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Wind
Wind energy cost overview
Costs for wind power have dropped
dramatically and are now typically 2.5 to 5 cents per kWh, after subtracting
the value of the Production Tax Credit.
These costs vary considerably by location and project. Key cost factors are capital costs of the chosen technology and construction, financing terms, the wind resource, access to transmission lines, and project size.
There are significant state and federal financial incentives for wind power. These include tax credits for private developers, production incentives for public utilities, state system benefits charges, and federal accelerated depreciation.
Costs for wind power have dropped
dramatically in the past 20 years, primarily because of both technical
refinements and the cost reductions one usually finds from economies of
scale in production. Add to this a handful of substantial state and federal
incentives and market-building portfolio standards, and increasingly,
wind power is achieving the renewable energy Holy Grail: generation of
cost-competitive kilowatt-hours. In 2001, contracts were signed in California
for wind power at levelized costs of 4 to 6 cents per kWh.
As is the case for all forms of electric generation, it isn't possible to quote a single number to represent the cost of a kilowatt-hour for all energy generated from wind. The levelized costs for wind are site- and project-specific and are influenced by the cost of capital, operations and maintenance, financing terms and project ownership, quality of wind resource, proximity to existing transmission infrastructure, project size, and federal and state renewable energy policy.
Many wind power cost factors continue to trend downward. Equipment efficiency gains are still achievable, growing demand is benefiting production economies, favorable state and federal incentives are already building markets—and are being seriously considered in states without them. And wind power's ability to compete with conventional generation on cost is certain to sustain its current growth trajectory, thereby driving down costs even further.
Detailed below are the two cost measures most commonly used to indicate wind power costs: the installed capital cost and the life-cycle cost of energy , also called the levellized cost.
Installed capital
cost: This cost measure includes all the necessary planning, equipment
purchase and delivery, construction, and installation costs that are necessary
to prepare a wind system for operation. If required, ICC may include the
capital cost of a substation. ICC does not include the costs associated
with borrowing the capital, nor does it include any other recurring fees
such as operations and maintenance. Currently, the ICC can range from
$800 to $1,000 per installed kilowatt ($1 million per megawatt) depending
on the turbine size and site characteristics.
Life-cycle cost of energy: Also referred to as levelized cost, CoE is the more comprehensive measure of wind energy costs, and is the cost measure most frequently cited in wind energy discussions. The CoE incorporates ICC, cost of capital, estimates of lifetime O&M expenses, major overhauls and subsystem replacements, and the performance characteristics of both the wind resource and the wind turbine (these include the annual energy production, which is derived from the site's wind speed distribution and the wind turbine power output curve). The levelized cost accounts for the stream of annually recurring costs plus less-frequent costs, assumptions of interest and inflation rates, and a return on the specific financial assets. These estimated actual costs are then projected over the 20- to 30-year lifetime of the installation and are levelized to obtain a single cost number that is equivalent to the multiyear sequence of estimated actual costs. The CoE for wind power has dropped to the point where it is now cost-competitive with many forms of conventional generation.
For a more detailed analysis of the specific contributors to each of these cost measures and estimates of prices, see Wind Energy Costs from the National Wind Coordinating Committee. Although this series was originally published in 1997, and specific numbers may not be representative of today's wind energy costs, the cost components and relative amounts are informative.
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