Wind Turbines Prices Have Begun to Show Signs of Easing

Increases in wind power prices and overall installed wind farm project costs mirror increases in the cost of wind turbines over the last several years.

Berkeley Lab has gathered data on 69 U.S. wind turbines transactions totaling 22,920 MW, including eight transactions summing to 1,674 MW announced in 2009.

Sources of transaction price data vary, but most derive from press releases and news reports. Wind turbine transactions differ in the services offered (e.g., whether towers and installation are provided, the length of the service agreement, etc.) and on the timing of future wind turbine delivery, driving some of the observed intra-year variability in transaction prices.

Nonetheless, most of the transactions included in the Berkeley Lab dataset likely include wind turbines, towers, erection, and limited warranty and service agreements.

Since hitting a low point of roughly $700/kW in the 2000-2002 timeframe, average wind turbine prices have increased by approximately $800/kW (>100%) through 2009.

The trend of increasing wind turbine prices also suggests that most of the rise in installed wind energy project costs reported earlier ($810/kW from 2001-04 through 2009) has come from wind turbine price increases.

Increases in wind turbine prices over this period have been caused by several factors, including a decline in the value of the U.S. dollar relative to the Euro, increased materials and energy input prices (e.g., steel and oil), a general move by manufacturers to improve their profitability, shortages in certain wind turbine components, an up-scaling of turbine size (and hub height), and improved sophistication of turbine design (e.g., improved grid interactions).

This is reflected in the fact that the majority of the largest wind turbine orders are located below the polynomial trend line, while the majority of the smallest orders are located above that line.

Though wind turbine price increases have been the rule for a number of years, evidence is beginning to emerge that those days have ended, at least temporarily. As reflected by the small number of recent data points on wind turbine transactions, visibility of wind turbine transaction prices has declined as the financial crisis has taken its toll and wind farm developers sit on turbine supply frame agreements that have exceeded near-term project development plans.

Energy and commodity prices have dropped since mid-2008, however, and the supply-demand balance for wind turbines has resulted in a turn towards a buyer’s market.

As a result, UBS (2010) estimates a 13% decline in average wind turbine sales prices in 2009, while Bloomberg New Energy Finance estimates that wind turbines delivered in the second half of 2010 are priced at a 15% discount relative to wind turbines delivered in the second half of 2008.

More favorable terms are also on offer for wind turbine purchasers, including lengthier servicing agreements. These price reductions and improved terms can be expected, over time, to exert downward pressure on total project costs and wind energy prices.

Wind Power Project Performance Has Generally Improved Over Time, but Has Leveled Off in Recent Years

Though wind turbine and installed wind farm project cost increases have driven wind power prices higher over the past several years, improvements in wind power project performance have mitigated these impacts to some degree.

In particular, capacity factors have generally increased for projects installed more recently, driven by some combination of higher hub heights, larger rotor diameters, and other technological advancements. At the same time, these performance improvements appear to have leveled off in the most recent time period.

This section presents excerpts from a Berkeley Lab compilation of project-level capacity-factor data. The full data sample consists of 260 wind farm projects built between 1983 and 2008, and totaling 22,366 MW (89% of nationwide installed wind power capacity at the end of 2008).

Focusing on a progressively larger cumulative sample of projects in each calendar year, figures demonstrates that average sample-wide wind power project capacity factors have, in general, gradually increased over time, from just over 24% in 1999 (for wind farm projects installed through 1998) to a high of nearly 34% in 2008 (for wind farm projects installed through 2007), before dropping to 30% in 2009 (for projects installed through 2008).

The general trend of increasing capacity factors may be due to a combination of factors, including – most prominently – the increasing hub heights and rotor diameters of more recently completed projects that also increase fleet-wide average wind turbine size over time.

Wind turbines with higher hub heights and with larger rotor diameters (relative to nameplate capacity) will tend to have higher average capacity factors.

The year-to-year variation in average capacity factors – and especially the large drop in average capacity factors in 2009 – is also caused by changes in the quality of the wind resource from year to year and by wind power curtailment.

-Wind Resource Variation: In part as a result of El Niño, the year 2009, for example, was considered to be a generally poor wind year throughout much of the United States, with average wind speeds below their long-term average over much of the country. The year 2008, meanwhile, was generally considered to be a good wind year. As a result, the large drop in average capacity factors between 2008 and 2009 is, in part, a reflection of natural yearly variations in national average wind resource conditions.

-Wind Power Curtailment: Increasing amounts of wind power curtailment in recent years also significantly reduced sample-wide average capacity factors in 2009. Curtailment of project output due primarily to transmission inadequacy (and, as a consequence, low wholesale electricity prices) is a growing problem, primarily in Texas, but also in other markets.

Due to transmission inadequacy, wind farm projects in West Texas (which represent a growing fraction of U.S. installations), for example, have been forced by grid operators to reduce their output (or have voluntarily chosen to do so in response to negative price signals in the wholesale electricity market). Roughly 17% of potential wind energy generation within ERCOT was curtailed in 2009, compared to 8% in 2008 and just 1% in 2007.

Curtailment was also experienced, to a much lesser degree, in other regions. In MISO, for example, roughly 1% of potential wind energy output in 2009 was curtailed. The national sample-wide average capacity factor in 2009 with curtailment was 30%. This sample-wide average capacity factor would have reached 32% if not for the curtailment experienced in ERCOT and MISO (and slightly higher were one to account for curtailment in other regions.

Individual wind farm project as well as capacity-weighted average 2009 capacity factors broken out by each project’s vintage (i.e., commercial operation date). The capacity-weighted average 2009 capacity factors in the Berkeley Lab sample increase from 21% for wind power projects installed before 1998 to roughly 26%-27% for projects installed from 1998-2001, 31% for projects installed from 2002-2003, and 34% for projects installed in 2004-2005.

Once again, higher hub heights and larger rotor diameters (particularly relative to turbine nameplate capacity) are likely to be largely responsible for these increases in capacity factors.

Projects installed since 2005, however, have in general bucked this trend of rising capacity factors among newer projects: the capacity-weighted average 2009 capacity factors for projects built in 2006, 2007, and 2008 were 28%, 33%, and 29%, respectively. Though further analysis would be needed to fully assess the reasons for this leveling of capacity factors, potential explanations include:

-Project Siting: Developers may be reacting to increasing transmission constraints (or even just regionally differentiated wholesale electricity prices, or siting constraints) by focusing on those wind farm projects in their pipeline that may not be located in the best wind resource areas, but that do have ready access to unconstrained transmission (or higher-priced markets or readily available sites without long permitting times).

-Technology Change: Though increases in average wind turbine hub height and rotor diameter have been substantial, those increases have moderated in recent years (as discussed in an earlier section), yielding a weaker technical push towards higher capacity factors.

Turbine Reliability: Some wind turbine manufacturers experienced blade and gearbox problems among their fleet of wind turbines installed in 2007 and 2008. Additionally, for the many projects completed in late 2008, the initial break-in period during which operational kinks are worked out may have extended well into 2009, negatively impacting 2009 capacity factors.

Trends in fleet-wide average capacity factors aside, the project-level spread shown is enormous, with 2009 capacity factors ranging from 16.6% to 43.5% among wind farm projects built in the same year, 2008. Some of this spread is attributable to regional variations in wind resource quality. Figures shows the regional variation in 2009 capacity factors, based on a sub-sample of wind power projects built from 2004 through 2008 (i.e., a period of relative stability in capacity factors).

For this sample of projects, weighted-average capacity factors are the highest in Hawaii (above 40% on average) and the Mountain region (around 35% on average), and lowest in the East (below 30% on average) and in Texas (around 26% on average). The relatively low 2009 average capacity factor in Texas is largely caused by curtailment within ERCOT: the ERCOT-wide 2009 capacity factor with curtailment of 25.8% would have been 31.1% were there no curtailment, an absolute difference of 5.2%.

All other regions feature weighted-average capacity factors in 2009 that are in the 30-35% range, which is similar to the national average among the overall 2004-2008 project sample. Given the small sample size in some regions, however, as well as the possibility that certain regions may have experienced a particularly good or bad wind resource year in 2009 or different levels of wind energy curtailment, care should be taken in extrapolating these results.

Though limited sample size is again a problem for many regions, figures illustrates trends in 2009 capacity factors for wind farm projects with different commercial operation dates, by region.

General Electric (GE) remained the number one manufacturer of wind turbines supplying the U.S. market in 2009, with 40% of domestic turbine installations. Following GE were Vestas (15%), Siemens (12%), Mitsubishi (8%), Suzlon (7%), Clipper (6%), Gamesa (6%), REpower (3%), Acciona (2%), and Nordex (1%). Other utility-scale (>100 kW) wind turbines installed in the United States in 2009 (and that fall into the “Other” category in Figure 9) include turbines from NedWind (6.5 MW), AAER (6 MW), DeWind (6 MW), Fuhrlander (4.5 MW), Goldwind (4.5 MW), RRB (2.4 MW), Elecon (0.6 MW), and Wind Energy Solutions (0.25 MW).

Primary authors: Ryan Wiser, Lawrence Berkeley National Laboratory, Mark Bolinger, Lawrence Berkeley National Laboratory. With contributions from Galen Barbose, Naïm Darghouth, Ben Hoen, and Andrew Mills (Berkeley Lab), Kevin Porter and Sari Fink (Exeter Associates), Suzanne Tegen (National Renewable Energy Laboratory).