Showing posts with label stimulus. Show all posts
Showing posts with label stimulus. Show all posts

Thursday, May 21, 2009

Now is the time to communicate with our elected officials!

The American Recovery and Reinvestment Act (ARRA) of 2009, also known as the “Economic Stimulus” package provides several alternatives for improving the economics of potential wind projects. Now is the time to let your elected officials know of your interest, and what you are doing about it.
The provisions of the law are intended to help projects become more economically viable by lessening the impact of high initial costs. Thus making wind projects even more attractive to you, the ones contemplating the project and to your elected officials who have a great interest in promoting renewable energy projects in their areas.
Many of the programs being established involve government grants and incentives. Your elected officials, at every level, may be in a position to influence the decisions that will assist you with your projects…but they have to know about them first!
Below is a sample letter that WECC has given to our clients to do just that. It is intended as a starting point. Copy and paste the letter, modify it as required, put it on your letterhead and explain to your officials what it is you, their constituent, are trying to accomplish.
Once you establish contact, WECC recommends periodic updates to ensure they have the up to date information to assist you as you move forward.
If you thought wind was not a cost-effective solution for your situation, now is the time to take a closer look. WECC can help, call us to learn how.


Letterhead

Dear (Elected official)
As our nation moves forward with programs aimed at reducing our dependence on foreign oil and allocates resources towards the development of alternative energy sources, I wanted to take this opportunity to describe to you our efforts in the pursuit of renewable, wind energy.
( Company/ City etc. Name) has commissioned/ will commission a (What you have done i.e. preliminary wind resource study) for our facility/ location in (city, state) Working with a professional wind consulting company, we have determined that the wind resource will support our expectations for a wind project to offset and stabilize our energy costs and assist in reducing the amount of non renewable energy that we use. We are aggressively pursuing our next step in the process, a (met tower, Turbine erection etc).and hope that your schedule will allow a personal update in the near future.
As we move through the complicated maze of project financing and execution, we would ask your assistance with
(federal money, net metering legislation, whatever) as that would greatly enhance our ability to produce the results we seek in the emerging and all important field.
Thank you for the opportunity to inform you of our efforts in this project, we will keep you apprised of our progress.

Sincerely,

Article written by Matt Tuohy
Email Matt at tuohy@frombeginningtowind.com
Visit Wind Energy Consulting and Contracting Inc.

Friday, April 17, 2009

Cost of Energy for Small Wind Projects

In this entry I will talk about the cost of energy for small wind projects. The previous blog addressed how the cost of energy is computed and presented the cost of energy generation for utility scale turbines. The focus of this blog entry will be on turbines that are rated 10KW or less.

To recap, the cost of energy production depends on average annual energy production (AEP), total cost of installation, recurring cost for operations and maintenance, and the discount rate.

Three turbines will be compared in this analysis: Bergey 10KW with 7m rotor diameter and 30.5m hub height; SkyStream 2.4KW with 3.7m rotor diameter and 13.7m hub height; and MariahPower 1.2KW with 1.2m width and 6.1m height. The first two are horizontal axis wind turbines (HAWT) and the third is a vertical axis wind turbine (VAWT).

The following parameters will be used for comparison purposes:

  • Wind conditions: 7m/s at 50m, which is Class 3 wind regime
  • Operations and maintenance costs: 1c per kWh of energy produced
  • Annual sinking fund for repairs: 0.75% of total installed cost
  • 3% inflation in costs
  • Wind shear of 0.15; this is used to compute wind speed at hub height while assuming wind speed of 7m/s at 50m
  • Life of wind project: 20 years
  • Annual Energy Production (AEP) is computed based on power curves provided by the manufacturer

The following table contains average AEP, the installed cost and cost of energy.

Turbine

AEP

Total installed cost

Total installed cost per KW

Cost of Energy/ kWh

Bergey 10KW

18.76 MWh

$65K

$6,500

$0.365

SkyStream 2.4KW

5.3 MWh

$18- 20K

$7,500 – $8,333

$0.3596

MariahPower 1.2kW

2 MWh

$9 - 10K

$7,500 - $8,333

$0.4672

Note the cost of energy does not include incentives or tax credits.

Since VAWT do have a hub-height, for computation purposes the hub height was assumed to be the height of pole plus half the height of the turbine, which is equal to 6m for the Mariah Power VAWT. If the VAWT is installed on a roof, then the hub-height would have to be appropriately adjusted, although the impact of turbulence due to air flow along the edge of the building would reduce energy production.

Next, let us examine the impact of the investment tax credit (ITC) grant of 30% that is part of the current stimulus package. In cases where the investment per KW is large, the ITC is preferable over the production tax credit (PTC). For a more detailed description, see WECC whitepaper on the stimulus package.

Turbine

Cost of Energy/ kWh with 30% ITC grant

Bergey 10KW

$0.267

SkyStream 2.4KW

$0.2555

MariahPower 1.2kW

$0.3308


Note that as a result of the ITC grant the reduction in cost of energy is a little less than 30%.

Next, let us look at depreciation, the other major tax benefit. The stimulus package allows a bonus depreciation of 50%, in addition to the accelerated depreciation already allowed for renewable energy items, if the project is put in place before the end of 2009. When a project utilizes the 30% ITC grant, the depreciable basis of the project must be reduced by 50% of the grant amount. The following are costs per kWh when bonus depreciation is coupled with 5-year MACRS depreciation.

Turbine

Cost of Energy/ kWh with 30% ITC grant, bonus dep. & 5-yr MACRS

Bergey 10KW

$0.1758

SkyStream 2.4KW

$0.1657

MariahPower 1.2kW

$0.2133


Note, bonus depreciation in addition to accelerated depreciation leads to a further reduction of about 33% of the cost of energy than with the 30% ITC grant.

On the benefits front one other item requires mention: Renewable Energy Credits (RECs). RECs are a tradable certificate of proof that 1 kWh of electricity was produced using a renewable source. They are typically sold to businesses seeking to reduce their carbon footprint or to government agencies trying to meet renewable portfolio standards set by state or national mandate. Their pricing depends on market conditions related to the current supply and demand of RECs. The price of a REC is typically in the range of 0.5c to 2c.

In conclusion, if a small wind project is able to use all of the tax benefits of ITC and depreciation, then the cost of electricity is reduced by more than 50% of the original installed cost without incentives.

Article written by Dr. Pramod Jain

Email Pramod at pramod@frombeginningtowind.com

Visit Wind Energy Consulting and Contracting Inc.