Like other renewable energy technologies, wind is capital intensive, but has no fuel costs. The key parameters governing wind power economics are the investment costs; operation and maintenance costs; capacity factor; economic lifetime; and the cost of capital. We take a closer look at the latest figures, courtesy of the International Renewable Energy Agency.
Although capital intensive, wind energy is one of the most cost-effective renewable technologies in terms of the cost per kWh of electricity generated.
Breakdown
The installed cost of a wind power project is dominated by the upfront capital cost (often referred to as CAPEX) for the wind turbines (including towers and installation) and this can be as much as 84% of the total installed cost. Similarly to other renewable technologies, the high upfront costs of wind power can be a barrier to their uptake, despite the fact there is no fuel price risk once the wind farm is built. The capital costs of a wind power project can be broken down into the following major categories:
1) The turbine cost: including blades, tower and transformer
2) Civil works: including construction costs for site preparation and the foundations for the towers
3) Grid connection costs: This can include transformers and substations, as well as the connection to the local distribution or transmission network
4) Other capital costs: these can include the construction of buildings, control systems, project consultancy costs, etc.
For the turbine, the largest costs components are the rotor blades, the tower and the gearbox. Together, these three items account for around 50% to 60% of the turbine cost. The generator, transformer and power converter account for about 13% of the turbine costs, with the balance of “other” costs being made up miscellaneous costs associated with the tower, such as the rotor hub, cabling and rotor shaft. Overall, the turbine accounts for between 64% to as much as 84% of the total installed costs, with the grid connection, civil works and other costs accounting for the rest (Blanco, 2009 and EWEA, 2009). The reality is that the share of different cost components varies by country and project, depending on turbine costs, site requirements, the competitiveness of the local wind industry and the cost structure of the country where the project is being developed.
