cost analysis

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The total cost of a wind farm is made of the sum of the following expenditures, in this chronological order:

  • Feasibility study, including wind analysis, preliminary layout, environmental studies, economical models and so on.
  • Technical/Juridical costs associated with the start up: power purchase agreement, legal permits, right of way with the landowners, etc.
  • Engineering: civil and electrical design.
  • Wind Turbines purchase (around 70% of the total).
  • Balance of Plant: Include foundations, access roads, MV cables, substation, connection with the grid and SCADA. Normally it’s about 20% of the total.
  • Other costs, such as financial costs, insurance, etc.

Then, when the wind farm is operative, there are the operation and maintenance costs.

There is a huge variability on several of this cost: for instance it can be necessary to build several Km of HV aerial lines to connect to the grid, or access can be complicated due to the lack of roads, or in some country cost of land can be a relevant factor. Here you have some figures, just as an order of magnitude:

My impression is that many wind farms, at least in Europe, are now developed in remote areas with a difficult access and connection to the grid: as a result, the weight of the BoP increase.

For instance many times the cost of road and crane pads can be up to 5%, because often improvements are needed outside the construction area, in the road from the factory or the port to the site.

Another relevant point is that the price of turbines is dropping quickly, due among other reasons to an intense competition between manufacturers.

Here you have a similar table, made in 1997, where turbine price is 80%:

It can be noted that around 80% or more in the life of a Wind Farm are capital costs: this means that wind turbine are capital intensive compared with fossil fuel-fired technologies. For instance in a gas power plant from 40% to 60% of the costs are related to fuel and O&M.

For this reason the cost of capital is of paramount importance for wind generated power.

The way wind energy is sold will be analyzed in detail other posts, as there is a great difference in the way energy is traded in different jurisdictions.

Normally a power purchasing agreement (PPA) is signed, specifying the time frame, the point of delivery, the voltage and the way energy is paid: fixed price, indexed price, power pool market and so on.

 

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