results hold true in Canada, too.

The Ontario government estimates that new gas generation costs between $85 and $296 per MWh, while wind energy costs just $115 per MWh, roughly the same as the cost of nuclear production. And that’s without taking external costs into account.

Moreover, the Ontario Power Authority estimates that the cost of wind energy will decrease by 28 per cent by 2032, while the cost of nuclear energy will rise.

And in Alberta, where the majority of electricity generation comes from coal, a 2013 report from the Pembina Institute estimated that the health impacts of burning coal cost $300 million annually, which amounts to a doubling of the cost of electricity production.

A more recent report found that the cost of electricity in Alberta would decline by four per cent by 2033 if the province starts to incorporate more renewable energy.

Still, the concept of cheap onshore wind energy will likely make more of an impact in the EU than in Canada.

That’s because sixty per cent of Canada’s electricity demand is met by hydro power, which is the least expensive energy source in Canada and in Europe, whether or not external costs are factored in.

In contrast, hydro power accounts for only 16 per cent of Europe’s electricity, meaning the EU will need other sources of inexpensive renewable energy to meet its 2020 goal of a 20 per cent reduction in greenhouse gas emissions from 1990 levels.