How Quickly Does a Wind Turbine Pay for Itself?
The answer to the question of “how quickly do turbines pay for themselves?” depends on several factors, including the turbine’s size and its operating conditions. Several factors affect the price of wind power, including the winds at a particular location. Tax credits and the payment structure for wind power impact turbines’ payback period, too. All factors considered, wind energy is one of the lowest costs of electricity in the United States behind natural gas, with a payback period of less than one year in some instances.
What is the Average Cost of Electricity?
In the United States, the average cost of electricity is 12 cents per kilowatt-hour (kWh). The total cost of electricity includes the transmission wires that carry the electricity generated from the wind turbine, the price of generating power, and the costs associated with the utility company to run its business. Without adding all these factors into the equation, the actual cost of generating power is much lower across the country. Nationwide, the average cost of electric power generation is two to four cents per kWh. Wind power competes with the cost of electric power generation alone rather than the overall cost of electricity.
Power Purchase Agreements
Most wind energy is derived through a Power Purchase Agreement, which is a third-party contract where any excess power generated by the turbine is purchased by a third party, such as a utility company. In the United States, most turbine power purchase agreements are located in the Midwest and interior of the country. The Western states contain the second highest volume of Power Purchase Agreements, while the Great Lakes region has the third highest volume of Power Purchase Agreements. The volume of Power Purchase Agreements in a given area impacts the cost of wind power in that region. Recently, a high volume of wind power has been produced at a cost of two cents per kWh in the country’s interior, which is some of the most competitive pricing compared to the rate of wholesale electricity.
Federal Tax Credits
Federal tax credits are another factor that enable turbines to pay for themselves sooner. In the United States, the production tax credit, which is a federal tax credit, creates a tax subsidy in the range of 18-23 dollars for every megawatt hour (MWH) that a turbine generates. With the levelized cost of electricity (LCOE) and the production tax credit eliminated, the cost of wind power generation is about five cents for every kWh. In comparison, the LCOE of natural gas, which is another one of the cheapest sources of electricity, trails much farther behind at 54 dollars per MWH, which translates to about 5.4 cents for every kilowatt hour.
Ultimately, turbines pay for themselves over time. The turbine’s location, average wind speeds in a given area, and the availability of federal tax credits are some of the key factors influencing payback time.
Categorised in: Latest Wind Power Industry News - Kurz Wind Division
This post was written by Matt Passannante