Wind Energy Economics

Wind Energy Converters

Wind Energy Economics

Economic Drivers of Wind Energy

* Wind Resource

* Technology

* Capital Cost

* Wind Energy Market

* Cost of Energy

What is the cheapest renewable energy?

* Biomass

* Hydro (large)

* Solar (thermal)

* Wind

Most site specific sources:

* Hydro

* Tidal

Site-specific sources

* Biomass

* Solar

Economic analysis methods

Simple payback period:

* Cost/payback period

Cost of Energy analysis:

* Cost of energy = operating cost/energy produced

Principal Methods

* Payback period

* Accounting rate of return

* Discounted cashflow

* NPV

* Internal rate of return

Slide 14 Example 1:

CA = c/A =$353/m2

CKW=c/Pmax = $2380/kw

CperKWH=Cyear/Vyear = 10,000[i-formula]/Vyear=$1390per year/13981kwh/year = $0.099/Kwh

Effects of Inflation:

* There are two ways to incorporate the effects of inflation:

* Treat the inflation and interest separately

* Combine the inflation with the interest and use the adjusted discount rate

Discounted Cash Flow methods

* Internal Rate of Return or yield

* Rate of return at which present value of net cash inflows equals initial cost

* Discount rate which produces NPV = zero

* For investments to be worthwile IRR must be greater than cost of capital

* Potential advantages

* Concerned with profitability and time value of money, loan handle variable lengths of investment.

Some Example:

NPV = - cost + revenues – salvage – (operation + maintenance)

NPV = -15m + volume * price – salvage

NPV = -15m + 5MW * 8760 * 30% * 375

= $4,927,500 1 year

PV = A[{1-(1.035)20}/{(1+0.1/1.035)-1}]=$552,54563

PV = FV/{1+r}n=310,000/(1+0.1)20=$46,079

O+M = 225,000 * 11.21 = $2.5m

NPV = $37,685,486

Costs to Consider

The most expensive part of wind

* Operation: 2.5%, other capital: 7%, site works: 24.5%, wind turbines: 66%

The cost of Wind Energy...