Revision to: Wind Farm Back-of-the-Envelope Economic Analysis

Guest post by Larry F. Brown, PhD

Various commenters pointed out to me that I made an error in my calculations. 

First, the maintenance man told me the turbines were designed to produce 2.3 MW but only produce an average of 1.3 MW.  I then reduced the 1.3 by about 80% because I found that the average wind machine nationwide only produces power about 18-19% of the time.  Using the reduction from 2.3 to 1.3 and then additionally reducing that by 80+% is apparently wrong. 

Next, I have been informed that a capacity factor of 1.3/2.3 = 57% (told to me by the maintenance man) is probably way high.  Multiple comments quoted other capacity factors, all of which were lower.

Some commenters were unhappy with the units I used – i.e., MW/hr vs the MWhr .  I choose to ignore these comments because they are nit-picky. I’m wrong – my mistake – they are correct – but my meaning and intent are perfectly clear to all readers.  Let’s move on for goodness sake. 

A few commenters wondered which facility I was evaluating – it is immediately outside Monticello, UT. 

A few commenters objected to calling these things farms – mmmmm —— they are called wind farms. 

I have redone the calculations and using the following adjustments: 

· Based on the comments, and assuming the maintenance man was being overly generous in his estimate, I have reduced the capacity factor from 57% to 40%, even though most who commented on this indicated it should probably be even lower. 

· I eliminated the 80+% reduction for wind. 

· And I raised the annual maintenance costs to $1 million from $750,000.  Three-quarters of a million sounds very low.  $1 million is a little more realistic. 

Again, I pay about $.11/kWh for my electricity here in western Colorado.  So, beginning the process of calculating the profitability of these things, each tower, using a capacity factor of 40%, will produce at 920 kW which, at $.11/kW, provides an income of about $101/hr = $2,430/day = $887,000 of electricity/year.  Sounds good – so far.

The $.11/kWhr I pay includes all the distribution costs, etc. The wind farm is not paid $.11/kWhr for their electricity.  According to the ISO Wholesale Power Market Prices, this site sells electricity for about $.03/kWhr.  So instead of grossing $887,000, they might gross about $242,000 per year per turbine.

It gets lots more complicated when you consider that the wind farms are being subsidized by the government with the Production Tax Credit (PTC).  A tax credit should not be confused with a tax deduction.  A deduction reduces the amount of taxes you pay.  A credit is money back.  And the PTC is a “Refundable Tax Credit” which means the company actually gets paid by the government even if it does not owe any taxes.   

The PTC subsidy has been in effect now for 27 years.  Congress has adjusted the PTC many times through the years but today the subsidy is about $.02+/kWhr.  So, the power company gets money back in the form of a subsidy for roughly 67% of what they produce – i.e., the company gets money back to the tune of $.02/kWhr after it sells the electricity for $.03/kWhr.  If the company sells $3 million of electricity they get the $3 million, plus a PTC subsidy of $2 million.  That is a huge subsidy!  In fact, I think it is the biggest subsidy ever given for anything. 

However, the economics get worse – much worse.  The maintenance man said the towers cost about $2 million each to install. Each tower probably did cost $2 million to install, but there are many other development costs associated with a project such as land and right-of-way leases, power line construction, road construction, fencing, runoff control, revegetation, bonding for dismantle, etc.  Newspaper articles reported that this particular wind farm cost about $130 million, which, for 27 turbines, is about $4.8 million per turbine.  The income of $242,000/yr/turbine would about pay the interest on a 5% loan to construct the towers.  But, there is more.

There are other peripheral costs associated with such a project.  I assume the maintenance cost for this wind farm (manpower on call 24 hours, office rental, trucks/fuel, electric consumption, security, snow removal, replacement parts, etc.) to be at least $1 million/year.

Additional expenses of this particular wind farm are the $1 million paid in taxes to the local government and the $1,000/tower/month rent to the landowners.  These three expenses total $2,324,000/year = about $86,000/turbine/year, so the income goes down from $242,000 to $156,000/turbine/year – which is probably not enough to pay the interest on a loan and certainly not enough to show a net profit.

Even with my error in the original calculation, my conclusion remains:   Companies are making money on these things, but the source of the profit is only (or at least mainly) coming from the Production Tax Credit – the subsidy paid by our government with our tax money for these projects.  It’s obvious that T. Boone Pickens and Warren Buffett were right.  Without the PTC (for the past 27 years) these things would not exist. 

I think we should stop building these wind farms — yesterday. 

Larry F. Brown, PhD

Palisade, CO 

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135 thoughts on “Revision to: Wind Farm Back-of-the-Envelope Economic Analysis

  1. Wind farmers are subsidy farmers. Period.

    Many of my family and friends here on the windy Columbia Plateau however have made out like gangbusters off the subsidies.

    Thanks, Suckers!

    • Those landowners will eventually come to regret their decision to take the Wind turbine money.
      One day the Wind energy companies sending the those monthly checks will file for bankruptcy. The turbines will quickly all stop turning, the maintenance crews will be laid off, the “farms” will fall into disrepair. Your calls, letters, and emails to the company will simply advise to contact the Bankruptcy trustee appointed by the Court. Those calls to Trustee Lawyer will only come with a response to file your claims as an unsecured creditor at the Bankruptcy court clerk office. Then wait at least 18 months.

      And then if you ever do get back royalty payments, they’ll be less than 6 cents on every dollar claimed. And then those turbines will just becomes eyesore hazards on your properties that no once will claim, or have the money to dismantle. But you won’t be able to touch them or dismantle them yourself. You’ll be screwed.

      Guaranteed to happen.

      • Joel,
        All that means is that wind farms will be treated like superfund sites. After all if the US taxpayer is happy to pay for cleaning up the mess left behind by mining companies why won’t they do the same for wind-farms. The standard dodge is for companies to set up wholly owned subsidiaries to own
        the polluting asset and then when it is unprofitable declare bankruptcy and walk away without paying any of the costs. It is a game that Donald Trump has played and boasted about so it comes fully backed by the president.

        • “All that means is that wind farms will be treated like superfund sites.”

          Nonsense. They’re not pollution; just an eyesore. Non-functional they will destroy aesthetics and property values, not health. The people who allowed those monstrosities on their properties will be screwed, and rightly so.

          • I’d think they’d be highly lucrative to scrap though, right? Lots and lots of steel, just start cutting it up and hauling it to be re-smelted. You’ll need pretty big equipment, but there’ll be a big check once the salvage is done.

        • Even if there’s a program similar to Superfund, it will take a LONG time to clean up the retired windmills.

          I live near one of the original “top ten” superfund sites. It took about 20 years to remediate the site. Granted, it involved more than just tearing down and hauling away windmills would, but the many levels of government bureaucracy probably doubled the timeline.

        • Izaak sez:
          After all if the US taxpayer is happy to pay for cleaning up the mess left behind by mining companies why won’t they do the same for wind-farms.

          Are you really that naive? Mining companies are portrayed as “evil”, and the eternal scare-mongering about such companies/activities motivates Congress & the eco-loons to appropriate monies to “clean up the mess”. There would never be any monies appropriated to clean-up failed wind farms — they’re not “scary”. Those exhausted farms will prb’ly be fenced off and stand/rust, unless the value of scrap metal is high enough.

        • Izaak Walton July 25, 2019 at 9:18 pm
          Joel,
          All that means is that wind farms will be treated like superfund sites. After all if the US taxpayer is happy to pay for cleaning up the mess left behind by mining companies why won’t they do the same for wind-farms. The standard dodge is for companies to set up wholly owned subsidiaries to own the polluting asset and then when it is unprofitable declare bankruptcy and walk away without paying any of the costs. It is a game that Donald Trump has played and boasted about so it comes fully backed by the president.

          What mining assets or mineral mining companies has Pres. Trump owned?

      • Where I a landowner, I’d insist on a bond being secured to pay for the complete removal, foundation included, when the tower’s useful life is reached, or earlier as circumstances warrant. The bond paid-in-full up front so it is perpetual.

      • Farms are collateral for (promised) subsidy payments.
        Host farmers will lose their land when turbines stop.

  2. Call ’em what they are. These are not “wind farms.” They are “government credit farms.”

      • Nope. Even “Plantation” sound bucolic and “natural”. These wind FACTORIES are not “natural”, “bucolic”, or pleasing to any human sense. They are enormous, sky-scraping, MACHINES, that disrupt landscapes, skycapes, and produce inner ear and brain damage to adjacent residents. They are visual pollution in the landscape and slaughter birds, bats, and insects.

        The eco-zealot-left like to play with the language and change the meaning of words. Wind “Farm” is one of their best brain teasers. I love the look of farms and plantations. Living crops … green … healthy … natural. Yeah, yeah, pesticides, herbicides, GMO’s. The gigantic wind contraptions emit and use their share environmental contaminants as well, with none of the biological benefit.

        And when Farm fields lay fallow … the farm is still beautiful ploughed earth – natural and healthy. When the ugly wind contraptions stop spinning because the subsidies dried up and they lay fallow … they become rusty testaments to absurd math and economics. And they add visible FAILURE to their visible BLIGHT.

        Don’t call them Wind Farms.

  3. The 2 new, proposed offshore boondoggle off New York – Empire Wind and Sunrise Wind – will cost north of $6 billion … to be entirely paid by ratepayers.
    The new, privately financed CCGP plant at Wayawanda will produce almost the exact amount of electricity with ZERO construction cost to the public.

    I continue to be astounded at how financially illiterate so many of these ‘progressives’ are.

    • Ah? Offshore wind? All those dead birds will land in the sea and can’t be counted, therefore it’s safe for birdlife.

    • “I continue to be astounded at how financially illiterate so many of these ‘progressives’ are.”

      Sound like they make out quite well with the PTA in place.

    • JoeB, they are not illiterate, they have attached themselves to what they believe is a noble cause, and they will commit all sorts of crimes in support of that belief. This is called ‘noble cause corruption’, and its adherents are deluded fanatics. The followers of Karl Marx were similarly afflicted.

    • I too am astounded at the willingness of Greens to spend other people’s money for so little gain. The Renewable Fuels Standard set up under the Energy Independence and Security Act already funds ethanol and biodiesel production through mandated to use those products (Renewable Volume Obligations) and financially through RIN credits which have to be purchased by Obligated Parties (read refineries and fuel blenders). This is bad enough.
      There is a mandate for Cellulosic Ethanol and Cellulosic Biofuels (diesel and jet fuel) that is more lucrative than conventional ethanol. Last year these D-3 RINs were selling for $2.30/gal with a 1.7 multiplier for diesel fuel so the subsidy would be $3.91/gal.
      Renewable Natural Gas (RNG) became available in 2014 and both the Federal RFS and California Low Carbon Fuels Standard (LCFS) jumped on board. RIN credits are about $6-10 right now (depending on the current D3 RIN value), but the LCFS credits are now $75/million BTU for a product that right now is worth under $2.50/MMBtu. Talk about a subsidy. That alone is 30X subsidy on the value of the product.
      Dairy farmers using manure to make RNG often make more on their cow poop than on the milk produced. What a change in fortune based on trying to “save the world from CAGW!”

    • Nah, it’s just about exactly what people who have fought wind projects have known.

      Except that infrasound is a real killer and should never be neglected. (And that the dBa scale sucks big time because it ignores infrasound.)

  4. You do not need to be an economist to determine that wind powered electricity is not economical and you don’t need to be an engineer to determine that wind power is unreliable. I’m waiting for the blowback from the massive European investment in wind power. It’s coming.

    • Mark,
      Whether or not wind power is economical or reliable depends entirely where you live. In New
      Zealand it is both. However NZ is a special case in that it is a long thin island with a very low
      population density and a lot of wind and a national grid that connects both islands so that if
      the wind stops in one part of the country they can shift power from where it is blowing. Similarly
      Scotland and Iceland have sufficient wind resources to make wind power there both economical and reliable — again they are essentially island nations with low population densities. But wind power is
      never going to suffice for many land-locked states in the USA.

      • Another thing NZ also has significant hydro to help manage the fluctuations with good geothermal for base load and being in the roaring 40s gets very good capacity factors out of wind, amongst the best in the world. On a levelised cost factor wind will be the next tranche of investment off the blocks for the NZ system.

        • HAS
          July 25, 2019 at 10:43 pm

          Yes, we do have lots of hydro and also slowly increasing amounts of geothermal which is a good baseload – even if some damage is done to housing because of ground subsidence. As far as I’m aware wind is pretty much unsubsidised here…certainly nothing like what occurs in the USA and much of Europe.

          However our power prices are very high (about NZD$0.25-27/Kwh). Increasing push by the left wing government in coalition with the Greens for more EVs is sure to place a huge strain on the grid. They also oppose any more hydro or coal (despite huge resources of the latter) and offshore gas exploration has been stopped by them so the future is rather bleak. I have a backup petrol generator and lots of fuel ready for the inevitable grid failures. We also have volcanoes and earthquakes and nowhere near enough has been done to provide grid resilience.

          • NZ’s prices for electricity aren’t out of the ordinary https://www.statista.com/statistics/263492/electricity-prices-in-selected-countries/, geothermal subsidence can be managed, electricity projections assuming widespread adoption of EVs and only renewable additions to generation are not showing stress (various Transpower reports) or increased risks of failure (in fact more batteries distributed throughout the system in EVs will mean less risk), a decent earthquake will take out fossil fuel generation as well as renewable, and disrupt fuel supply chains.

            Apart from that I think you could be roughly correct.

      • ” so that if
        the wind stops in one part of the country they can shift power from where it is blowing. Similarly
        Scotland and Iceland have sufficient wind resources to make wind power there both economical and reliable”

        Untrue. Low wind weather systems can be in place across multiple countries in Europe at once. The wind is not always blowing somewhere else. Wind needs near 100% backup from fossil or nuclear power.

        “Pan-European lulls in the wind stretching from Spain in the South to Sweden in the North, Britain to the West and Germany in the East are commonplace. The combined wind capacity of these six countries is 97.9 GW. On occasions the output from this gigantic resource falls below 3 GW, a load of 2.9%.”

        http://euanmearns.com/the-wind-in-spain-blows/

        • True.

          The idiots have invented the term ‘smart’ electrical grid for a grid that has either magical batteries or magical wind sources and power lines that are available when required to make the silly scheme work.

          Wind speed is low or high over large regions so there is not wind power to available to freewheel and the transportation of large amounts of electrical power requires high voltage power lines which are very expensive, require large right-ways, and waste power.

          As the capacity factor for wind is roughly 20%, the absolute theoretical maximum wind power is limited to 20% average of grid minimum load assuming there is no nuclear power in the grid or combined cycle natural gas both of which cannot be turned on/off/on/off.

          To get above 20% requires batteries at which point there is no longer a savings in CO2 emissions so the scheme fails conceptually.

      • How is Scotland an “island nation”. Last time I looked it was still firmly attached to England.

      • all i have been able to determine that wind power in NZ is a means of conserving water from the hydro generation. The gas fired stations run at a stable rate to give most power from the minimum gas burned. The geothermal stations likewise run at a consistent rate to give maximum rate from geothermal fluids used.

        People are at some time going to realise wind power is a most uneconomic way of conserving water in one of the wettest counties on earth.

        • The hydro makes a big difference because it supplies intra seasonal storage (but not inter seasonal as in other countries). As you say the wind can be used anytime it runs unless the hydro is spilling.

          Gas is currently run in two main ways in NZ. Combined cycle that typically does mid load, and open cycle (cheaper but less efficent) peaking. The problem for renewables in NZ is the last couple of percent in early winter when the lakes are low, wind relatively low and demand is high.

  5. All of the costs given are from the subsidy farmer’s perspective. On average, the value of the intermittent output is negative. The intermittency adds cost to the maintenance and operation of dispatchable generators, all of which are still needed when the wind is not blowing and use those opportunities to recover their costs so their average cost of power sent out goes up.

    The dispatchable output from a wind or solar subsidy farm is precisely ZERO. They do not reduce the amount of dispatchable generation to meet the maximum demand. They inevitably displace slow response, low cost dispatchable generators with higher cost, fast response dispatchable generators. The dispatchable generators charge what they like when the sun is not shining, wind is not blowing and demand is strong.

    In Australia, the national electricity market has a capped price of AUD14,000/MWh (USD10/kWh). It does not take a dispatchable generator very many hours of production to recover their annual costs when what the send out gets that price.

    Australia inherited Audrey Zibelman from the New York power supply industry. She has coined a new term for turning power off in Australia; referred to as “demand management”. In the past, the State governments that built the power supply grid would lose the next election if the lights went out. Audrey states clearly that Australians need to get used to this perfectly acceptable practice. I note it is also being used in New York.

    Networks with low percentage of hydro generation that have achieved 30% market share for intermittents, like Germany and South Australia, are paying 2 to 3 times the wholesale cost of pre-intermittent power. Prices will rise 8 to 10 times the pre-intermittent cost to achieve 100% dispatchable intermittents using the presently available solar/ wind generation and storage technology.

    • … demand management …

      I can’t find the exact quote but it’s something like: “You can know the level of civilization by watching the havoc when the lights go out.” Civilization is a good thing. Audrey Zibelman stands about zero chance of dying in childbirth. Thanks to civilization, she doesn’t even have to have children if she doesn’t want to. If she does have kids, they will likely survive to adulthood. She doesn’t have to worry about where her next meal is coming from. The infections that used to kill our ancestors are no longer a problem (in spite of the best efforts of the anti-vaxers).

      Why are people from the third world risking their lives trying to get to the developed nations? They’re not stupid, that’s why.

      We are living in the golden age of humanity and the postmodern Marxist greenies don’t come remotely close to understanding that. They have not a shred of gratitude for their amazing good luck. In terms of all humanity over all of time, we, including the aforementioned out-of-touch entitled little s**ts, are in the 1% of the 1%. They tell us to check our privilege. I throw it right back at them.

      Audrey Zibelman should go live in the jungle if she wants to kill civilization that badly.

  6. I’ll call ’em what they are – pollution. Driving through Oregon two years ago to view the eclipse, almost every dramatic natural vista was visually polluted by windmills along the horizons. Think Yosemite with windmill towers on top of El Capitan. Fifty years from now these will be rusting hulks on the horizon, because I doubt there are monies set aside to remove the towers and remediate the damage to the landscape.

    • Beautiful Vermont (the Green Mountain State) is also becoming a wind tower polluted eyesore.
      The gorgeous ridges are infested with these spinning insects.
      The locals hate them, the eco-loons in the state government just want Moar.

      I also saw the same thing happening in Sicily.

      • France, the country that went for nuclear after the oil crisises of the 1970s, is going for wind generation. The population falls into two camps those who don’t like them but buy into them but accept they are needed and those that oppose them for reasons outlined here. Unfortunately the former are in the majority. When France decommissions these nuclear facilities Europe may have problems.

        • The EU has just approved the state aid implied in the agreed feed in tariff for some 3GW of offshore windfarms in France, expected onstream in about 2022. The rate? About €150/MWh.

  7. There is a small wind installation in Australia called the Hepburn Springs Wind. For all the warm and fuzzy community owned stuff that goes on around trumpeting its “success” , its accounts quite clearly show that it makes no money generating electricity but generates most of its profits selling renewable energy certificates to companies that generate actual usuable power. Its a money skimming system sponsored by the Australian Government.

    This is a great example as its small and easy for people to understand , and the information is public.

    https://www.hepburnwind.com.au/

    • Yarpos. Simon loves his little project, eh! And supposedly powers the EV charging ‘station’ in the main Street of Daylesford! Actually, very well might, for the number of cars I have actually seen there charging!
      I have to look at these things every day I go to work, :(. And now, on the way home, there is now the Yendon ‘farm’ . Yikes! That is Ugly!

    • Greens buying and selling their eco-indulgences is grotesque. Such falsehoods will never procurevtheir admission to the 7th level of eco-Buddhist heaven. Nope … they’re doomed to their cockroach form

  8. I have been told by a very sincere green that the reason Germany and South Australia show such bad results from wind is that they got in too early in the learning curve. That rather reminded me of Communists trying to explain away why the Soviet Union was a miserable economic failure.
    As there are no properly working examples of something, perhaps the concept was flawed from the start?

  9. It really doesn’t matter what these things are costing – the bottom line is are they producing electricity CHEAPER than alternatives? So even if they managed to produce a profit, they still should not be built if they produce less profit than a comparable investment in another technology. PERIOD.

    The fact that they are being built points to corruption – government subsidies corrupting the decision making process in this case, and likely a lot of money passing hands to keep the subsidies in place.

    If you regulate pollution (and I mean REAL pollution, not made up stuff like CO2) then there is a cost to cleaning up the energy source to make it viable. Coal looses out – it produces a lot of pollution and its expensive to clean it all up. Natural gas is much cleaner and therefore will be cheaper to burn. New generation nuclear power plants have the potential to be even cleaner given some investment.

    No one seems to ever consider the environmental impacts of wind turbines – it’s tremendous. Besides taking up a lot of room they are constantly killing large birds and all sorts of bats. They catch on fire – so California should pay attention to this. Eventually they have to be torn down…I sure hope the company that built them is collecting money into a fund for cleanup costs.

    Solar is much, much worse…the solar panel is a mixture of glass and heavy metals that are no designed to be recycled. Eventually a tornado is going to hit a large solar farm and scatter deadly glass everywhere – maybe then people will start paying attention. A house fire will have the potential of melting and scattering heavy metals over an large area when the solar panels melt. Where do we put all the waste once a farm is decommissioned? No one seems to care if it isn’t a fossil fuel.

  10. The profitability of wind farms clearly depends on location and will vary from country to country.
    In New Zealand the average consumer price for electricity is about $0.29 per kWhr which equates to
    19 US cents per kWhr, which is more than the author pays for his power. However in NZ wind power
    is profitable without any subsidies at that price. So for example Meridan energy which supplies energy
    to 14% of New Zealanders and which is 100% renewable (a mixture of hydro and wind) made a profit of
    just under $200 million NZ dollars in 2017.

      • Total NZ is around 60% hydro, 17% geothermal, 15% gas, 5% wind and 3% coal. New investment is in wind and geothermal, and the forecasts suggest no significant real increases in prices. Both generally out compete solar and there’s no need to consider offshore wind, even to service the 40% growth in demand to service the conversion of short haul transport to EVs.

    • NZ does not have an industrial base so calling their wind generation a success is a false positive.

      • 30% of UK’s electricity is used in industry, 40% of NZ’s. Happens when you have an Al smelter run on hydro and need to process primary products (we call that industry down here).

      • NC,
        The issue in NZ is that it is both sparsely populated and has a large area
        suitable for wind generation. The presence or lack of an industrial base is
        irrelevant. NZ proves that renewable generation is viable in some circumstances.

        • “NZ proves that renewable generation is viable in some circumstances.”

          Those circumstance will become more limited as people become more aware of wind turbines’ harmful effects to health (vibro-acoustic disease), wildlife (birds, insects, bats) and ecosystems (turbines acting as top predators remove avian predators of small animals, allowing unnatural proliferation).

        • As you say in special circumstances wind can be economical, but is that in the Long Term as it all has to be replaced between 15 and 25 years later?
          Whereas most Hydro, Nuclear and FF generators last 50 to 60 years

          • “In New Zealand the average consumer price for electricity is about $0.29 per kWhr which equates to
            19 US cents per kWhr, which is more than the author pays for his power. However in NZ wind power
            is profitable without any subsidies at that price.”

            Well anything can be economical at that price. Here in Ontario it is around 11 cents US /kW-hr taxes and everything else inc. We got rid of all subsidies 1 yr ago and the wind and solar industries went elsewhere. Good riddance. . Unfortunately in the 15 years before that, subsidies on wind and solar caused the price to double. If we had never had the green energy scam in Ontario, we would be paying only around 6 US cents /kW-hr now.

  11. A capacity factor of 30% would probably be more realistic.

    Another issue rarely addressed is that the turbines need 24/7 despatchable electricity for blade pitch control, hydraulics, air conditioning, yaw control etc and the inverter electronics also need 24/7 despatchable electricity.

    If the wind ain’t blowing a significant amount of power is drawn from the grid just to keep the turbine ready for when the wind blows.

    If hypothetically you had a grid with only renewables and no despatchable power, batteries would have to be provided for all the turbines and if they went flat, the turbines would have to shutdown.

    As far as I know, electricity drawn from the grid is not metered and is just another subsidy for renewables.

    • Peter,
      People build wind farms in areas where there is lots of wind. Hence the capacity factor is likely to be
      larger than the average capacity factor for the entire state. Looking at the wikipedia page for Meridian energy in NZ it shows the generating capacity and amount generated for the various wind farms.
      Typical values seem to be between 45 and 50% which is only slight lower than the figures for the
      various hydroelectric power stations.

      The capacity factor also continues to improve as turbines get taller and move to off-shore locations since the wind blows more consistently in those locations

      • An interesting fact for you. CF for wind in Australia is falling! Now sits at about 28%. Seems the more of these things you spear into the ground, the less efficient they become! Probably less than ideal sites. And as they are generally further away from the FF generators, they are generally downgraded for output by the AEMO. The infrastructure is not designed for sparse energy distribution!

      • Dream on, Izaak. These are subsidy factories, there is no intention to make as much electricity as possible. Here in the UK turbines are de rated as small turbines get a higher subsidy.

        • Chaswarnetoo,
          In NZ there are no subsidies and wind farms are profitable and form a vital
          part of the mix. In the UK there are subsidies but that is true for all fuels.
          Just look at the guaranteed price for electricity from the latest nuclear reactor.

          • A guaranteed price isn’t necessarily a subsidy, it could just be a form of underwriting insurance. If the market price is always higher than the guaranteed price, no subsidy exists. The reason for the guaranteed price is to entice investors who are risk averse – if you can guarantee that prices cannot fall too low, more investment money will be available.

            No idea if that’s the case in the UK

          • The ONLY reason that Hinckley needs subsidies is for it to compete with Wind & Solar because of their subsidies.
            In fact future Gas installations will probably also need subsidies, how else do you get investment for them if they may only be used for back up as Wind & Solar get first choice and subsidies even when they are not producing.
            The other point is that Wind is also parasitic on the UK grid for a lot of the time.

          • A guaranteed price is a subsidy.
            with 60% Hydro NZ is NOT relying on Wind/Solar. W/S can be used as a means to control the flow of water through the generator. In Oregon, US the Columbia Nuclear power station does NOT need to be operating when the dam is dumping water to maintain “Natural” historic river flows needed for Salmon runs. Similarly, the NS Hydro serves as a ready storage system for when there is no Wind/Solar.

      • Capacity factors are not really a sensible metric for wind farms. They are measured relative to the size of the installed generator, which can vary even for the same swept area and hub height – a design choice that is related to the anticipated distribution of wind speeds, with smaller generators installed where wind speeds are typically lower.

        I would much rather see site potential expressed as a theoretical maximum available energy per square metre of swept area over a year (allowing for the Betz limit). Actual (or forecast) capacity factors should be measured relative to this. Both should be quoted, so as not to flatter the performance of low wind speed sites.

  12. Of course it is the subsidy that keeps them going. That is why it is being assigned after all. It is the green policies that ,and the ugly things are made and kept going..

  13. A few commenters objected to calling these things farms – mmmmm —— they are called wind farms.

    The machines harvest wind, the builder/owner harvests money. Sort of like a farm.
    However, plant fruit trees and you have an orchard. Plant grapes and you have a vineyard. Plant massive steel towers and you have a farm. Hmm?

    Some of the money is not deserved — or so many believe.
    Some folks thought the subsidies were needed to get the industry started.
    When does it transition from “starting” to “up and running”?

        • Steven – Capacity factors are all over the place. I picked 40% knowing it is on the high side because I wanted to give the greens the benefit of the doubt. Isn’t it interesting that the economics are not even close to profitable even with such a high capacity factor? Also, I
          and did not want to open the discussion to accusations of bias – accusations of underestimating the profitability.

          • Some interesting data on UK offshore wind farms capacity factor performance, and average energy per m^2 of swept area is here:

            http://energynumbers.info/uk-offshore-wind-capacity-factors

            The UK has just seen the Beatrice offshore project officially opened. It’s 588MW nominal capacity (which it has actually achieved), and the cost was £2.5bn, just under budget of £2.6bn. Among the other data revealed is that they anticipate spending £2.7bn on O&M during the 25 year life, and it is supposed to produce enough to power 450,000 homes. The current CFD price for its output is £158.73/MWh (indexed with inflation).

            If we use 4MWh/year as a nominal UK “home”, then the output works out at 1.8TWh/year or a capacity factor of 35%, and revenue totals £7.14bn over 25 years ignoring further indexation. If we consider financing on a mortgage basis, 25 years at 4% gives an uplift factor of 1.6, to the capital cost including financing is £4bn. Add the O&M bill (probably not including likely inflation either) and it doesn’t leave much for abandonment cost.

    • Look at the summer months. Throughout the windiest parts of the U.S. the summer months have a capacity factor of 15-18%. The summer months also present the highest demand for air conditioning.

      Second, when wind projects are “repowered” they are done so with larger diameter rotors and larger nameplate rating. In effect the are being redesigned as a better match to actual conditions, which is probably a good reason for the recent improvement in capacity factor. However, that trend can’t go on indefinitely–at some point the best sites are taken and the design modification have been finished.

    • Steven – I put on the PhD thinking it provided some level of credibility. Guess not. Next time I post I will leave it off.

  14. I am Australian and have spent quite some time looking at the performance of wind if you wish to generate power from it. In Australia we have a body called the Australian Energy Market Operator which publishes data on dispatched power from electricity generators. In 2017 we had about 4 GW of wind power over a geographical area of 2,250,000 km² on the eastern grid. The dispatched capacity factor from that varied from 0% to 82%. The average capacity factor was 30%. This is a distilled result from 42 wind power stations which has an accuracy in terms of resolution of five minutes. The power being put out every five minutes is recorded. In that year there was a period of three hours when everything stopped and even a small amount was being drawn from the grid. There was a 45 hour period when the capacity factor was below 6%. The extreme variation makes a nonsense of averages.

  15. Think european experience is about a 30% capacity factor. But what you have not taken into account is that when the power is being delivered, its not necessarily aligned with demand. The thing may be producing a huge amount of power when its not needed, and none at all when its peak demand.

    This will have a cost, its just a question of who pays it. In Europe they pay the farm not to generate in these cases, or use standby natural gas power, which also costs.

    The key parameter is usable power capacity. You need to find a way to allow for that capacity factor. Its not just that the wind does not blow all the time. Its that some of the time it IS blowing, its at the wrong times for demand, so it may be producing, but its useless and unsaleable.

  16. What’s your PhD in? Can’t surely be Maths, Economics or Engineering. That’s the most ill informed and lazy ‘analysis’ of the economics of turbines Ive seen. They last 22 years plus. Large turbines have a payback period under non subsidised conditions of 5 to 7 years. You’re sounding like a putinbot. SNIP – respect when responding
    to other posters/authors is a must

  17. I might have missed something here but it seems to me that you have omitted the repayment of the capital part of the loan, or return on capital if the money comes from private investors. If you only pay interest on the loan the capital remains. What asset would there be available to sell after say 20 years of the term of the loan?

    The turbine operators will have made a profit because of all of the lovely subsidy. What is to stop them walking away leaving the debt and the industrial waste of now defunct wind turbines?

    • Simon, that is spot on, but even that does not cover the whole economic story or slight of hand used by the renewables sales team jokers.
      Not only do you have to divide the capital cost over the term of the project. so a £20 million installation with a 20 year life will have a standing cost of £1 million/yr. This is normally wrapped into the bank borrowing loan, so that £20 million borrowed actually costs £1 million/yr capital repayment plus the interest charge so say 5% (government backed). You will pay £1 million interest in year one falling to zero at the last day of the loan term. This averages (£1million to zero) at £500 x 20 so it’s £10 million over the term interest cost. The annual cost of the loan + interest is therefore £1.5 million/year.
      Now the unspoken bit.
      If the business is intending to continue past 20 years, it has to factor in depreciation costs, which adds another £1million/year. If they choose to wrap up the business after the term then the dismantling costs are a feature that must be accounted for. Failure to do that is fraud or failure of the directors to carry out their fiduciary responsibilities. Either way a jail term is waiting.
      Not looking so good is it?

    • SimonfromAshby – Yes, I omitted the repayment of capital. I omitted it because the real profit was not even enough to pay the interest on a loan. There was no money left to repay the capital. With regard to an asset available after the 20-year life, there is certainly some salvage value but I doubt very much if the salvage value exceeds the cost to dismantle and reclaim.

  18. One aspect not yet covered with regard capacity factor is that the more of the intermittents installed, the more each unit impinges on another’s output. South Australia provides a great example of this “curtailment”. The State has 2142MW of wind capacity. The average demand is around 1200MW. That currently gets as low as 400MW when the sun is shining as the small scale solar kicks in. The network requires a minimum of 250MW of gas output to ensure system stability. A beneficial factor for the CF is the 600MW link to the Victorian network the allows wind generators to export when there is surplus generation and demand met from Victoria when wind is low. Even with that link there are times when the wind output is capped at its safe maximum of 1200MW.

    Once market share of intermittents exceeds around 30% there are frequent times when the output of the intermittents is capped. The only reason SA wind generators are able to exceed 30% market share is due to using Victoria as a giant battery with peak power of 600MW for in or out and infinite storage. That connection has doubled the wholesale price in Victoria as the wind generators squeezed out slow response brown coal generation. Victoria now relies on diesel fuelled generators to meet the summer peak demand. They soon recover their capital cost when prices hit AUD14,000/MWh. Those who do not make their own power are burdened with paying for those who make their own and all the grid scale intermittents plus the costs for all the remaining dispatchable generators. It is legal theft from the poor consumer to not so poor and wealthy generators.

  19. Every now and again some comedian tries to tell us wind farms are positive.
    The numbers they adopt to do this, are taken from ideal sites, using achievable theoretical efficiency rates, i.e. conversion of wind energy into electrical energy, and imaginary utilisation of the resource i.e. up time when they are generating.
    This imaginary scene is then subjected to the little mentioned fudge factor called output ratio. That is the actual output of kWs versus the plate rated output.
    When the wind is low the output is a fraction of the plated rate, but the turbine is still generating. When the wind is too high the turbine is shut down and not producing. When the wind is too low the turbine is stalled and is not producing. During the sweet spot of wind speed which varies with design, the turbine is producing its maximum, which will always be below the plated maximum unless you are trying to generate a fire in the turbine head, a situation that seems to be happening all too frequently.
    That is the typical background variability of wind energy attempting to supply a grid connection ever more remote and distanced from the consumer.
    The alternatives, are fossil fuel fired constant output generation or hydro, which is almost constant and nuclear, which is as constant as it gets.
    There is always solar of course, which is completely variable and completely zero during half of the day… so maybe not.

  20. eia says, “Estimated levelized cost of electricity (capacity-weighted average1) for new generation resources entering service in 2023 (2018 $/MWh)”

    Conventional CC: 42.8
    Advanced CC: 42.8
    Geothermal: 39.4
    Wind onshore: 42.8
    Wind onshore with levelized tax credit: 36.6
    Solar PV: 48.8
    Solar PV with levelized tax credit: 37.6
    Hydroelectric: 39.1

    The report has all the details but and agrees that solar and wind are competitive only with taxpayer contributions.
    https://www.eia.gov/outlooks/aeo/pdf/electricity_generation.pdf
    (Page 7)

    • Wind onshore: 42.8

      CAPEX alone is more than double that. Take a typical (for an onshore wind farm) 3MW wind turbine. Installation costs in Germany is currently 1,567€/kW. Or 4,700,000€ for a single 3MW wind turbine. Taking discount rate of 6% into account and typical lifetime of 15-20 years our annual revenue must be greater than total installation costs divided by 10. Therefore CAPEX alone is 470,000€ annually. Plus operational costs, land rent, taxes…

      Given that an average 3MW wind turbine produces in Germany on average ca. 5 million kWh/a, CAPEX alone is ca. 105$/MWh. Add 20-30$ of operational costs, 10-20$ land rent – and we are already at 135-155$/MWh. Plus taxes. Plus dismantling of the turbine and the foundation, which would add another 5$/MWh. Plus backup. Plus falling prices if there is too much wind.

      How could anyone arrive at 43$MWh – I couldn’t even guess.

  21. So, to use your numbers, but look at it from a utility perspective….the current value of the subsidy is 0.02/kwh..which according to your calculation is around $160K/year. The PTC is good for 10 years…so using your cost of money of 5%, this is worth around $1.25M/turbine. So according to your price per turbine…the federal gov’t is picking up around 25-30% of the cost…..Since Utah is not governed by renewable energy mandate, I would say that it must make sense for the utility to build these at this price, probably in part because there are enough customers willing to spend a couple extra dollars/month for clean energy.

    All things being relative….probably a less than the federal government contribution to the big western hydroelectric dams or to rural electrification (some of the reasons why electricity is cheap in your region) As a taxpayer in Maryland, I’m not enthused…but I would say you are getting a great deal out there in Utah….

    • Mike F – No, the $156 K/year/ turbine profit is the bottom line without considering the $.02/kWh PEC subsidy. I do not consider the PTC subsidy to be real profit because they certainly don’t earn it. They sell their power for $.03/kWh and are then given an additional $.02/kWh as subsidy from the PTC. I hope that clears things up a little.

      • No Larry, the $160k/year is the amount of money coming in from the subsidy based on your production estimate…which is $1.6M in 10 years…using your 5 percent cost of money…has a present value of $1.25M…

        • Let me calculate it out for you…2.3mw*.4*24*365=8000mw*ht/yr
          8000*$20/mwhr=$160k/yr/turbine=value of ptc

          • Mikef – We are both right. The resultant values are the same $ but they represent different results. It is just by chance that both numbers come out to be $160 K. Thanks for the input.

  22. “A few commenters objected to calling these things farms – mmmmm —— they are called wind farms. ”

    They are called “Farms” by the salesmen who pushed governments to buy them because “farm” make them sound green and all nice and cuddly whilst an accurate name like “industrial estate” does not … it was and still is pure deceitful spin.

    And the deceit goes further. Farm suggests a”harvest” … to imply that you are buying a “harvester” to obtain “free … coal” …. did I say “Free coal”, did I really mean a machine to “farm coal” instead of “farm wind”? Might I also go on to say “100% organic coal – produced without any fossil fuels from the natural power of the sun?”

    Of course we “farm coal”, and we have “coal farms” … in EXACTLY the same way we “farm wind” and have “wind farms”.

    Indeed, I await the day when the coal farming sector wakes up and realises that it’s time it sold itself as producing 100% organic energy.

  23. Dr. Brown – does the $0.11 you pay per KwH include the cost of delivery – typically $0.03 to $0.04/KwH?

  24. I believe this is an important topic, but the approach is too casual to be very useful. It would be much more informative to analyze the actual financial statements of an existing utility. But we need to be careful because everyone’s financials are wrong. The cost of providing backup to wind power deserves to be counted as part of the cost of the wind power, but utilities don’t do it that way.

    The challenge is to adjust the cost accounting methodology to something that reasonably shows the true cost of wind power. The cost to generate electricity from wind turbines is not the relevant cost. And because power may be dumped, the amount of power generated is not the relevant denominator. We need to know the cost of the “wind power system” that includes the cost of the backup supply.

    Cost per unit is the amount produced divided by total cost. Utilities divide the power generated by the wind turbines (for a period) by the total cost of the wind turbines (for the same period). That sounds right, but it understates the cost of power. We need to include the cost of generating backup power as part of the wind power system. The unit costs need to be determined by taking total power SOLD, divided by total system costs.

    Another useful metric would be the incremental cost of wind power. You would determine that by dividing the incremental costs of adding the wind turbines to a power generation system, and dividing that by the incremental amount of usable power generated. You need someone with cost accounting skills to do this because there are other issues to consider, such as unused capacity, reserves for end-of-life demolition, and so on.

    • Steve O – The simple reason I did these calculations is because of the fact, as you point out, that everyone does them differently and comes up with widely different values. Hence, I wanted to do a simple basic calculation that I (and hopefully everyone) could understand. Years ago everyone had a different value for the cost of owning and driving a car – so, I kept track of every penny I spent on a couple of cars throughout their life and came out with an unassailable number that I knew was correct. That is basically what I was trying to do here – realizing of course, that it’s impossible to be 100% accurate without getting exact values from the company, etc. I asked a couple of representatives of the company to review my numbers a couple of times. They did not respond and it’s pretty clear now why they didn’t respond – the numbers are terrible.

  25. AS far as these things not existing, government interference is not limited to the PTC. Not nearly.

  26. I think I missed org article, cannot seem to find it either. there a link or was it removed?

    • dmacleo – on the WattsUpWithThat site, find the search box and search for “Wind Farm Back of the Envelope Economic Analysis”.

  27. Please will some kind soul produce a profit/loss flow from this post. Many who cannot grasp the enormity of waste will then understand.

  28. Some commenters were unhappy with the units I used – i.e., MW/hr vs the MWhr . I choose to ignore these comments because they are nit-picky. I’m wrong – my mistake – they are correct – but my meaning and intent are perfectly clear to all readers. Let’s move on for goodness sake.

    No it is not knit picking and you still don’t seem to have done the BASIC research to understand what you are writing about. It is neither MW/hr nor the MWhr. Production is either in MW or GW or alternatively MWh per year. The figure you used suggested it was 2.3 MW. ( The knit pick would be point out that despite multiple folks correcting you and explaining the units, you are still using hr instead of h as the abbreviation for hour. )

    You still don’t bother to explain what site you were talking about so anyone can sort out the mess you posted.
    I did try to find what seemed to be the wind farm in question and got the figures for capacity factor , you are still blindly pulling figures out of the air:

    I have reduced the capacity factor from 57% to 40%, even though most who commented on this indicated it should probably be even lower.

    And I raised the annual maintenance costs to $1 million from $750,000. Three-quarters of a million sounds very low. $1 million is a little more realistic.

    more blindly pulling figures out of the air, trying to compensate for other errors ??

    Doing an honest assessment of the cost and viability of wind power is legitimate and important. Sadly, we only seem to have evangelical warmists or equally biased opponents of wind power.

    • He did call it a “back of envelope” assessment. I agree it is nit picking…. we all knew what he meant. OMG he used hr instead of h??? The horrors!

    • Greg – You put your foot in it by still wondering which site this is. You have to read the post before you criticize it.

    • I know I’m “knit-picking” but the term is “nit-picking”. Be sure you have all your bases covered when you’re criticizing others. Otherwise you will look silly and wrong.

  29. By all means the subsidy for wind power should be eliminated, so that wind power competes with other energy sources on a “level playing field”. There are some windy areas (such as New Zealand, pointed out by come commenters) where wind power is competitive or cheaper than other energy sources, but without subsidies, investors will be more selective about where wind farms should be located.

    The main problem with wind power is its intermittent nature, while consumers usually want power to be available whenever they turn on a switch or an appliance. Demand for electric power also fluctuates by season and time of day, but existing power companies know how to manage the grid so that power goes where it is needed, and the power output of a fossil-fuels plant can be adjusted up or down (within limits) to account for demand.

    Wind farms could have their usefulness if they could sell their power into an existing grid to power companies at the price the power company charges consumers (for the specific time of day according to demand), which would enable the power company to “turn down” their generators and consume less fuel during the time their grid is receiving power from a wind farm. But the rules need to be established so that neither wind farms nor fossil-fuel generating plants have an unfair advantage.

  30. I don’t see anything in there about crane rental for repair and maintenance or the hourly cost of labor working in high places. Did I miss that somewhere?

    • Resource Guy – I have no clue what the maintenance cost is – but had to put in something – so put in $1 million a year for all 27 turbines.

  31. This isn’t so very much unlike my plugin hybrid.
    One reason that it is cheaper to charge the hybrid via the power company and not just drive it as a hybrid is that the electrons I buy to charge it have a very low tax, unlike the gasoline. If I had to pay the equivalent tax on the electrons, charging the car wouldn’t make economic sense. Just drive it as a hybrid.
    If it were not for the tax credits, almost $10,000 on my car, it would not make economic sense to buy a hybrid rather than just buy a pure gasoline version.
    So, this fellow is just demonstrating in wind power that the govt has tipped the economic playing field to a particular type of technology. That will work as long as the govt can keep paying those subsidies.
    My take: Just take the govt money. You might as well get some, too.
    Save the outrage. I don’t make the law.

  32. Meanwhile … is ANYONE looking at the ‘stranded assets’ problem that will loom on the horizon in the not so distance future?

    Let’s pretend for a moment that someone invents a ‘box’, a box about the height and width of a refrigerator, maybe a bit shorter, that can be parked just outside the garage on a small concrete slab (like an A/C condenser) and can produce, oh, say, ~25kW for 1/2 hr periods and ~20 kW continuous, and requires just a Liter a day in fuel?

    Would this thing have a market?

    Would this thing, if sold in volume, affect the consumption, that is reduce consumption ‘off the grid’?

    Would this thing, if sold in sufficient numbers, eventually result in reduced need for a ‘grid’ at the HV interconnected transmission and substation level?

    Consider the above questions 20 years AFTER the fielding of such a device.

  33. Removing subsidies would be good but only if the mandates and grid priority is also ended. Do that and wind and solar would be down and out. Hand wringing over nickel dine issues like PTC pennies is a fools errand. Wind and solar is worth less than nothing providing off spec electricity at the wrong time and in the wrong amount. Germany has proven how damaging this grid poison can be. In Germany solar and wind provides a “substitution factor” of 5%. ..adding 1000 Mw nameplate of RE allows for the removal of 50 Mw of “FF”.

    • re: “BTW, How much does it cost (and how long does it take) to get a 2500 ton ton crane in to repair/ replace a turbine?”

      Does it depend on soil moisture content (are you driving on mud) and how fast a road bed can be laid down?

  34. The 2 cent per KWH production tax credit would pay the entire operations and maintenance budget for just about any nuclear plant in America. It is a HUGE amount of money.

  35. News from Ontario Canada. Wind and solar are not effective for reducing C02 emissions.

    Reference: “Ontario’s Electricity Dilemma – Achieving Low Emissions at Reasonable Electricity Rates”. Ontario Society of Professional Engineers (OSPE). April 2015.
    https://www.ospe.on.ca/public/documents/presentations/ontarios-electricity-dilemma.pdf

    Page 15 of 23. “Why Will Emissions Double as We Add Wind and Solar Plants ?”

    – Wind and Solar require flexible backup generation.

    – Nuclear is too inflexible to backup renewables without expensive engineering changes to the reactors.

    – Flexible electric storage is too expensive at the moment.

    – Consequently natural gas provides the backup for wind and solar in North America.

    – When you add wind and solar you are actually forced to reduce nuclear generation to make room for more natural gas generation to provide flexible backup.

    – Ontario currently produces electricity at less than 40 grams of CO2 emissions/kWh.

    – Wind and solar with natural gas backup produces electricity at about 200 grams of CO2 emissions/kWh. Therefore adding wind and solar to Ontario’s grid drives CO2 emissions higher. From 2016 to 2032 as Ontario phases out nuclear capacity to make room for wind and solar, CO2 emissions will double (2013 LTEP data).

    – In Ontario, with limited economic hydro and expensive storage, it is mathematically impossible to achieve low CO2 emissions at reasonable electricity prices without nuclear generation.

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