Buffet’s Wind Purchase Further Proof of Wind Power Competitiveness in the Heartland
December 21, 2013
The decision by Warren Buffett’s utility company to order about $1 billion of wind turbines for projects in Iowa shows how a drop in equipment costs is making renewable energy more competitive with power from fossil fuels.
Turbine prices have fallen 26 percent worldwide since the first half of 2009, bringing wind power within 5.5 percent of the cost of electricity from coal, according to data compiled by Bloomberg. MidAmerican Energy Holdings Co., a unit of Buffett’s Berkshire Hathaway Inc. (BRK/A), yesterday announced an order for 1,050 megawatts of Siemens AG (SIE) wind turbines in the industry’s largest order to date for land-based gear.
Wind is the cheapest source of power in Iowa, and the deal indicates that turbines are becoming profitable without subsidies, according to Tom Kiernan, chief executive officer of the American Wind Energy Association trade group. That’s a boost for suppliers including Siemens, General Electric Co. (GE) and Vestas Wind Systems A/S (VWS), and a threat to coal miners such as Peabody Energy Corp.
“If Congress were to remove all the subsidies from every energy source, the wind industry can compete on its own,” Kiernan said at a press conference at a Siemens factory in Fort Madison, Iowa, yesterday, when the order was announced.
Power from wind is now cheaper than power from newly built natural gas plants, said Amy Grace, a wind analyst for Bloomberg New Energy Finance.
“Most people expect gas to become more expensive,”she said in an interview. “I think in most windy areas in the U.S it will be competitive by 2020.”
DTE Energy Co. has announced lower electric rates for business customers in 2014 by 5.5 percent to 7.4 percent, depending on their service level. DTE also is cutting residential electric rates by 6.5 percent, company officials said today.
The rate cuts, said DTE, are due to lower fuel supply costs, which include lower renewable energy costs from wind, and ongoing efforts to reduce the company’s cost structure.
This is the first rate decrease for Detroit-based DTE in more than five years, spokesman Scott Simons said. Michigan approved the renewable energy package in 2008.
From 2007 and 2012, for example, DTE held operating cost increases to zero compared with average cost increase of 33 percent at its peer electric companies over the same period.
The plan was approved by the Michigan Public Service Commission.
The MPSC also cut its renewable energy surcharge by 85 percent, which reduces the fee to 43 cents per month from $3. Customer bills will be reduced by about $90 million.
“Our use of renewable energy is saving customers money while improving the health of Michiganders around the state,” said Rory Neuner of MI Air MI Health, in a statement.
Detroit — Gov. Rick Snyder laid out four goals for Michigan’s energy policy Thursday, but offered few details on how he intends to accomplish them through a legislative proposal in 2014.
Snyder told reporters in Detroit his goals include reducing the amount of energy the state gets from coal and boosting the amount it generates from renewables, particularly on-shore wind.