This July 2007 policy brief by John Farrell is a companion piece to the Wind and Ethanol: Economies and Diseconomies of Scale report.  Policymakers who promote wind energy and biofuels argue that their policies have two goals: the rapid increase in renewable energy, and the betterment of the rural and agricultural economies. Yet to date their policies have been tailored almost entirely to achieve the first goal — more, not better.

Larger wind farms and ethanol plants do produce energy at a lower unit cost, but because they are usually more distant from their ultimate customers, transportation related costs increase.  Thus, the net cost reductions are modest.

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This July 2007 report by John Farrell finds that there are indeed small cost reductions from very large scale, absentee owned renewable energy facilities. But that these are overshadowed by the significant loss in potential economic benefits from locally owned and more modestly scaled facilities. The study finds that these transportation-related costs may offset a large part of the reduced production costs from large wind farms and ethanol plants. Continue reading