There were a number of emails relating to the posting on Big Wind a few weeks ago and I would like to make some clarifications. My numbers were off, primarily based on the fact that “retail” rates for electricity such as you and I pay, are much higher than the wholesale rate which utilities pay. The actual cost of electricity is around 4 to 5 cents depending on a variety of conditions that can influence the rate. Based on that fact, the estimated payback for a large scale wind turbine is 2.5 times longer than my estimate in the posting.
In an effort to check the facts, I visited the American Wind Energy Association website. There is a brief article (www.awea.org/pubs/factsheets/EconomicsOfWind-Feb2005.pdf) that goes into some detail on the costs of large wind projects. I used some of that information for a reality check. They put a utility scale project analysis in the article that starts with a 50 MW capacity. They say that a project this size would probably cost around $65 million to install. I put in the recently published national average $1.93 million dollars per megawatt and got $96 million, a whole lot more expensive.
If the turbines are located on a site with wind available 35% of the time, and that’s a big number, the site should generate 150 million kilowatt hours per year. The revenue will be around $6 to $6.75 million dollars a year not including maintenance, property taxes, management costs, etc. Best case, the project will break even in about 10 or 11 years. Worst case, 15 or more. Don’t know if the life expectancy of the equipment is 20 or 25 years. I’ll check into that.
And by the way, medium size photovoltaic projects operate on about the same basis. They are too expensive to make it worthwhile to take your home off the grid. So the DOE’s “Million Roofs on Solar” project is doomed. You can legislate a program, but you can’t make it work unless it pays for itself. And the government doesn’t have enough money to pay for it for you.
These are really big numbers to be tossing around, and it makes me uncomfortable that the mainstream press doesn’t report on the facts. Maybe that’s too much to ask. It is a somewhat technical subject.
OK. Here’s the real point. The projects have many financial incentives like State and Federal subsidies, accelerated depreciation and investment tax credits helping to subsidize the costs. That’s how we get to payback periods of 6 to 8 years. So my math was wrong, but the final results are as represented.
When politicians make policy without facts, it comes out wrong. Wind is great. I am an avid wind energy enthusiast. But we cannot create these massive alternative energy industries with billions of dollars of commerce that require government subsidies in order to operate.
I have done some numerical analysis of the wind energy problem and there are solutions that will result in 2 year paybacks for investors. We need more innovation that integrates financial responsibility in the equation. This is the kind of engineering that is self sustaining and will result in new jobs without government subsidies.