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CEIC-14-02

The Social Costs and Benefits of Wind Energy: A Case Study of the PJM Interconnection
Roger Lueken, Jared Moore, and Jay Apt

Abstract:
Large deployments of wind create social costs and benefits that are not captured by traditional levelized cost of electricity (LCOE) analyses. Social costs are due to the inherent variability and unpredictability of wind power; social benefits are due to reductions in greenhouse gas and criteria pollutant emissions from fossil fuel plants. We investigated the social costs and benefits of wind in the PJM Interconnection for two scenarios: a 2012 scenario with 1.5% of energy from wind, and a high wind scenario with 20% of energy from wind. We found that social costs are uncertain but significant when compared to wind's LCOE. Social costs range from $4/MWh -$74/MWh in the low wind scenario, with an expected value of $36/MWh; in the high wind scenario costs range from $9/MWh - $94/MWh with an expected value of $51/MWh. Pollution reduction benefits exceed social costs with very high probability; the median expected net benefit is $74/MWh for both the low and high wind scenarios. EPA regulations may reduce the pollution reduction benefits of additional wind in the future. If cross-state air pollution regulations result in binding emission caps at anticipated permit prices, policies that incentivize additional wind will not reduce criteria pollutant emissions.
 

 

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