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Clean Power U.S. Wind Power Economies of Scale

Published on October 20th, 2011 | by John Farrell

5

Big Wind Farms Cost More Than Small Ones

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October 20th, 2011 by
 

It seems obvious: every extra turbine in a wind farm comes at a lower incremental cost, making the biggest wind power projects the most cost effective.

If you bet $20 on that proposition, you just lost $20.

Instead, data from the U.S. Department of Energy’s 2009 Wind Technologies Market Report by Ryan Wiser and Mark Bolinger (a must-read) blows a hole in the conventional wisdom that bigger is better.  The report shows that wind projects between 5 and 20 megawatts have the lowest installed cost per Watt of any size wind project.

There are a few plausible explanations.  For one, the economies of scale for ever-larger wind projects are limited.  At some point, the marginal cost of an additional turbine is much like the previous one.  The 500th wind turbine is likely the same price to install as the 499th.

Furthermore, there may be disproportionate costs for larger wind projects.  For example, projects over 20 megawatts must by processed by the Federal Energy Regulatory Commission (FERC), a more onerous step than smaller projects being handled at the state level.  Additionally, projects of inordinate size may require special financing that only a few large firms can handle, adding a price premium.  Finally, large projects may only be possible with the addition of new transmission line capacity, both a costly and time-consuming process.

Whatever the reason, the conventional wisdom of “bigger is better” does not hold with wind power in the United States.  And with the cost advantage of modest-sized wind power projects, it may open up opportunities for local ownership like the seven-turbine South Dakota Wind Partners, project with its 600 South Dakotan owners.  The prospect isn’t just good for the cost of wind power, but for clean energy and the economy.  Not only do locally owned projects like Wind Partners bring more public support for wind, they also garner significantly greater local economic benefits.

In wind power, the best policy is to “go local.”

This post originally appeared on Energy Self-Reliant States, a resource of the Institute for Local Self-Reliance’s New Rules Project.

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About the Author

directs the Democratic Energy program at ILSR and he focuses on energy policy developments that best expand the benefits of local ownership and dispersed generation of renewable energy. His seminal paper, Democratizing the Electricity System, describes how to blast the roadblocks to distributed renewable energy generation, and how such small-scale renewable energy projects are the key to the biggest strides in renewable energy development.   Farrell also authored the landmark report Energy Self-Reliant States, which serves as the definitive energy atlas for the United States, detailing the state-by-state renewable electricity generation potential. Farrell regularly provides discussion and analysis of distributed renewable energy policy on his blog, Energy Self-Reliant States (energyselfreliantstates.org), and articles are regularly syndicated on Grist and Renewable Energy World.   John Farrell can also be found on Twitter @johnffarrell, or at jfarrell@ilsr.org.



  • Anonymous

    Unfort, that’s not opening to me, but looks like it’s page 42 of the report?

    • Anonymous

      Try now. (I stuck a blank line between the URL and the “(p.42)”.)

      • Anonymous

        Thanks. That’s a wicked useful presentation! :D

  • Anonymous

    I doubt that this comparison is very useful. Very large wind farms are likely to be built in areas where the wind is strongest. That means that they will produce more power per unit time. What we need to look at is cost of power from various sized farms.

    Additionally, we typically amortize new transmission over 20 years which is really unrealistic. Transmission costs include land acquisition and permitting, which last forever. Transmission involves building towers which have, probably, a one hundred year lifetime. Even the cables won’t need to be replaced in twenty years.

    Local is great, distributed power is great, but we should be careful to not push the data in order to support beliefs.

  • http://pulse.yahoo.com/_KBYM37QEABM6E2754OVYVQVV5Q Daniel

    I don’t think you can conclude much from this. I still think that if you had a small wind farm on your own land, that the 8th wind turbine will cause average cost to be lower than if you only had 7, or the (n+1)th will bring a lower average cost than a project with only (n).

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