Economics - Wind Energy: Renewable Energy and the Environment - page 242

to the utility. The electricity used on site displaces electricity at the retail rate. For those states that
have net energy billing (in general, size is limited to small wind turbines), even the energy fed back
to the utility is worth the retail rate. If more energy was produced than was used during the billing
period, then that energy is sold for avoided cost. For locations where the retail rate is higher than
the avoided cost paid for excess energy fed back to the utility, economic feasibility improves with
increasing on-site consumption. The price paid by the utility is either negotiated with the utility, set
by law, or decided by a public regulatory agency.

EXAMPLE 12.1
A wind turbine produces 2,000 kWh in a month. There are two meters: one measures energy pur-
chased from the utility company (3,000 kWh), and the second measures energy fed back to the grid
(1,200 kWh). The energy displaced by the wind turbine is 800 kWh (2,000 - 1,200). Retail rate (from
grid) is $0.08/kWh. The value of the excess energy sold to the grid (avoided cost set by the state) is
$0.04/kWh.

Bill if Use Two Meters kWh $/kWh $

Meter 1 3,000 0.08 240

Meter 2 1,200 0.04 -48

Month charge for second meter 15

Total 207

Net billing, one meter runs forward and backward

Meter 1,800 0.08 144

Clearly net billing is preferable, because all the energy produced by the wind turbine is worth the
retail rate, up to the point where the meter reads no difference from the previous month.

The costs of routine operation and maintenance for individuals represent the time and parts
costs. Until system reliability and durability are better known for long time periods, the costs of
repairs will be difficult to estimate. It is important that the owner has a clear understanding of the
manufacturer's warranty and that the manufacturer has a good reputation. Estimates should be
made on costs of repairing the most probable failures. Insurance costs may be complicated by com-
panies that are uncertain about the risks involved in a comparatively new technology. However, the
risks are less than those associated with operating a car.
Inflation will have its principal impact on expenses incurred over the lifetime of the product. The
costs of operation and maintenance, and especially the unanticipated repairs, fall into this category.
On the other hand, cheaper dollars would be used to repay borrowed money (for fixed-rate loans).

12.3 ECONOMIC ANALYSIS
Economic analyses, both simple and complicated, provide guidelines. Simple calculations should
be made first. Commonly calculated quantities are (1) simple payback, (2) cost of energy (COE),
and (3) cash flow.
A wind turbine is economically feasible only if its overall earnings exceed its overall costs within
a time period up to the lifetime of the system. The time at which earnings equal cost is called the
payback time. The relatively large initial cost means that this period could be a number of years, and
in some cases earnings may never exceed the costs. Of course, a short payback is preferred, and a
payback of 5 to 7 years is acceptable. Longer paybacks should be viewed with caution.
How do you calculate the overall earnings or value of energy? If you did not have any source
of energy for lights, radio, and maybe a TV, a cost of $0.50-$1.00/kWh may be acceptable for