The Economics of Wind Energy

John Martin and Doug Ramsey

Journal of Applied Corporate Finance, 2009, vol. 21, issue 2, 100-109

Abstract: In the summer of 2008 the authors of this article met with Boone Pickens to discuss the centerpiece of the Pickens plan for moving the U.S. toward energy independence: the feasibility of wind power as a source for the production of electricity. That meeting, along with their survey of published sources, leads the authors to the following conclusions: • Wind power is an abundant and clean source of energy for the U.S. both now and in the future. • Wind power is now economically viable in some parts of the country, and would be viable throughout the wind‐rich mid‐section of the U.S. if we had a national transmission grid. But developing such a grid faces several hurdles, including the cost of construction and the need for state‐by‐state approvals of interstate transmission lines. To overcome these obstacles, the authors offer the following policy recommendations: Federal oversight of the construction of the national transmission grid. Moving toward renewable sources of energy and reduced greenhouse gas from the use of coal changes the problem of managing electric power generation from a local to regional and national problem. This requires broader cooperation and coordination to ensure the construction and management of reliable sources of electric power. Identify adequate sources of financing. The positive economics of wind power suggest that wind farm development and transmission grid installation should attract sufficient private funding to fully develop the 20% wind solution. But because of the sheer size of the plan, completing it may require innovative financing structures that include the possibility of some combination of public and private funding sources.

Date: 2009
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