Technology Corridor

Smaller systems aren't cost-effective.

It's time for a reality check on the commercial viability of wind farms. Are large wind systems more economical than small wind systems?

A typical small wind-energy generation system is a 10-kW turbine. A wind turbine output calculator ¹ puts the capacity factor at 23.18 percent and estimated annual output at 20,283 kWh per year. Mike Bergey of Bergey Windpower Co. listed a typical capital cost of such a system at $45,000. ² At an interest rate of 5.50 percent over 20 years, and an operation and maintenance cost of 2.0 cents/kWh, analysis indicates a break-even cost for producing the wind energy of 20.31 cents/kWh (). Note that the capacity factor is the amount of system capacity converted to energy for the time period under consideration. When the capacity factor is increased from 20.31 percent to 35 percent, the break-even cost becomes 14.13 cents/kWh ().

A $323 million project consisting of about 200 wind turbines with a capacity of 310,000 kW and no subsidies indicates a break-even price for wind energy of 3.359 cents/kWh ().

Case #4 is for a small wind energy system at 35 percent capacity factor and with a governmental subsidy of 50 percent tax credit for the capital investment with the resultant cost to produce the wind energy of 8.070 cents/kWh.

Cases #5 and #6 are for a small wind energy system that has a 50 percent tax credit on the capital investment and a 1.8 cents/kWh governmental payment for the wind energy produced. Case #5 with a capacity factor of 35 percent results in an energy production cost of 6.27 cents/kWh, and Case #6 has a production cost of 9.36 cents/kWh at a capacity factor of 23.2 percent. Large wind farms select sites that have a capacity factor in the 30-plus percent range whereas small wind farms are typically restricted to some existing fixed site associated with an existing business operation.

Cases #4, #5, and #6 show how important that a capital (equipment) tax credit, governmental subsidy payment and capacity factor are to making a "small wind" energy system economically feasible at today's electrical rates.

If a utility granted a small wind energy system a capital tax credit and the same governmental benefits it granted a large system, such as a subsidy for wind energy of 1.8 cents/kWh and green credits of 2 cents/kWh, the break-even cost of producing the wind energy becomes 7.36 cents/kWh (11.16 - 1.8 - 2 = 7.36 cents/kWh) ().

A small wind energy system can be economically viable if:

• a site is selected where the capacity factor is high;
• a tax credit on capital investment is obtained;
• a governmental grant to reduce capital investment is obtained;
• a governmental tax credit is issued for the energy produced; and
• payment is made for green energy credits.

If one compares large and small wind energy systems, the cost to produce energy by the large system (3.359 cents/kWh) is substantially lower than the production cost for the small system (14.13 cents/kWh) (). The "Capital Cost per Wind Energy Output" in