Economics - Wind Energy: Renewable Energy and the Environment - page 245

IC AEP AOM LRC

120

110

100

90

80

70

-20 -15 -10 5 0 5 10 15 20

Percent Change

FIGURE 12.1 Sensitivity analysis for cost of energy for wind turbine.

and fuel costs for conventional power plants. Since the cost of fuel for wind energy is zero, that term
will be left out:

IC FCR RC AOM (* )

COE (12.4)

AEP

where LRC levelized replacement cost ($/year) and AEP net annual energy production (MWh
or kWh/year).
The COE can be calculated for $/kWh or $/MWh, and the last term could be separate as AOM/
AEP, $/kWh or $/MWh. With histogram data and power curves to calculate annual energy produc-
tion, the cost of energy can be calculated. A first estimate for levelized replacement costs could be
4-5% of the installed cost.

EXAMPLE 12.6
Wind turbine, 1 MW, IC $1,600,000, FCR 0.07, AEP 3,000 MWh/year, LRC $80,000/year,
AOM $8/MWh $0.008/kWh.

(1,600,000 * 0.08) 80,000

COE 8 $77/ MWh 0.077/kWh $

3000

That cost of energy needs to be compared to all expected net income from the wind farm, which
includes any incentives, depreciation, and expected rate of return.

Levelized replacement cost distributes the costs for major overhauls and replacements over the
life of the system. For example, in a village power system, storage batteries will need to be replaced
every 5 to 7 years. The levelized replacement cost can be calculated with the following information.
Again, it is an estimate for future replacement costs based on today's costs of components.

1. Year in which the replace is required, n
2. Replacement cost, including parts, supplies, and labor, RC
3. Present value of each year's replacement cost, PV

The present value for replacement costs is given by

PV( n ) PV( n ) * RC( n ) (12.5)