Wind power is more affordable

The sharp reduction in installation costs for wind power plants in recent years has enabled wind energy to greatly increase its competitiveness with respect to conventional energy generation methods. Consequently, a large number of commercial consumers and industries are choosing wind power with the double objective of reducing costs and increasing the reliability of the energy supply.

For decades, several institutions and companies have criticized the development of wind energy, arguing that it amounted to an expensive luxury that society could not afford (an argument especially made in times of economic crisis); they maintained that it was a technology incapable of competing with energy sources such as coal, petroleum and gas. If one discounts the serious impacts on health and the environment that these conventional energies cause, this statement was close to the truth for certain technologies. However, today the situation is very different owing to technological advances significantly increasing the competitiveness of wind power.

As we can see in the graph below, following the LCOE criteria (Levelized Cost of Energy) wind power is cheaper than the other forms of energy production shown¹. This fact is due to improved technology such as the increase in the size of the turbines and the evolution in design of the blades, among other factors. The financial advisory firm Lazard (Lazard, 2013) consider wind energy to be more affordable than natural gas or coal. In their report Lazard state that the price of energy generation from wind has fallen 58% from 2009, and 15% last year.

Leveled cost of electricity (LCOE) in Europe
according to different technologies

Wind power is more affordable

Source: Directorate-General for Energy (European Commission) and Ecofys.

Not only is wind power an increasingly inexpensive technology, it is also contributing to a reduction in the cost of wholesale energy. This is because wind energy is offered on the markets at zero price, because there are no marginal costs dependent on, for example, the buying of raw materials (uranium, coal). Whenever price is a determining factor in a free market where energy supply meets energy demand, zero price energies will overtake more expensive technologies. This means, if there is the same level of demand, when wind energy is available the general market price reduces. Therefore, it can be said that the increase in availability of wind energy is reducing energy prices in the majority of European markets, as described in the study "Is green energy expensive? Empirical evidence from the Spanish electricity market" from the Bilbao Energy Research Team, University of Pais Vasco: The wind has reduced the market price between 17 and 37% in recent years, according to the University of Pais Vasco.

A good example is Germany, where renewable energies made up 27.4% of the energy mix in 2014. As a result, the price of the wholesale market for energy decreased, registering a record price of €33 per MWh, while in 2013 it was €38 per MWh. This reduction allowed the German market to export 5.6% of its production to neighboring countries, also a record.

According to the International Renewable Energy Agency (IRENA, 2014), having a high proportion of renewables in the energy mix doesn’t only contribute flexibility and energy independence, it also delivers an energy supply that is more reliable and affordable.

¹ Ecofys (2014), “Subsidies and costs of EU energy”.