This discussion is locked.
You cannot post a reply to this discussion. If you have a question start a new discussion

The True Cost of Wind Power

Wind power is often sold to us as the ‘cheapest’ option. With the current fossil fuel prices that may be the case, but is the quoted strike price of £40 per kWh really valid?

 

The wind turbine manufacturers appear to be struggling:

https://www.bloomberg.com/news/articles/2022-11-07/wind-giant-rues-promise-that-renewable-power-could-be-free

Manufacturers such as Vestas Wind Systems A/S are seeing losses pile up as orders collapse at a time when they should be capitalizing on the turmoil in natural-gas markets. To blame -- at least in part -- is the industry’s insistence that clean electricity can only get cheaper, according to Henrik Andersen, chief executive officer of the Danish wind giant.

Vestas expects its profit margin to be around -5% in 2022.

“The output from the turbine has never been more valuable,” Andersen said. “But we are losing money in manufacturing a turbine.” Vestas has raised prices more than 30% in the past year to help stem losses.

 

New installations no longer seem to be viable at the agreed prices:

https://newbedfordlight.org/major-massachusetts-offshore-wind-project-no-longer-viable/

A major offshore wind project in the Massachusetts pipeline “is no longer viable and would not be able to move forward” under the terms of contracts filed in May. Both developers behind the state’s next two offshore wind projects are asking state regulators to pause review of the contracts for one month amid price increases, supply shortages and interest rate hikes.

Utility executives working with assistance from the Baker administration last year chose Avangrid’s roughly 1,200-megawatt Commonwealth Wind project and a 400 MW project from Mayflower Wind in the third round of offshore wind procurement to continue the state’s pursuit of establishing cleaner offshore wind power. Contracts, or power purchase agreements (PPAs), for the projects were filed with the Department of Public Utilities in May.

 

I have previously looked at the viability of the Dogger Bank Wind Farm. This is all taken from the official Dogger Bank website:

doggerbank.com/.../

The project is designed in three similar phases but I will just look at one phase:

 

Installed capacity 1.2 GW

Expected annual output 6 TWh

Cost £3 Billion

Strike price £40 per MWh.

Expected Service life not mentioned.

Nameplate output 1.2 x 8760 GWh per year =  10 512 GWh per year = 10.5 TWh per year.

An expected annual output of 6 TWh gives a capacity factor of 57%. Is this realistic?

What will they earn at the strike  price?

6 TWh at £40 per MWh  = £240 Million per year.

Straight payback of £3 Billion in 12.5 years.

 

So with no costs for maintenance, no interest or dividends paid and a very optimistic capacity factor there is a 12.5 year payback on an asset with a 20-25 year lifespan (no one really knows). That is simply not a valid business model. A more realistic strike price is £80-100 per MWh which takes you into the NPP range.

How much of the low strike price has simply been gambling on higher electricity prices and then taking the market rate?

Does anyone have any more encouraging figures?

Parents
  • I’m really not sure which is why I raised the point.

     If £40 per kWh is a true cost then there is some headroom to pay for storage or backup systems and it is a viable source of electricity.

    If £40 per kWh is a non-viable ‘Political’ strike price to be competitive with fossil fuels then there are going to be a lot of bankruptcies that will have to be bailed out by the taxpayer. With the current high energy prices there are probably ok although they are not looking forward to a ‘windfall’ tax.

    ‘Energy firms warn against extending windfall tax to renewables’

    https://www.bbc.com/news/business-61566083

    The Dogger Bank information suggests that if maintenance costs and interest on £3 Billon are taken into account £40 per kWh is not viable, especially with rising interest rates.

Reply
  • I’m really not sure which is why I raised the point.

     If £40 per kWh is a true cost then there is some headroom to pay for storage or backup systems and it is a viable source of electricity.

    If £40 per kWh is a non-viable ‘Political’ strike price to be competitive with fossil fuels then there are going to be a lot of bankruptcies that will have to be bailed out by the taxpayer. With the current high energy prices there are probably ok although they are not looking forward to a ‘windfall’ tax.

    ‘Energy firms warn against extending windfall tax to renewables’

    https://www.bbc.com/news/business-61566083

    The Dogger Bank information suggests that if maintenance costs and interest on £3 Billon are taken into account £40 per kWh is not viable, especially with rising interest rates.

Children
  • The point Roger is that it is certainly not viable. £40 per MWh (you keep saying kWh, which is probably where we shall end up at this rate!) comes with a huge assumption, and that unfortunately is that they will always be paid a lot more than this. The pricing model is very flawed indeed, and the idea that wind has precedence over any other source is clearly ridiculous. Look at the plan from an accountants viewpoint (not mine):

    Wind is given the principal source of electricity, other available sources are shut down due to cost and legal constraints and political pressure.

    Overall failure of the system and blackouts will be seen as "good" because they reinforce the idea that energy use is "bad".

    The economy begins to suffer big time, so much more (taxpayers) money is provided to make wind more profitable and expand.

    The price of electricity goes through the roof, and profits roll in very fast (as is happening this year due to high gas prices).

    The question is therefore "how can we prevent fossil fuels from filling the gap?". Simple. Government and opposition policy is both no fracking and no coal mining. The accountants have succeeded already due to, in my and many others with a scientific background, political lies, misinformation, censorship, and a completely compliant MSM. The UK future is indeed very bleak unless we can show the problem, which Engineers have predicted for many years, much more widely. Blackouts may do that to some extent, but will be blamed on something else entirely, perhaps Covid or Russian wars, but certainly not on useless energy policy.