It’s very important for governments, regulators and indeed the customers of electricity to realise that when you change your production of electricity to renewable energy you can achieve several benefits:
1. CO2 fines avoided
The first benefit is that you make electricity without releasing any COs emissions. The CO2 that’s used in making the wind turbine is repaid in the first 3 months, and thereafter you are just making electricity without any CO2. That’s a huge benefit and will have a huge benefit to the customer because many countries around the world are introducing a tax on CO2. In Europe nearly every country has a tax on CO2 and the world will have a big tax on CO2 over the next 20 years.
2. The merit order effect
When the wind blows the first plant switched off is the most expensive plant. That’s what we call the ‘merit order effect’. This effect has been seen dramatically in places like Germany and Denmark over the past 5 years where much of their electricity comes from the wind.
3. Reduces ‘systemic risk’
With wind and solar energy there’s no volatility in the fuel costs because the fuel cost is zero. And it always will be.
Knowing this cost changes the risk profile the system. This is called the systemic risk. You reduce the overall risk from fossil fuels whose prices are going literally up and down every day.
4. Reduces demand for, therefore cost of, fossil fuels
When the wind blows it reduces the demand for fossil fuels and therefore the price. The more renewable energy on a system, the less demand there is for fossil fuels. The price is reduced just by having renewables on the system. In a study that was conducted in Mexico about 10 years ago it was shown that if you introduced 10% wind on to the system in Mexico you would reduce the price of fossil fuels by 9%.