Valuation of Distributed Wind in an Isolated System

Sarah Barrows,Brian Naughton,Kendall Mongird,Rachid Darbali-Zamora

doi:10.3390/en14216956

Sarah Barrows, Brian Naughton + Show 2 more

Open Access

https://doi.org/10.3390/en14216956

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Abstract

Remote communities are increasingly adopting renewable energy, such as wind, as they transition away from diesel energy generation. It is important to understand the benefits and costs of wind energy to isolated systems so that decision-makers can optimize their choices in these communities. There are few examples of valuation of wind energy as a distributed resource and numerous differences in valuation approaches, especially in the inclusion of environmental and economic impacts. We apply a distributed wind valuation framework to calculate the benefits and costs of wind in St. Mary’s, Alaska, to the local electric cooperative and to society, finding that the project does not have a favorable benefit-to-cost ratio unless societal benefits are included, in which case the benefit-to-cost ratio is nearly double. Government funding is important to reducing the initial capital expenditures of this wind project and will likely be the case for projects with similar characteristics. Additional fuel savings benefits are potentially possible for this project through technological additions such as energy storage and advanced controls.

Highlights

Many remote communities rely on diesel generators for their energy generation, which means they often have higher than average electricity prices due to the high cost of supplying fuel to remote locations
Several studies have investigated the value of small-scale wind projects using real options analysis [13,14,15], techno-economic analysis [3,5,16,17,18,19], and even contingent valuation [20]
We chose to represent the almost USD6 million in grants and awards under electric cooperative costs rather than societal costs because, if there was no external funding, these capital costs would be faced by the electric cooperative

Summary

Introduction

Many remote communities rely on diesel generators for their energy generation, which means they often have higher than average electricity prices due to the high cost of supplying fuel to remote locations. This means that societal benefits, such as environmental and regional economic impacts, are often not included in the economic analysis of remote renewable energy generation systems, nor are qualitative value elements typically included This is similar to the results from [21], which concluded that few distributed energy resource (DER) valuation studies focus on the environmental and social impacts of DERs. in the valuation of remote systems, the inclusion of societal benefits is considered relevant, given the societal subsidization of many of the projects [22]

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