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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
  • The problem is that there are two different discussions going on here.

    If you're a climate change denier then it's purely a matter of cost.

    If you're not then it's an ALARP discussion - given the hazardous option of using fossil fuels the less hazardous alternatives should (in fact in UK law must) be used unless it is grossly disproportionate to do so. There's then the ongoing legal debate of what "grossly disproportionate" means, with figures of 10x cost to 100x cost being discussed (so if the higher end is taken, then if wind power cost 100x more but significantly reduced the CO2 emissions then it should be considered for implementation). Of course it's actually FAR more complicated than that, because if energy becomes more expensive there are other hazards introduced by that itself (energy poverty). But whether renewables are cheaper than fossil fuels is not the issue given an unnacceptable alternative. (But of course how to make them cheaper than they are is a useful discussion.)

Reply
  • The problem is that there are two different discussions going on here.

    If you're a climate change denier then it's purely a matter of cost.

    If you're not then it's an ALARP discussion - given the hazardous option of using fossil fuels the less hazardous alternatives should (in fact in UK law must) be used unless it is grossly disproportionate to do so. There's then the ongoing legal debate of what "grossly disproportionate" means, with figures of 10x cost to 100x cost being discussed (so if the higher end is taken, then if wind power cost 100x more but significantly reduced the CO2 emissions then it should be considered for implementation). Of course it's actually FAR more complicated than that, because if energy becomes more expensive there are other hazards introduced by that itself (energy poverty). But whether renewables are cheaper than fossil fuels is not the issue given an unnacceptable alternative. (But of course how to make them cheaper than they are is a useful discussion.)

Children
  • “If you're a climate change denier then it's purely a matter of cost.” If you are the one having to pay for it it is also a matter of cost. Money and resources are limited, it maybe that wind power is not the answer.

    ALARP is a complicated thing. I have to deal with it in my radiation protection work and as the risk isn’t properly quantified reasonable is not definable, the joys of the Linear No Threshold Theory.

    The same problem applies to defining the risk of fossil fuels and their effect on the future climate as well as the effect of the future climate on mankind. If you read the IPCCs scientific reports, not the political summaries the risk is actually reducing. The key value, Equilibrium Climate Sensitivity (ECS), is being reduced as the Assessment Reports progress. Maybe we do just have a climate problem not a climate emergency. The IPCC also does not see significant changes in various natural disasters over time. Perhaps we should keep using fossil fuels whilst we build up our nuclear power capabilities rather than wasting money and resources on a dash for wind?