Question

Suppose an electric utility is considering whether to install a wind farm with 30 megawatts (mw) of capacity or a natural gas generator that would produce the same amount of annual electricity. An engineering study showed that the site for the wind farm would produce a load factor of 25 percent. (Actual generation would be 25 percent of capacity on average over the course of a year.) The natural gas plant could be operated with a load factor of 50 percent. Capital costs for the wind farm would $1.5 million per megawatt, compared to $1.0 million per megawatt for the natural gas plant. Operating costs for both plants would be $2 million per year excluding fuel costs.

If the electric utility has to pay an emission fee of $25 per metric ton of carbon dioxide emitted from fuel consumption, what would be the effect on the levelized cost of power and the regulated price? Use the emission factors for natural gas combustion on the EIA's website to derive your answer.

Answer 1