The cost of wind energy has fallen significantly in the past couple of years

Wind farm construction costs come down. The cost of wind turbines has fallen significantly in the past couple of years, down about 15 per cent to 20 per cent, making wind power more attractive, according to the Wind Energy Association.

The New Zealand dollar has also risen strongly against the euro, also reducing the construction costs of wind power projects, with most wind turbines bought from Europe.

However, with flat demand for power in New Zealand following the recession and the global financial crisis, and several large new power stations, electricity companies are not rushing to build more wind farms.

Last week, Contact Energy won an appeal to build a $400 million wind farm near Dannevirke, with a five-year lapse time for the consent. But Contact has not given a firm date for the wind farm project to be built, other than "when market conditions allowed".

One independent energy consultant doubted it would ever be built because it was not commercially viable, with estimated cost of production equal to about 12c a kilowatt hour. That assumed $3000 to $3500 a kilowatt to build a wind farm.

But Wind Energy Association chief executive Fraser Clark said wind was one of the lowest cost options for power, with lower international turbine prices bringing construction costs well below that level.

New Zealand was alone in being able to build economically competitive wind farms without government subsidies, given high wind speeds.

Mr Clark expected Contact’s Dannevirke project to go ahead. "It has a good enough wind resource to [go ahead]," he said. "I imagine it will see some progress [within five years]."

However, at present hydro lakes were relatively full, and electricity demand growth was flat after the recession. There had also been a number of large new power stations and wind farms built in recent years, including Meridian’s 142MW West Wind near Wellington, completed last year. Mighty River Power’s 140 MW Nga Awa Purua geothermal station near Taupo was completed this year.

"The sense around the industry is that there is no need (for more generation). Things are relatively rosy," Mr Clark said.

Meanwhile, Mighty River Power is still waiting for a decision on its Turitea wind farm nearly nine months after a government board of inquiry finished. The project was "called in" by the Government in an effort to speed up the process for the 104-turbine project near Palmerston North, but the city’s mayor, Jono Naylor, said the delay was "absurd".

But Mr Clark said wind projects were being built that competed with geothermal costs, such as Meridian’s 64 MW Te Uku wind farm and TrustPower’s 36 MW Mahinerangi.
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"They are competing directly against geothermal," Mr Clark said. TrustPower’s Mahinerangi wind farm, for example, will cost about $75m, equal to about $2100 a kilowatt, for a 36 MW project.

The generally accepted range for development costs of wind farms is between 8c and 12c a kilowatt hour, with projects at the lower end of the range moving ahead.

Figures from the United States Energy department showed wind power costs last year averaged just more than US$2000 (NZ$2760) a kW of capacity.

But since the global financial crisis, demand for turbines had dropped, at the same time as companies had ramped up production to meet earlier demand.

A recent Bloomberg report said the median price for turbines ordered in the first half of this year was equal to US$1400 a kw, down from about US$1800 in 2008. Bloomberg expected prices to keep dropping next year.

"There is some pretty sharp pricing, as companies see the opportunity to squeeze smaller competitors out," Mr Clark said. As well, prices for materials such as copper and steel had fallen back from previous peaks.