The Economics of Wind Energy

The presented work examines the special characteristics of electricity produced by the wind as a renewable resource into which considerable hopes are being placed. Production of electricity from wind, as well as from other renewable sources, is a subject of many legislatively enshrined preferential rules. These subsidies and regulatory provisions help the energy producers but represent additional costs to every final customer and tax payer. The aim of this work is to analyse the key arguments of wind energy advocates, which are 1) economic advantage of this production due to zero costs for 'fuel' and 2) negligible burden on the environment due to zero carbon dioxide emissions. The work takes into account all aspects of wind energy production, including their financial and extra-financial implications, and shows their indefensibility in economic terms and in terms of environmental protection. Besides, I have attempted to identify institutional aspects and forms of government which is known to give interest groups a chance to succeed in their rent-seeking activities and as a result allow prosperity of the above-mentioned ineffective energy production. Attention is also paid to the observation that, given the specific technological features of electricity production from the wind, it is not possible to fully apply the conclusions of a traditional theory of economic regulation onto the current position of key players in the electricity market.