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Mark Nicholls

Mark Nicholls

Mark is a writer for Environmental Finance. Environmental Finance is the leading global publication covering the ever-increasing impact of environmental issues on the lending, insurance,…

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Wind Power to be Competitive with Natural Gas by 2016

Falling costs mean that the average onshore wind farm will be competitive with natural gas-fired power generation by 2016, according to Bloomberg New Energy Finance (BNEF).

The London-based analysis company says that the levelised cost of energy from onshore wind farms – that is, the cost without subsidies or support mechanisms – has fallen by 14% for every doubling of capacity.

Between 1984 and 2011, that cost has dropped from €200 ($271)/MWh to €52/MWh, in 2011 terms – just €6/MWh more expensive than the average cost for power from a combined-cycle natural gas fired plant. That figure excludes any cost of carbon emissions produced by the latter.

“Due to structural overcapacity and growing competition in the wind industry, we expect turbine prices to continue to fall over the next few years. At the same time as designers roll out yet larger turbines with longer blades designed to capture more energy, even in low-wind locations, capacity factors will continue to increase,” the company said.

“We expect wind to become fully competitive with energy produced from combined-cycle gas turbines by 2016 in most regions offering fair wind conditions … Any increase in the cost of gas, which will consequently raise the cost of energy of gas-fired turbines, would bring forward the timing of grid parity for wind.”

Specifically, BNEF cites an “experience curve” of a 7% cost reduction in turbines for every doubling of capacity, noting that turbine prices have fallen to €0.88 million per MW in 2011 from around €2.0 million/MW in 1984.

Efficiency up, maintenance costs down

Also, the capacity factor – the power output achieved as a percentage of nameplate capacity – has been rising as a result of a trend towards bigger and taller turbines, better aerodynamics, better controls and gearboxes, and improved electrical generation efficiency. These improvements have increased capacity factors by 13 percentage points to 34% over the past 27 years.

Operation and maintenance costs have also decreased, from on average over the lifetime of the project of €50/MWh in the 1980s to €11/MWh today, as operators have become more experienced and the quality of turbines has improved.

While each megawatt of wind capacity built on land in the 1980s could be expected to deliver 1,800MWh of electricity per year, that figure today is 2,900MWh, BNEF says. 

 “The press is reacting to the recent price drops in solar equipment as though they are the result of temporary oversupply or of a trade war,” said Justin Wu, lead wind analyst at BNEF. “This masks what is really going on: a long-term, consistent drop in clean energy technology costs, resulting from decades of hard work by tens of thousands of researchers, engineers, technicians and people in operations and procurement.

“And it is not going to stop: In the next few years the mainstream world is going to wake up to wind cheaper than gas, and rooftop solar power cheaper than daytime electricity. Add in the same sort of deep long-term price drops for power storage, demand management, LED lighting and so on, and we are clearly talking about a whole new game.”

By. Mark Nicholls

Source: Environmental Finance




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  • Anonymous on November 14 2011 said:
    In a paper that I presented to a conference recently, I said that it was necessary to be careful with what you believed when the subject was energy. I also said that I expected improvements in wind and solar technology.There may be some localities where capacity factors are now 34%, but this is quite special. Wind is a topic that I generally stay away from, but I don't see the point in believing that a new wind turbine anywhere in e.g. the promised land of wind power, Denmark, or on the German Baltic coast, can show a capacity factor of 34%.
  • Anonymous on November 14 2011 said:
    Capacity factor is just a small part of the story. For wind to stand alone -- without expensive fossil fuel backup power plants -- it would have to know to blow consistently during peak demand hours.If you can teach the wind to always blow strong and steady during peak hours, you will revolutionize the industry!Not too strong, not too weak, but just right, the way Goldilocks likes it.Otherwise, the big bad wolf (gas) or the mean poppa bear (coal) will show their ugly heads and eat you up!

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