Economics - Wind Energy: Renewable Energy and the Environment - page 240

12 Economics
The most critical factors in determining whether it is financially worthwhile to install wind turbines
are the initial cost of the installation and the annual energy production. In determining economic
feasibility, wind energy must compete with the energy available from competing technologies. If
the system produces electrical energy for the grid, the price for which the electrical energy can
be sold is also critical. Today, wind farms are essentially competitive with all new power plants,
even combined-cycle natural gas turbines, as fuel prices have increased with oil over $100/bbl. To
increase market penetration of wind systems, the return from the energy generated must exceed all
costs in a reasonable time.
Of course, all values for electricity produced by wind turbines depend on the wind resource,
so there is a range of values. Installed costs for wind farms had declined to $1,000/kW by 2003,
which translates to a value of electricity produced of $0.04-0.06/kWh. Operation and maintenance
(O&M) costs for wind farms were around $0.01/kWh. In the United States contracts for selling elec-
tricity from wind farms were signed in 1995 for $0.04/kWh, and in 2002 for less than $0.03/kWh.
Since then the prices of steel, cement, and copper have increased, and the installed costs in 2008 are
estimated at $1,800-2,000/kW, which translates to a value of electricity of $0.07-0.09/kWh. None
of the earlier dollar values have been corrected for inflation.
Therefore, the U.S. Department of Energy's (DOE) goals for wind turbines for wind farms to
produce electricity at $0.03/kWh for class 6 lands (6.7 m/s annual average at 10 m height) by 2004
and $0.03/kWh for class 4 lands (5.8 m/s annual average at 10 m height) by 2010 cannot be met.
These values include O&M at $0.005/kWh. However, the cost of electricity from new power plants
using fossil fuels will also increase, so electricity from wind farms is still competitive.
Systems of 1 kW are not cost-effective when connected in parallel to the utility grid, even for single
residences; however, people will purchase them for other reasons. Residences connected to the utility grid
need 5-10 kW machines, and farms, ranches, and businesses need a minimum size of 25 kW (around
10 m diameter) or larger. In general, installed costs for small wind turbines up to 50 kW are around
$2,500-$5,000/kW, which translates to a value of electricity produced of around $0.12-0.30/kWh.
The size of the wind turbine for residences, farms, ranches, and rural applications depends on the
amount and price of electricity from the grid, if net metering is available and local infrastructure. The
kilowatt-hour consumed can be obtained from the monthly electric bill or by calling the local utility to
obtain the monthly use. To maximize the return on the wind system, most of the energy should be used
on site, because that energy is worth the retail rate. However, net energy billing allows for larger-sized sys-
tems, as the system can be sized for producing all the energy needed on site within the billing period.
As stated in the previous chapter, economics is intertwined with incentives and penalties, so
actual life cycle costs [1] are hard to determine, especially when externalities of pollution and gov-
ernment support for R&D for competing energy sources are not included.
12.1 FACTORS AFFECTING ECONOMICS
The following list includes most of the factors that should be considered when purchasing a small
wind energy conversion system for home, business, or farm or ranch.
1. Load (power) and energy
Energy: Calculate by month or by day for small systems
2. Cost of energy from competing energy sources to meet need
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