The cost of wind

The blogger Jérôme à Paris is one of the best source of information about the cost of wind power. He both builds wind generating facilities, and also works on the financial side of the wind generating business. Hence he is exceptionally well informed about cost. Yet in the past Jérôme à Paris appears at times to have lowballed the cost of building wind generators. For example, in 2006 he claims:

"initial investments [in wind generators] are high, around 1000 $/kW. This is high because a kW of wind power produdes fewer kWh (typically, a third or a quarter as many) than a kW of coal, nuclear of gas)-fired power, due to the intermittent nature of wind. Thus the cost per kWh over the life of the plant of that investment is much higher. On the other hand, it is possible to invest small amounts as individual wind turbines are relatively cheap ($2-3M today for modern models).

Yet accordint to a press release from American Wind Energy Association, which à Paris notes, the U.S. wind energy industry installed 5,244 megawatts (MW) in 2007, while investing $9 billion while doing so. Now that comes to an investment of something over $1700 per KW, much higher than the $1000 a Paris claimed in 2006. By a Paris's own accounting the cost of wind power in Europe is even higher. He reported that in 2007, on shore wind generating facilities in Europe cost between 1200 to 1600 Euros per KW ($1745 to $2320). Off shore facilities were even higher, 2200 to 3000 Euros per KW ($3190 to 4350).

What à Paris is talking about is name plate power, or rated power. In the real world wind generators rarely produce their rated power, because the wind rarely blows as hard as the speed that would produce maximum generation. For example, if a wind generator is designed to produce its rated power at in a 20 MPH wind, it will not produce maximum power in a 10 MPH wind. Real world wind generation is rated by something called a capacity factor. The capacity factor is the average percentage of name plate power produced over time. So for example if a 2 MW generator averages producing 1 MW of power over a year, it has a capacity factor of 50%. If you install a 2.5 MW wind turbine, that sounds impressive, but if the capacity factor is 10% you are not producing much electricity for what you paid. Jérôme à Paris tells us for example, that the onshore capacity factor in Europe is 29%. He appears to be seriously fudging here. A Paris also tells us that the average wind turbine operates 2100, or 1/4th of the time. It would be impossible for a wind generator to have a capacity factor of 29% when it was only operating 25% of the time. Reports indicate that the capacity factor for Denmark is 20% and for Germany is 18%. Many British wind farms have a capacity factor of 20%, but some have capacity factors as low as 9%.

Why would à Paris fudge? The answer is simple. It takes a 30% capacity factor for a shore based wind farm to make money. Wind farms in Europe and the United States that produce power at a lower capacity factor stay in business because of government subsidies. Jérôme à Paris is in the business, and he does not want to show his business in a bad light.

A Paris also appears to fudge about off shore wind costs too. In a recent European Tribune post, à Paris claimed offshore costs ran from 2200 to 3000 Euros per KW ($3190 to 4350) Yet in a 2006 post for The Oil Drum, a Paris described and off shore oil project, he described an off shore project to building 60 wind turbines that produced 120 MWs for 378 million Euros ($550 million), which amounts $4.58. A Paris suggested but did not overtly indicated that he included the cost of interconnecting cables in his cost report. A 2007 report from Long Island power stated, "Generic estimates for European installations are expected to exceed $4,000 per kW before the inclusion of interconnection costs within a few years." Long Island power indicated that it faced a "$500 per kW premium on the North American GE turbine" over European costs. Long Island power reported its total cost would run an "estimate of $5,231 per kW (before interconnection)."

Long Island Power found that its offshore wind project, had a "green premium." It observed, "the Green Premium per MWh was calculated as the total cost per MWh of wind power versus
the total cost per MWh of the CCGT. Then to arrive at an annual dollar value we simply
multiplied the Green Premium per MWh times the number of “green” MWh’s produced by the
Project. That annual stream of dollar values was reduced to a net present value (“NPV”) in order to arrive at the NPV Green Premium. That NPV Green Premium was calculated to be $787 million. We also calculated the levelized Green Premium to be $153/MWh, or 15.3 cents per KWh, over the 20-year time horizon."

Long Island Power also indicated that its expected capacity factor was 38%. Thus LIP would be paying something like $13,766 per KW of real world generating capacity. Shortly after it received this assessment, Long Island power, canceled its off shore wind project.