Abstract
This paper quantifies the long-term impact of wind energy development on electricity prices across the residential, commercial, and industrial sectors in the United States. Our data set is made up of state level panel data from 2000 through 2018. This time period covers the vast majority of total wind energy capacity installed in the history of the USA. Our econometric model accounts for the primary factors that influence electricity prices, incorporating both fixed effects and general method of moments in order to more precisely isolate the effect of wind energy. The empirical results conclude that wind energy is positively and significantly related to electricity prices across all sectors, as indicated by the higher average electricity prices in states with higher percentages of wind energy. The price increase is largest in the industrial sector, followed by commercial, then residential. Wind turbine technology has become significantly more efficient, but the technical gains have been offset by the increased indirect costs of incorporating wind energy into the grid. Transmission and balancing costs have increased the final price to consumers. Our results highlight the need to view wind energy development from a more holistic perspective that accounts for structural and systemic costs. This will ensure the continued growth of wind energy. These results provide relevant insight to help wind energy developers, policy makers, and utility companies build a more sustainable energy future.
Highlights
wind energy development (Wind) energy development has expanded rapidly this century [1,2,3]
The analysis finds that electricity price volatility increases while short-term electricity prices decrease with higher wind energy levels [27]
Directionality was the same across all sectors, wind energy produced the highest level of pricing increase in the industrial sector
Summary
Wind energy development has expanded rapidly this century [1,2,3]. The total installed capacity has increased from 18 GW in the year 2000, to 733 GW in the year 2021 [4]. In the US wind energy has benefitted from government incentives, the Federal Production Tax Credit (PTC), and state level energy regulatory policies called Renewable Portfolio Standards (RPS). Legislators in many nations have devoted support to new sources of energy in an attempt to mitigate the negative impact of greenhouse gases and CO2 [7]. Despite these advances in green energy, coal is still the leading source of energy in many developed nations [8,9].
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