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Clean Power wind power costs at all-time low

Published on February 9th, 2012 | by Zachary Shahan

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Wind Levelized Cost of Electricity (LCOE) at All-Time Low



 
It’s been awhile since I read and wrote about so many huge clean energy stories in one day, or in one week. From clean, renewable energy providing Europe with 70% of its new power in 2011, to solar PV bringing down the cost of electricity in Germany, to the largest offshore wind farm in the world opening in the UK today, and even more big stories in between, this is a time to remember. Another big story, reported by Greentech Media and discovered by researchers at the Lawrence Berkeley National Laboratory (LBNL), is that the levelized cost of electricity (LCOE) from wind power has reached an all-time low.

wind power costs at all-time low

Wind power levelized cost of electricity at all-time low.

Its LCOE is now between $33 and $65 per MWh and clearly beats that of fossil fuels. This is actually not brand new news, as it was previously reported at the end of December, but I’m sure not many eyes have run across this yet, and it’s worth broadcasting loud and clear.

In a detailed analysis of “four endogenous factors (labor costs, warranty provisions, profitability, turbine design/scaling) and three exogenous factors (raw materials prices, energy prices, foreign exchange rates),” LBNL researchers Mark Bollinger and Ryan Wiser found that the single largest contributor to the LCOE reductions was bigger wind turbines that have a higher capacity factor.

“The standard for turbines has moved up from 1.0 megawatts to between 1.6 and 3.5 megawatts, and taller towers and longer blades allow them to produce electricity from slower winds,” Herman Trabish writes.

“Due to the capacity factor/capital cost interdependency, and to falling turbine costs, falling operations and maintenance (O&M) costs, an increased turbine supply, and lower cost financing, Wiser said, ‘the delivered levelized cost of wind energy has declined substantially in recent years [... and] is now at an all-time low across all wind speeds.’”

“Assumed improvements in O&M costs, financing rates, and availability lead to substantial additional estimated LCOE reductions,” Wiser found, “of 24 percent to 39 percent.”

However, two challenges do remain that could actually increase wind’s LCOE again. Those would be increasing development of “lower wind speed sites as a result of severe transmission/siting limitations,” Wiser notes, or the “loss of federal PTC/ITC/Treasury Grant” incentives (it’s a constant struggle to ensure stable incentives for wind energy like the fossil fuel industry has received for over a century—somebody doesn’t want the new kid on the block to have equal access to the competition).

Source: Greentech Media

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About the Author

is the director of CleanTechnica, the most popular cleantech-focused website in the world, and Planetsave, a world-leading green and science news site. He has been covering green news of various sorts since 2008, and he has been especially focused on solar energy, electric vehicles, and wind energy for the past four years or so. Aside from his work on CleanTechnica and Planetsave, he's the Network Manager for their parent organization – Important Media – and he's the Owner/Founder of Solar Love, EV Obsession, and Bikocity. To connect with Zach on some of your favorite social networks, go to ZacharyShahan.com and click on the relevant buttons.



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  • Bbx

    So what’s the LCOE w/o subsidies?

    • Bob_Wallace

      The LCOE w/o subsidies is the LCOE.

    • Ian Oxenham

      based on the source this article is citing, (http://emp.lbl.gov/sites/all/files/wind-energy-costs-2-2012_0.pdf , see pages 27-28 in particular), the LCOE of un-subsidized wind ranges from about $60 to $110 per megawatt-hour, or in other words, from about 6 to 11 cents per kilowatt hour. For comparison purposes, the average cost of grid electricity in the US in 2012 was 9.87 cents per kilowatt hour for all sectors, and 11.88 cents per kilowatt hour for the residential sector (source: http://www.eia.gov/electricity/monthly/xls/table_5_03.xlsx )

      • Bob_Wallace

        The important comparison is how much new generation costs, not what the current average is. Much of today’s lower cost input comes from plants and dams build many years ago and now paid off.

        It makes no sense to compare a new wind turbine, solar panel, nuclear plant LCOE against, for example, the price of electricity coming from a TVA dam built in the 1930s.

        An old, paid off nuclear plant can produce electricity for five or six cents. In the best of cases a bit lower. A new plant that has to pay for its capital expenses and financing would produce electricity above 12 cents per kWh.

        • Ian Oxenham

          good point … though I also realized that since wind competes with wholesale electricity (unlike a residential or commercial PV system which competes against retail), the proper comparison for wind even from an average price standpoint would be wholesale electricity, which tends to average to around 4 cents per kwh. As you point out though, that price is driven down by the abundance of plants have already paid off their capital costs, and is not useful for comparisons against new installations of other generation facilities.

          Still, the average price comparison metric can provide a sense of how close wind might be to displacing existing fossil fuel plants.

          • Bob_Wallace

            The EIA open source site gives a range for onshore wind with a low of $0.04/kWh to a high of $0.12/kWh with a median LCOE of $0.06/kWh.

            The LCOE for coal runs from $0.01 to $0.12 with a median of $0.05/kWh

            http://en.openei.org/apps/TCDB/

            But that doesn’t tell the full story. First, wind has an operating cost of about a penny per kWh. And it gets a subsidy of 2.3 cents per kWh. That means that wind can sell for -1.3 cents and break even. It can make money simply giving its electricity away (2.3 – 1 = profit).

            Coal and nuclear plants can’t shut down and turn back on quickly. When demand is low and the wind blowing they have to sell their product for next to nothing and sometimes less than nothing in order to make wind farms drop out. Even without the 2.3 cent subsidy they would be hurting just competing against wind able to sell for a bit over 1 cent.

            If thermal plants sell close to zero a number of hours then they need to sell at higher prices other hours in order to stay in business.

            Coal and nuclear depend on a relatively few hours of very profitable sales to keep their bottom line positive. I don’t know the number of hours in the US, but I recently read that coal plants in Australia make 25% of their annual profits during only 40 hours a year when demand is super high and the wholesale price of electricity it through the roof.

            Now along comes solar. Solar is starting to produce electricity under 10 cents (without subsidies). The traditional earning hours for coal and nuclear are hot, sunny afternoons. Solar is starting to kill those profits. It’s happened in Germany. It’s starting to happen in Australia. Solar is lowering the wholesale price ceiling and wiping out the high revenues of peak demand hours. Plus end-user solar is lowering peak demand.

            And then there’s natural gas, which is cheap right now. If the wholesale price of electricity goes above 5 cents or so, on come the gas plants. Away goes profits for coal and nuclear.

            First week of May we saw a perfectly fine, paid off nuclear reactor close down because it was losing money. We saw another which had been down for repairs announce that it wouldn’t be coming back. About a quarter of our existing nuclear reactors are in danger of bankruptcy.

            http://www.nytimes.com/2012/10/24/business/energy-environment/economics-forcing-some-nuclear-plants-into-retirement.html?_r=1

            Australia is seeing coal plants closed due to lots of rooftop solar.

            http://reneweconomy.com.au/2013/shift-from-base-load-slashes-value-of-state-coal-generators-92669

            The utility business is getting a major shake up. Interesting times ahead.

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