Once government subsidies are removed, can wind power, on average, compete on a large scale with traditional power sources?
Assuming a market rate of $.10/KWh, and the wind farm is located on the prairies in an area with plenty of wind, what kind of profits would there be?
Hi, I’m Erik Astrand and the man behind this site.
My story? I am about to be 50 and all my life I have been interested in technical things. Not sure if the special interest for the wind, and how to use the wind, started when I as a 5 year old boy and got my first sail dinghy.
Anyway, wind power and to build my own wind generator was a dream for several years. I studied many websites and also bought many courses before I finally built my own windmill. This site is about that journey and you will also find some more general articles about wind power.
Enjoy! and check out the about me page to read more.
Wind power is profitable, although it takes a while to be.
And… how far is that prarie away from a city?
Eventually, the wind turbines would pay for themselves. However, they are very expensive, about $70,000 to power a home. Then, they need repairs every three to five years. However, eventually it will pay for itself, and it is good to be independant when it comes to energy.
Assuming you paid them $0.10 for their power, then yes they would be. But the wholesale rate for electricity is generally lower; maybe half that.
For example, the Roscoe wind farm cost about $1.25m/MW of capacity. Assuming wind resources are UK average, the capacity factor will be bout 30% (UK average is 28-31% depending on year). Therefore each MW will generate about 2.62 million kWh/year, or $262k/yr.
The Danish Wind Energy Association claims that maintenance costs are under 3% of initial outlay, so you should expect that over a 25 year life, excluding decommissioning costs and assuming $0.10/kWh, a wind turbine has a yield of about 8% annual return, assuming that you put aside the maintenance money at the beginning, an annual rate of interest of 3% and a rate of electricity inflation of 3%.
Assuming $0.05/kWh, then the rate of return is just under 5% over the 25yrs.
In general, coal is cheaper than wind without subsidy; but we can’t really tell how much. In the US, the subsidy is equivalent to about 1.2 cents/kWh, and that has led to an explosion of wind power. Since I’m not aware of any countries that have large wind power without some kind of encouragement, I can’t think of any empirical data to show just how competitive wind is.
That said, there are very good reasons for either taxing coal or subsidising wind. Coal adds social costs in terms of billions of dollars in healthcare and agricultural damage from air pollution plus the social costs of climate change. Considering these costs are typically estimated at between 1-10 cents per kWh, the US subsidy looks justified to me.