Economics of a wind project

In this blog I will discuss the economics of a wind project, with a focus on total installed cost of a wind project.

The most recent source of total installed cost of wind project is from the January 2009 issue of WindPower Monthly. It reported that the average total cost of fully installed projects in 2008 was 1,502 Euros per KW (or $1,950/KW at 1.3 conversion rate). The average was take over 3,600MW of installs worldwide in 2008. The range of costs was 1,300 to 1,700 Euros per KW. Although this data is skewed towards large wind farm projects, it serves as a lower bound for a community wind project of size 1 MW to 10MW.

A second source of total installed cost is from NREL's May 2008 report "Annual Report on US Wind Power Installation, Cost and Performance Trends: 2007" It reports that an average cost in 2008 was $1,920/KW, $210/KW higher than the previous year. The average cost in 2007 was $1,710/KW with a range of $1,240 to $2,600/KW.

One would expect economies of scale in wind projects, meaning large wind farms would be cheaper to install compared to single turbine installation; the NREL data does not convincingly support this assertion. Personally, this is surprising. I would expect large wind farms to receive larger discounts on turbines, incur lower setup and mobilization costs for cranes and other equipments, and spread out the initial cost of wind measurement and consulting. Nevertheless this is what the data shows.

There seems to be a significant variation in cost by region. The Heartland region has the lowest cost; the Great Lakes region, Mountain states, Texas, the Northwest, and California have similar costs; with New England showing the highest costs.

The cost of turbine is the biggest component of the total installed cost. The turbine typically represents 60 to 70% of the cost. Turbine prices reached a low of $700/KW in 2000-2002, and have risen about $600/KW in 2006-2007. The prices stand at $1,125 to 1,240/KW. The other components of the total installed cost include: Consulting/design; construction of foundation and access roads; erection of turbine; electrical equipments like transformers, protective relays; commissioning of turbine; and other associative costs.

For smaller projects, the total installed cost (TIC) may be much higher. As examples consider the following single turbines and their TIC:

1. 10KW Bergey, the TIC is $6,000 to $7,500/kW
   
2. 100KW Northern Power, the TIC is $6,000 to $6,500/KW
   
3. 275KW Vergnet, the TIC is $2,500 or less
   
4. 1MW to 2.5MW, the TIC would be about $2,500 to as high as $3,000
   

The TIC depends on several factors: exchange rate, terrain, transportation costs, distance to transmission and others. The TIC has to be estimated for a specific project based on local conditions.

In the next blog, I will discuss Operations and Maintenance costs and the cost of producing electricity using wind.

Article written by Dr. Pramod Jain

Email Pramod at pramod@frombeginningtowind.com

Visit Wind Energy Consulting and Contracting Inc.

A few common questions about wind projects, from the Technical Side

In this blog I will list common questions that we have encountered from organizations that are considering adding wind energy to their portfolio of energy resources. In subsequent blogs I will answer the questions in some detail and point you to resources that will help you to answer the question. As with any endeavor like this, answers are not always crisp and precise; the answer usually starts with “It depends.” In my answers I will help you to understand: A) What the answer depends on? B) Why does the answer depend on it? and C) Any other the issues related to the answer.

1. What are the economics of a wind project? How much does it cost to install a wind project? How much of the total install cost is turbine cost? What is the cost of producing energy using wind? How does this cost compare with other sources like coal, natural gas, solar and others?
   
2. Which country leads the world in wind energy production? Which country has the highest penetration of wind energy in electricity generation? Is there a limit to the maximum penetration of wind?
   
3. Wind 101. How is wind generated? How much wind speed do I need for a viable wind project? What is shear? What is turbulence? How do I measure wind speed?
   
4. Turbine 101. What are the major components of a turbine? What are the major types of turbines? Who certifies turbines?
   
5. Project Siting 101. What are the main considerations when siting a wind project? What are the impacts on the environment from a wind project? How serious is the issue about killing of birds and bats? Which agencies will I need approval from? What are the other studies and analyses that I need to perform?
   
6. Wind Resource Assessment 101. How do I find out wind speed at my location? What are the limitations of high level wind resource maps? What kind of wind resource analysis is required to get a project funded?
   

My focus will be on projects of the size of 50KW to 10MW. This is not a hard and fast range, but a range that the industry refers to as small wind, distributed wind and community wind. WECC’s niche market consist of school districts, colleges/universities, municipalities, factories, hotels, and a variety of other facilities.

Find more details at http://www.frombeginningtowind.com

Article written by Dr. Pramod Jain

Email Pramod at pramod@frombeginningtowind.com

Visit Wind Energy Consulting and Contracting Inc.

Wind is But a Piece of the Puzzle

Renewable energy is not the total answer to solve the energy dilemma, but is certainly part of the solution to reduce our reliance on fossil fuels, and wind is but a piece in solving the larger puzzle. When I think about the impact that renewable energy can have on a school, manufacturing plant, municipality or any location where the high and increasing cost of energy can be mitigated, I think back to a visit I made a couple of years ago to the Massachusetts Maritime Academy at Buzzards Bay. This school has its collective act together, in my view. Upon entering the campus one immediately sees a beautiful, gently spinning Vestas 660 wind turbine generator. Under the campus football field a geo-thermal system is buried. There are photo voltaic arrays on dormitories, and solar powered trash compactors spread throughout the campus. The point I am making is that this institution is using several solutions to counter the high cost of energy, and they are doing it effectively.

Wind energy is a solution worth considering. Wind energy is loved by some, hated by others, and misunderstood by many. With the primary wind energy focus around the world on large wind farms and transmission issues, we will use this blog as an opportunity to write about the many issues that can determine the success or failure of a smaller scale wind project. Whether it be a one wind turbine generator “behind the meter” installation to augment power at a school , farm or manufacturing plant or a group of landowners coming together to develop a community wind project for purposes of selling power to the grid, I am confident that you will find the information stimulating and beneficial. Whitepaper downloads are available at www.frombeginningtowind.com/whitepaper.

In the coming weeks, the Wind Energy Consulting & Contracting (WECC) staff will publish a steady flow of informative white papers and blog entries regarding a variety of topics that will provide readers with sound and reliable information to help take the mystery out of wind projects. In closing, my nature is to be direct, and therefore there will be issues that I address that may appear controversial to some. My goal is to create a healthy exchange of ideas and information.

Article written by Wayne Hildreth

Email Wayne at hildreth@frombeginningtowind.com

Visit Wind Energy Consulting and Contracting Inc.