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Wind
Recent Cost Estimates
At the beginning of 2004, one
sees cost estimates for wind energy ranging from 2.5 cents to 5 cents
(after subtracting the value of the PTC) cited in wind energy trade press.
But moving from the theoretical to the concrete on actual wind power costs
is difficult because of the variability inherent in each of the cost factors.
Furthermore, project cost break-downs and the prices included in power
purchase agreements are hard to come by, as utilities and developers alike
tend keep this information proprietary for competitive reasons. It is
not uncommon for utilities to first encounter detailed price break-downs
in proposals responding to requests for power.
But a few recent analyses illustrate
of the current prices and costs of wind power in the West. Three separate
memoranda provided by the Lawrence Berkeley National Laboratory summarize
some of the best publicly available data on wind cost structure. The first
two provide a quantitative breakdown of the costs for a kilowatt-hour
of wind power offered in California by independent developers. A third
memo details the costs of a municipally owned wind installation.
To put recent estimated and
project specific costs into some perspective, one would need to know the
hedge value of renewables against future changes in conventional generation.
One study from Platts Research and Consulting, The Value of Renewables
As A Hedge Against Gas Price Movements, using natural gas cost projections,
estimates the hedge value of renewables to be about $5.20/MWh.
California Department of Water Resources
In the summer of 2001, with legislative authorization, California's Department of Water Resources procured large quantities of power, through long-term contracts, to stave off any further supply shortages and decrease dependence on its then-volatile spot market. The vast majority of these contracts were signed with natural gas generators, but DWR also signed contracts with two developers for three wind projects totaling 175 MW (representing 2 percent of the roughly 10,000 MW procured by the DWR). Contract prices ranged from $58.50 to $60.00/MWh (5.85¢ to 6.0¢/kWh), subtracting the value of the production tax credit. But because these contracts were signed during a period in which the state's cost of electricity had reached record highs—with even higher costs predicted—these prices reflect the then-going market rate rather than actual costs of generating wind power. For details, see "Summary of Recent California Contracts and Letters of Intent for Renewable Energy."
California Power Authority
More representative of the lower prices
that are available in California (and elsewhere) are those proposed to
the California
Consumer Power and Conservation Financing Authority (also called the
California Power Authority). By the fall of 2001, the California Power
Authority had signed letters of intent to purchase a total of 1,328 MW
of wind power from independent developers. The proposed contract prices
in this memorandum range from $39.90 to $50.00/MWh with a capacity-weighted
average of $45.10/MWh. Most of the contract terms were for 10 years, although
a few were for 15-year purchase agreements. The authors of the memorandum
assume these prices reflect the value of the production tax credit has
been subtracted and that interconnection costs are included. As of June
2002 there was a power surplus in California, and therefore none of the
letters of interest had been signed. For details, see "Summary
of Power Authority Letter of Intent for Renewable Energy."
Energy Northwest
Energy Northwest, a publicly owned utility in Washington, working on behalf of a number of municipals in Washington and Oregon, recently issued low-interest revenue bonds to finance a 48-MW wind project to be developed by a private wind developer. The project's up-front construction and equipment costs break down to $877/kilowatt (kW) installed. When additional development, transmission and distribution, and interconnection costs are added, the per-kilowatt cost rises to $1,081. With the inclusion of the bond issuance and indemnity contracts, the cost rises to $1,189 per kilowatt. After adding in projections for fixed and variable operating costs and lease payments, the levelized cost equals $34/MWh in 2003, rising to $38/MWh in 2007 because of an increase in operating and land-lease costs. For more information, view the LBNL memorandum "Energy Northwest Bond Issuance for 48MW Wind Project."
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