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| Fig. 1: Capital Expenditure Breakdown for a reference land-based wind power project in 2018. [2] (Source: A. Davis) |
For years, wind energy has been consistently touted as one of the most promising sources of renewable energy in the world. From 2008 to 2018, the United States cumulative wind energy capacity has grown at a rate of 15.3% per annum, dwarfing every other renewable energy source in that time interval except solar energy. [1] As an unlimited and free resource, wind energy naturally seems to carry a lot of economic value on the surface. However, there are other economical aspects of producing wind energy that bring its viability as a primary energy source into question. More specifically, the cost of materials and manufacturing for constructing a wind energy field, as well as wind's intermittency issue are facets that need to be addressed for wind to be a primary source of energy in the future.
In the United States, to install a 2.4-MW land-based turbine (the average turbine size installed in the United States in 2018), the total capital expenditures required is on average, approximately $3,528,000 or $1470/kW. [2] Of this value, the capital costs of the main turbine components (i.e. rotor, nacelle, and tower) composes 68 percent, balance of system (i.e. electrical infrastructure, assembly/installation, foundation, etc.) composes 22.6%, and financial costs (i.e. construction financing cost and contingency fund) composes 8.6%, as is shown in Fig. 1. [2] From these statistics, it becomes quite clear how significant the up-front cost of building a wind farm can be, especially considering the scale of large (>20 MW) wind projects.
For a 2.4-MW land-based turbine in the United States, the average annual operation and maintenance cost is about $105,600 per year or ~$44/kW/yr. [2] This value includes fixed operation/maintenance costs (e.g., scheduled plant maintenance or land lease costs) and variable operation/maintenance costs (e.g., unscheduled plant maintenance). These costs are minuscule in comparison to the installation costs and demonstrate a significant advantage for wind energy over coal and other fossil fuel industries where the majority of costs are attributed to operation and maintenance. [3]
Perhaps the most profound obstacle that wind energy faces is that the wind is intermittent and thus, is a non-dispatchable energy source. Therefore, wind turbines will often produce excess power at night or periods of low demand and it is extremely difficult to store this electricity effectively for future use. If not used, this surplus energy will have a negative value because it costs money to produce, yet there are no buyers, thus, diminishing economic gains. These costs (called integration costs) are estimated to have a value near or below $5 per MWh. [4] Fortunately for wind farmers, this cost can be offset by federal subsidies (coming in the form of production and investment tax credit) which in 2015, had a value of $8/MWh. [5]
Though this problem can be remedied by federal subsidies, it is essential for wind energy's future to be able to flourish without substantial federal reliance. To accomplish this, wind farmers have taken to several different methods to store energy and diminish losses. One of these methods is pumped hydroelectric energy storage (PHES), where the surplus electricity is used to pump water from a lower reservoir to one thats higher. When there is a need for electricity, this water can flow from the higher elevation and can be used to run turbines to generate electricity. Globally, there are about 270 PHES plants currently in operation, with power ratings ranging from 30-5000 MW. The cost of such storage ranges from $600/kW to over $2000/kW depending on a number of factors such as size, location and connection to the power grid. [6] Another main energy storage method (and the only other very large-scale method) is compressed air energy storage (CAES), which involves the conversion of electrical energy into high-pressure compressed air that can be released at a later time to drive a turbine generator to produce electricity. The cost of CAES facilities ranges from $425/kW to $450/kW. Maintenance is estimated between $3/kWh and $10/kWh. [6] There are only 2 commercial CAES storage facilities in the world today, one in the US and one in Germany. Currently, these large, commercial-scale CAES projects have a power rating of 110 MW and 320 MW, respectively. [7] These methods along with advances in battery technology are working to remedy the intermittency issue that plagues wind energy.
In all, after analyzing the various costs that go into wind energy, it becomes apparent that the main economic drawbacks of wind energy are the up-front cost and the intermittency of wind. Interestingly, on average, wind project installation costs declined by roughly $3,330/kW between the early 1980s and 2018. [8] Furthermore, thanks to federal subsidies, U.S. wind energy is currently not in much immediate economic danger due to its non-dispatchable nature, however, advancements in PHES and CAES technologies are working to solve this problem before it becomes a severe detriment to wind energy's economic benefits and future growth. If these trends continue, wind energy will undoubtedly continue growing at an outstanding rate.
© Amir Davis. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] "BP Statistical Review of World Energy 2020," June 2020.
[2] T. Stehly and P. Beiter, "2018 Cost of Wind Energy Review," National Renewable Energy Laboratory, December 2019.
[3] "Variable Operations and Maintenance Cost," California ISO, 26 Dec 18.
[4] "2018 Wind Technologies Market Report," U.S. Office of Energy Efficiency and Renewable Energy, August 2019.
[5] "Examination of Federal Financial Assistance in the Renewable Energy Market," Scully Capital Services, October 2018.
[6] M. J. Leahy, D. Connolly and D. N. Buckley, "Wind Energy Storage Technologies," WIT Transactions on State of the Art in Science and Engineering 44, 661 (2010).
[7] H. Safaei and M. J. Aziz, "Thermodynamic Analysis of Three Compressed Air Energy Storage Systems: Conventional, Adiabatic, and Hydrogen-Fueled," Energies 10, 1020 (2017).
[8] "Wind Energy," Center for Sustainable Systems, University of Michigan, September 2020.