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Wind Economics

Before spending a great deal of money on wind energy you probably want to know if this is going to work for you or not. If so, this section is for you. It explains the relation between wind, electricity production, and economics. No advanced degree in corporate finance needed! The plan is to extend this with technical information as well in the near future, so check back in a bit. Meanwhile, you can find the following sections:

For a quick summary take a look at the table on the Scirocco page. It shows electricity production, cost per kWh, Return-On-Investment time, and profit or loss for business/farm as well as home use with net metering. This table was produced using realistic cost numbers and the current electricity price. If you want to know exactly where the numbers came from, they are explained in the sections below.

In case you are thinking about wind energy, also consider solar: Wind makes a wonderful complement to solar energy: When there is no sun there is often wind, when there is no wind the sun is usually shining bright.

 

Wind Energy Potential

Wind energy potential of a site is largely determined by its average, or mean, wind speed. If you have the opportunity it is a good idea to actually collect your own wind speed data, specifically for your site. Alternatively, for most larger places the meteorological office keeps wind speed data, then there are wind speed atlases that can fill in the blanks. While wind speed data can be measured at different heights, it is almost always recalculated and published as wind speed at 10 meters above the ground, in an area free of obstacles.

In addition, there is also the concept of "wind class" to quantify a site's potential for wind energy production. Classes are based on the average power available in the wind, and range from 1 ("Not enough wind to make any money") through 7 ("All your money will go to repairing your wind turbine"). Here is a table showing wind speeds and wind classes:

Standard Wind Class Definitions
Wind
Class
10 m height (33 ft)30 m height (98 feet)50 m height (164 feet)
Avg. Wind SpeedWind Power W/m2Avg. Wind SpeedWind Power W/m2Avg. Wind SpeedWind Power W/m2
 m/skm/hmphm/skm/hmphm/skm/hmph
10-4.40-15.80-9.80-1000-5.10-18.40-11.40-1600-5.60-20.20-12.50-200
24.4-5.115.8-18.49.8-11.5100-1505.1-5.918.4-21.211.4-13.1160-2405.6-6.420.2-23.012.5-4.3200-300
35.1-5.618.4-20.211.5-12.5150-2005.9-6.521.2-23.413.1-14.5240-3206.4-7.023.0-25.214.3-15.7300-400
45.6-6.020.2-21.612.5-13.4200-2506.5-7.023.4-25.214.5-15.7320-4007.0-7.525.2-27.015.7-16.6400-500
56.0-6.421.6-23.013.4-14.3250-3007.0-7.425.2-26.615.7-16.6400-4807.5-8.027.0-28.816.6-17.9500-600
66.4-7.023.0-25.214.3-15.7300-4007.4-8.226.6-29.516.6-18.3480-6408.0-8.828.8-31.717.9-19.7600-800
77.0-9.425.2-33.815.7-21.1400-10008.2-11.029.5-39.618.3-24.6640-16008.8-11.931.7-42.819.7-26.6800-2000

Keep in mind that wind classes are about average wind speed. While, for example, an absolute wind speed of 7 m/s contains 210 W/m2, a site with an average wind speed of 7 m/s contains about twice as much power in its wind. This is in part because of the way wind speeds over land are typically distributed (called a Weibull distribution), and in part because those times the wind blows harder than average contribute proportionally more to the power made from wind. Energy in the wind is related to the cube of the wind speed, so when it is blowing harder than average the wind will contain far more power than what's lost during the times the wind is blowing less than average.

So what do these wind classes feel like? Take a look at the next table:

ClassBeaufort ScaleWindDescription
10-3Calm - Light breezeSmoke rises vertically - Leaves rustle, vanes moved by wind
23Gentle breezeLeaves and twigs in constant motion
3
43-4Moderate breezeRaises dust and loose paper, small branches are moved
54
6
74-5Fresh breezeSmall trees begin to sway, crested wavelets form on inland waters

Again, wind class is about average wind speed, much of the time (especially in winter) it will be much windier than the mean wind speed. A class 3 site, which is considered by many to be the least amount of wind to be economically viable, will feel as if the wind is just about always blowing at a pretty good clip. The message to take home from the previous table is that good wind potential sites are very windy places indeed!

 

Predicted Electricity Production Potential

The next step is to determine how much energy we can expect from our wind turbine. Electrical energy is commonly measured in kilo-Watt-hours, or kWh, just as you pay the electricity company for the number of kWh you consumed. One kWh is the amount of energy used if you let 1000 Watt of light bulbs (=1 kW) burn for exactly one hour. In other words, kWh = load (in kW) * time (in hours). Knowing the mean wind speed, turbine height for your site, and turbine type largely determine how much the wind turbine is going to produce. The next table shows expected production for a few wind turbines:

Wind Turbine Monthly Energy Production
Wind
Class
60 ft tower (18 m)100 ft tower (31 m)120 ft tower (37 m)
kWh/monthkWh/monthkWh/month
 Eoltec
Scirocco
Bergey
Excel-S
Whisper
500
Eoltec
Scirocco
Bergey
Excel-S
Whisper
500
Eoltec
Scirocco
Bergey
Excel-S
Whisper
500
10-6700-7800-3500-8100-9500-4300-8600-10300-450
2670-960780-1150350-500810-1130950-1370430-600860-11901030-1460450-630
3960-11701150-1430500-6101130-13501370-1680600-7101190-14201460-1790630-740
41170-13301430-1660610-7001350-15301680-1930710-8001420-15901790-2040740-830
51330-14901660-1900700-7801530-16901930-2160800-8701590-17502040-2270830-900
61490-17201900-2230780-9001690-19102160-2490870-9801750-19802270-2590900-1000
71720-24002230-3140900-11601910-25402490-3260980-12101980-25802590-33001000-1220

Weibull factor=2, site altitude=sea level for all production numbers; Production derated 10% for turbulence

You should keep in mind that these production numbers are largely the maximum one can expect, and for the Whisper 500 very likely quite a bit more than the maximum, as this is based on a very improbably power curve supplied by the manufacturer. Many site-specific factors conspire to actually make it less: Turbulence, tower interference, cable losses, inverter losses, down time, etc. A very big one in this short list is turbulence. Wind is turbulent when the air is moving at different speeds and directions, creating swirls and eddies instead of flowing nicely parallel to the ground. Turbulence is very bad indeed for wind turbines, it not only kills energy production, it also causes excessive wear-and-tear on the wind turbine parts because it constantly has to speed up, slow down, and reorient itself. The rule-of-thumb to get away from turbulent air is to place the turbine at least 10 meters (30 feet) plus one blade length higher than the highest obstacle in a 100 meter (300 feet) radius around the turbine, and this should really be regarded as the very minimum. For that reason there is not much point in placing a turbine on a tower of less than 60 feet (18 meters).

As mentioned elsewhere; Pine Ridge Products in Montana has been flying a Scirocco on a 100' tower, next to a Bergey Excel-S on an equally high 100' tower. In the 1½ years both were up, they measured Scirocco production to be 87% of Excel production. Theirs is a high-wind site, for lower wind sites the expectation is that production of both would be even closer together.

 

Economic Return On Investment

The wind may be free, as they say, but it sure costs a lot to catch it! Wind turbines and their associated towers, inverters and so on are not cheap. Cost, and return on investment, are not everyone's main concern. Maybe you need a wind turbine to power your off-grid house, or lake-side cottage, and only care if there's enough energy in the wind to do so? In that case even wind class 1 can work fine for your needs. Possibly you place great value on clean, renewable energy, even if it is more expensive than the utility company. If so, cost may be secondary. On the other side, maybe you have a farm and simply need it to make money for you.

Now that we know what to expect in terms of electricity production, it is time to take a look at how long it will take to earn back our investment. Since we sell Eoltec Scirocco turbines, that is what we will use in these examples. We will go for a grid-connected application, no batteries. Here is our list of common expenses (an estimate, though it should be fairly close to reality):

 

Eoltec Scirocco wind turbine and inverter$25,995
106' guyed tilt-up tower and foundation$12,800
Wiring, turbine to inverter$900
PVC conduit$250
Electrical panel, breakers, switches  $850
Permits/zoning variance$1,000
Lightning protection$150
Shipping expenses$2,000
Labour$4,500
Total$48,445

 

The part that should be evident from this price list is that the wind turbine is just a small part of the total expenses. Such is the (sad) reality of wind energy.

The next bit is somewhat Ontario-centric, though it should not be hard to apply the same logic to your particular situation if you live in another province. Take a look at your latest electricity bill, and divide the amount you pay by the number of kilowatt-hours you used. If your bill is anything like ours, you are paying around 14.3 cents per kWh (quite a bit more than the 'official' rate of 6.7 cents per kWh!). If you are going to produce less renewable power than you consume, and you are currently paying effectively over 11 cents per kWh, it is to your advantage to go for net metering. This means you pay Ontario Hydro at the end of the year for the amount of electricity you used more than what you produced. The alternative is to make use of the Ontario Standard Offer Program (SOP). Under the SOP the utility will be paying you 11 cents for every kWh produced by wind with a contract term of 20 years, with some inflation correction thrown in. For small wind turbines it is almost always more profitable to go for net metering, so that is what we will use in the following examples. We will assume the current electricity price of 14.3 cents per kWh, which is the effective price as this is being written (September 2006).

Wind generators make more kilometres in a year than your car in its life time, therefore they need inspections, maintenance, and repairs. A commonly accepted number is that it will cost around 1 cent per kWh produced to keep the turbine running. In other words, we will offset 14.3 - 1 = 13.3 cents net for every kWh produced.

Scenario 1: The Farm

You have a farm and are looking at reducing your electricity cost. Your current tax bracket is 35%, and since you purchase this wind energy installation for business use it is 100% deductible the first year through the Capital Cost Allowance tax program. In other words, your net cost is $46,645 * 0.65 = $31,489.

Scenario 2: Home Use

For home use you will have to pay sales tax, but get the Ontario RST back, making for a total addition of 6% in GST tax, or $2,907 + $46,645 = $51,352.

With those cost numbers, the first calculation we can make is to show the cost per kWh over the lifetime of the system. The graph below shows just this. The wind speed is at hub-height, and it is assumed that the wind turbine has a life span of 20 years. For comparison, remember that the current electricity price (at the time this was written) is 14.3 cents/kWh:

The next table shows for the two scenarios above, per wind class, how much money can be produced per year, how long it takes to earn back the investment, and how much profit (if any) is made at the end of the 20 years. Incidentally, 20 years is also a reasonable expected life time for a good wind turbine.

Scirocco Wind Turbine Payback
Wind
Class
Annual ProductionScenario 1: The FarmScenario 2: Home Use
Payback TimeProfit or Loss After 20 YearsPayback TimeProfit or Loss After 20 Years
10-$1,29324 yr - inf.$-31,000 - $-6,00040 yr - inf.$-51,000 - $-25,000
2$1,293-$1,80317 yr - 24 yr$-6,000 - $5,00028 yr - 40 yr$-25,000 - $-15,000
3$1,803-$2,15515 yr - 17 yr$5,000 - $12,00024 yr - 28 yr$-15,000 - $-8,000
4$2,155-$2,44213 yr - 15 yr$12,000 - $17,00021 yr - 24 yr$-8,000 - $-3,000
5$2,442-$2,69712 yr - 13 yr$17,000 - $22,00019 yr - 21 yr$-3,000 - $3,000
6$2,697-$3,04810 yr - 12 yr$22,000 - $29,00017 yr - 19 yr$3,000 - $10,000
7$3,048-$4,0548 yr - 10 yr$29,000  - $50,00013 yr - 17 yr$10,000 - 30,000

Numbers based on the net metering offset price of 14.3 cents per kWh, minus 1 cent per kWh for maintenance, or 13.3 cents per kWh effectively

The moral of the table above is that for wind to be profitable you really need a windy site, and have to keep cost down. That means placing a turbine on a cheaper 60' (18m) tower, in an high-wind area with no obstructions so there is minimal turbulence close to the ground, possibly on top of a small hill where wind speeds tend to be higher than average.

In case of the home use scenario it should be clear from the above that one either needs a very windy site, or it is going to take a very long time before this investment has paid for itself. Not all hope is lost though, if you choose net metering  and electricity prices rise to more than the current 14.3 cents effectively per kWh, payback times will shorten drastically. Ontario Hydro is already paying over 40 cents per kWh wholesale during the peak-hours in summer (which they then have to sell to you for the official rate of 6.7 cents per kWh), so we think it is a pretty safe bet that electricity prices will go up drastically in the near future.

Scenario 3: Dreaming About The (Near?) Future - 25 cents per kWh

So what if electricity prices rise to 25 cents effectively per kWh in the near future, and you opt for net metering? You think this is a pipe-dream? Keep dreaming! All it takes is a doubling of current rates. If When that happens, what do our economic scenarios look like?

Scirocco Wind Turbine Payback
Wind
Class
Annual ProductionScenario 1: The FarmScenario 2: Home Use
Payback TimeProfit or Loss After 20 YearsPayback TimeProfit or Loss After 20 Years
10-$2,33313 yr - inf.$-30,000 - $15,00022 yr - inf.$-50,000 - $-5,000
2$2,333-$3,25410 yr - 13 yr$15,000 - $34,00016 yr - 22 yr$-5,000 - $14,000
3$3,254-$3,8888 yr - 10 yr$34,000 - $46,00013 yr - 16 yr$14,000 - $26,000
4$3,888-$4,4067 yr - 8 yr$46,000 - $57,00012 yr - 13 yr$26,000 - $37,000
5$4,406-$4,8676 yr - 7 yr$58,000 - $66,00011 yr - 12 yr$37,000 - $46,000
6$4,867-$5,5016 yr$66,000 - $79,0009 yr - 11 yr$46,000 - $59,000
7$5,501-$7,3154 yr - 6 yr$79,000  - $115,0007 yr - 9 yr$59,000 - $95,000

Numbers based on net metering offset price of 25 cents per kWh, minus 1 cent per kWh for maintenance, or 24 cents per kWh effectively

What this table shows is the power of locking in your electricity price at the time of installation. The effect of a rise in electricity prices on ROI can be very dramatic!

There are of course other reasons than those based on economics only for using renewable energy to power your home or business; Maybe you feel responsibility towards our environment and want to curb the addition you make in releasing greenhouse gasses? Maybe you want to go completely off-grid so you are no longer depending on your electricity company? Maybe you want to present your business as a green company? A wind turbine in your parking lot would certainly make that statement!

 

 
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