As the winds of change blow through America on this historic election day, here’s an update on wind energy. The last two years have seen an astonishing growth in wind capacity worldwide, particularly since the installed base of wind generating capacity now constitutes a substantial denominator over which to calculate percentage growth. Sometime this year, the installed base of wind generating capacity worldwide crossed 100 gigawatts. By comparison, the estimated total installed base of photovoltaic capacity worldwide at the end of 2007 was only about 10 gigawatts – and the yields from wind energy are now reliably over 25% – in some cases much higher – whereas the yields from solar average well under 20%.
If you want to learn everything there is to know about wind, the first place to go is read “Annual Report on U.S. Wind Power, Installation, Cost & Performance Trends,” issued every spring by the DOE’s Office of Energy Efficiency and Renewable Energy. This report provides comprehensive information on the U.S. wind energy industry and includes a lot of useful information on worldwide wind energy. Today I had the opportunity to talk with one of the principle authors of this report, Ryan Wiser, who was able to shed some light on what is happening with wind in 2008.
As of 12-31-07, the total installed base of wind energy in the world was 94 gigawatts, and total new installations in the world probably will exceed 2007′s 20 gigawatts, meaning as of 12-31-08, the total installed base of wind energy in the world will be about 120 gigawatts. In the U.S., in terms of percentage growth, the story is even more dramatic. During both 2005 and 2006, not quite 2.5 gigawatts of wind capacity was installed in the U.S. Then in 2007 another 5.0 gigawatts of wind capacity was added. Estimated total installations for 2008 are at least another 7.0 gigawatts, putting total estimated U.S. wind capacity as of 12-31-08 at around 22 gigawatts; 77% of that in just the last four years; 55% of that in just the last two years!
The installed cost for wind energy has been in flux – but increased demand combined with increases in commodity prices led to cost increases in the past few years, something that will continue into 2009 since most of the turbines that will be installed in 2009 have already been ordered. The U.S. average in 2008 was about $2.0 million per megawatt ($2.0 billion per gigawatt). In 2007 the average was $1.7 million per megawatt, and in 2006 it was $1.5 million per megawatt.
INSTALLED WIND PROJECT COSTS OVER TIME
|Since 1982 the cost for wind energy has dropped about 50%.
Getting from cost per installed capacity to cost per kilowatt-hour is a subjective exercise, but the variables requiring assumptions are relatively finite: installation cost (including land), operating & maintenance costs, transmission costs, the yield, the life, and the cost of financing and return to investors. In the U.S. in 2006/2007 the costs per kilowatt-hour for wind energy installations came in between $.045 and $.05 per kilowatt-hour; the 2008/2009 installations may come in about two cents higher than that, between $.065 and $.07 per kilowatt-hour.
An interesting fact regarding wind power is the question of costs for onshore vs. offshore. There aren’t any offshore windfarms yet in the U.S., but there are plenty of them in Europe, and basically the installation cost for an offshore windfarm is about twice what it would cost onshore. This disparity is mitigated however by higher yields offshore, as well as zero costs for acquiring the land. Also helping the economics of offshore wind is the presumably lower cost to market. A windfarm can be just offshore from a major metropolitan area, with a transmission distance of 50 miles, for example, whereas land-based wind is sited in areas where land is cheap and wind is plentiful, and these areas may be hundreds or even thousands of miles removed from major population centers.
As with solar, the installed base of wind energy, despite impressive percentage gains in recent years, is still minute compared to total energy demand in the world. At a yield of 25%, as of 12-31-08 wind energy will deliver 30 gigawatt-years of electricity. If we round this total up to 33.4 gigawatt-years, which is the energy equivalent of 1.0 quadrillion BTUs (known as “quads” by energy economists), then by early 2009, wind energy will constitute 1.0 quad of annual energy production, which is probably going to exceed 500 quads next year. Wind energy is up to one-fifth of one percent of global energy production.
When comparing solar energy to wind energy, the most interesting fact is that solar energy’s percentage growth is even more dramatic than wind. As wind turbine production grows by 20% or more annually, production of photovoltaics is growing at 50% or more annually. A very interesting bet would be when total solar output, currently only about 15% that of wind, will surpass wind. Prices for solar energy also are becoming competitive with wind – the prices to install utility scale solar are highly proprietary, but some credible estimates go as low as $3.0 million per megawatt, which is getting within striking distance of the installed prices for wind turbines. While solar still has a somewhat lower yield than wind, it has far more potential to deliver energy in decentralized applications, in addition to utility scale applications. And both thin film and solar thermal technologies are just beginning to take off. Nonetheless wind electricity is still demonstrably cheaper than solar electricity and, at least in absolute terms, is still extending its lead.
For more information on wind energy read our recent report “Multi-megawatt Wind Turbines.”