5.5 COST AND ECONOMICS

5.5.1 Construction

The cost of constructing a wind turbine generator is very important because this almost entirely determines the cost of the electricity generated. As may be expected, the cost per rated kW output decreases with increasing size. A typical breakdown for a wind farm installation is shown below:

 

Manufacture of complete wind turbine	63%
Site works	29%
Other capital outlay	8%

 

Manufacturing cost has been coming down steadily over the last 15 years as a result of improved technology, volume production and larger unit size. The turbine cost per rated kW depends on both the turbine size and the wind speed at the site, but is typically in the range 500-700 €/kW. A total wind farm installation cost may be as low as 800 €/kW.

 

5.5.2 Capacity credit

The economic viability of wind power depends particularly upon whether the investment can be offset by a reduced requirement for conventional power station capacity in the utility system. Such a system obviously cannot meet its power demand reliably with wind power alone, because the wind does not always blow. But a large system comprising a range of generators is not the same as a remote wind/diesel unit in which the wind turbine merely saves the cost of diesel fuel, since demand and supply are continuously fluctuating (see also Section 5.2.4.5.1 above about the separate problem of control and wind prediction). The question is then how to determine the proportion of wind power which can contribute to the useful capacity of the system without loss of reliability, or its capacity credit.

Because of wind speed fluctuation, the annual electrical energy output of a wind farm is typically about 30% of the maximum possible if its rated power could be delivered continuously. This ratio is known as the load factor or capacity factor of the wind farm, and depends mainly on the the site conditions but also on the type of turbine. All types of generator (fossil fuel, nuclear etc) have load factors, which although they may be higher than 30% are always less than 100%, and depend on the possibility of failure as well as the need for maintenance. The requirement of the overall power system is that a complete loss of power should be very unlikely, or have a low enough annual probability such as 1%. It can be shown that for low levels of penetration of wind power into the grid, the capacity credit of wind energy is simply the installed capacity multiplied by the load factor. However as the level of wind penetration rises (e.g. to 15% of maximum annual demand), the capacity credit falls off and might be halved in this case. Denmark has exceeded this amount of wind power without apparent difficulty, but after that the country with the highest wind power penetration to date is Germany with less than 5%, so Europe still has a long way to go before this becomes a problem.

5.5.3 Unit cost

The price of wind generated electricity depends on the plant installation cost and the cost of finance, both spread over the energy generation expected during the lifetime of the plant, with a quite small addition for operating cost (e.g. 15 €/yr per rated kW). The price per kWh therefore depends on the average wind speed at the site, the load factor and the cost of finance, of which the third tends to be more unpredictable than the first two. At a good site, a price to the client or distributing company of 3.5 c€/kWh is possible, which is highly competitive with the true costs of conventional power (i.e. if all decommissioning costs are realistically included and historic subsidies discounted). It is largely for this reason that Europe is investing in Wind power so successfully.