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THE ECONOMICS OF WIND POWER |
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Generating electricity from the wind makes environmental sense. The wind is a clean and renewable fuel that will never run out. It can also make economic sense. Although a wind energy system requires a large initial capital outlay, the wind itself is free. Hence, a turbine can generate electricity for years with no fuel costs while the costs of other sources of energy may escalate. After the initial cost of a turbine is paid off, the only on-going cost is maintenance; the fuel is free. How long do wind turbines take to pay for themselves? The answer to this question depends on a lot of factors, such as how often the wind blows, how much money homeowners can save by generating their own electricity, and how much a commercial wind farm can sell their energy for. Trends sugggest that wind power, which is already cost competitive in windy areas, is likely to become even more cost effective over time. For one thing, the cost of producing electricity from fossil fuels is likely to increase, causing utility rates to rise. In addition, the technology associated with manufacturing turbines and generating wind power is likely to become less expensive.
The economics of wind power can vary significantly. Many websites give visitors access to specialized calculators for computing the cost of operating a specific turbine. That said, rough estimates for the current cost of generating electricity from wind power are: Residential Wind Turbine - About 10 cents per kilowatt-hour Commercial Wind Turbine - About 4 cents per kilowatt-hour
A kilowatt-hour is the amount of energy it takes to power ten 100 watt lightbulbs for an hour. For owners of residential turbines, the main number to compare this with is the amount that UPPCO charges for a kilowatt-hour, which is about 11 cents. For commercial generators of wind power, the main number to compare this with is the amount that they can sell their electricity for, which depends on the contract they negotiate. When the operators of a wind farm negotiate their contract as part of a Green Energy program or in conjunction with customers who guarentee to pay a certain amount, they can receive enough to make a profit. Other incentives, such as renewable energy production tax credits can add to that profit margin. As another point of comparison, coal-fired power plants can produce electricity for about 3 cents per kilowatt-hour.
With wind energy, the fuel is free. The cost of generating electricity from wind is primarly affected by three factors: installation costs, operation and maintenance costs, and the windiness of the site. A. Installation Costs The installation costs include the purchase price of the complete system (including tower, wiring, utility interconnection or battery storage equipment, power conditioning unit, etc.) plus delivery and installation charges and professional fees.
In general, capital costs represent between 75% and 90% of the total cost. B. Operation and maintenance costs Operating expenses are incurred over the lifetime of the wind system. Operating costs include maintenance and service, insurance, and any applicable taxes. Once the project has been paid for, the only costs are operation and maintenance costs. A rule of estimation for annual operating expenses is 1.5% to 2.5% of the initial system cost. Another estimate is based on the system's energy production and is equivalent 1 to 2 cents per kW-hr of output. C. Windiness of the site Wind turbines obviously yield more energy in places with lots of wind, with the average strength of the wind being a key parameter. Therefore, in evaluating the actual output of a wind turbine, one has to take into account the capacity factor, which is the ratio of average power output to the rated power of the turbine. Based on the wind potential map for the local area, a conservative estimate of the capacity factor for wind turbines in the western UP would be in the range 0.15-0.25.
To determine the cost per kW-hr for electricty generated by a wind turbine, one first estimates the wind turbine's total annual costs and the turbine's annual energy output. Then one can estimate the cost per kilowatt-hour as: Cost Per kW-hr = Annual Cost/Annual Energy Output For illustrative purposes, consider the total initial cost of a 5 kW residential system and a 500 kW commercial system. A. Total Annual Cost The total annual cost will be the initial cost of the turbine spread out over the lifetime of the turbine plus the annual operating expenses. Initial costs: The initial cost is inclusive of all expenses to evaluate, buy, install and start-up a wind system. Residential 5 kW system = $15,000 Operation and maintenance costs: Annual operating costs are estimated as 2% of initial capital cost. For the two wind system examples, the annual operating costs are: Residential 2% x $15,000 = $300 Total annual costs over expected lifetime: To compute annual cost of the wind turbines. Annual Cost = (Initial Cost/Expected Life) + Annual Operating Costs Wind turbine manufacturers estimate a useful life of between 20 and 30 years for their product. Using 30 years as expected lifetime: Residential ($15,000/30) + $300 = $800 per year B. Cost Per Kilowatt Hour The cost per kilowatt-hour will be: Cost Per kWh = Annual Cost/Annual Energy Output Annual energy output. The annual energy output will depend on the windiness of the site as represented by a capacity factor. Based on the average wind speed in UP, a conservative estimate of the wind turbine capacity factor will be 0.18 for the residential system and 0.20 for the commercial system. Therefore, the annual energy outputs of the two systems would be: Residential 5kw x 0.18 x 24 x 365 = 7,884 kilowatt-hrs And, therefore, the cost per kilowatt-hr of the two systems are: Residential $800/7,884 kwh = $0.10 per kilowatt-hr
A more accurate cost per kilowatt-hour calculation requires that one also take into account many details, including:
An online financial calculator allows one to integrate these factors into the calculation. Wind Power in the Western Upper Peninsula
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