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Current considerations for investment into wind projects

Renewable energy appears to be one of the areas that have been less affected by the financial market’s turmoil and economic downturn. In fact, green energy is widely regarded as a fairly safe haven for investors in many countries, offering long-term prospects with low risk because of reliable technology, rated off-takers and attractive returns. Wind energy is still the favourite among the renewable options.

With prices for fossil fuels increasing and pushing up electricity price, wind-generated electricity is becoming competitive in many parts of the world. There is of course debate on how to calculate such grid parity – the point at which green power has the same price tag as other power. There is also debate on whether to include into the calculation the cost of stand-by options such as coal or gas power, used to balance the grid during low wind speeds. But even in the worst case calculations wind generated power is becoming increasingly competitive – especially in areas with high wind speeds.

Turbine costs, turbine supply
Costs for wind energy projects are dominated by the price of turbines, which constitute up to 75% of onshore project costs. For offshore projects, the share is much lower, probably about 40-50%, but even here turbine price is a decisive factor.

Today’s turbine market is a buyer’s market. Surplus turbines are piling up in warehouses with finance harder to obtain and orders being cancelled. This is in sharp contrast to the situation of just three years ago when customers faced an 18 months wait. There are, however, first signs that the situation may be turning: reports are circulating once again about waiting periods for turbines from certain manufacturers.

Another factor is at work too in pushing down wind project prices: recession has lowered the price of steel, bringing it down from the peak it reached some years ago.

Off-take tariffs
The price utilities pay for wind-generated electricity has risen in recent years. This is less true in countries whose feed-in tariffs are set on a long term basis, and all the more evident in countries that operate certificate or related systems as well as countries where power purchase agreements with utilities are negotiated freely.


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