In 2010, wind energy competitiveness greatly increased

Oversupply and increased manufacturing efficiency. According to the most recent edition of the Wind Turbine Price Index published by Bloomberg New Energy Finance, this is why in 2010 all major wind farm markets registered a sharp fall in prices of onshore wind turbines.

The Bloomberg NE index examined more than 150 sale contracts of onshore wind turbines, for a total of nearly 7,000 MW in 28 countries around the world, focusing on Europe and the Americas. It was found that in the first half of the year the average price of wind turbines for the buyer was 980,000 €/MW (with peaks of 900,000), recording a 7% decrease over the previous year and a 19% drop compared with the peak reached in 2007-2008.

Specifically, UK, USA and Italy benefited the most from the reduced cost of wind turbines.

According to Bloomberg NE, wind energy generation cost has currently reached its all-time lowest point. In a number of wind installations located in areas with excellent wind conditions (in the US, Sweden, Mexico and Brazil), the current cost of generated energy (including capital and maintenance costs and excluding the effect of incentives ) roughly amounts to $68 per MWh (50 €). For comparison, according to Bloomberg updated average cost of coal power plants amounts to $67 per MWh and $56 MWh for gas-fired plants.

Dropping wind turbine prices may be uncomfortable for manufacturers, but it is good news for wind farm project developers and it further improves the cost-competitiveness of wind energy compared with gas and coal. The main conclusions of the analysis are:

• Global turbine contracts signed in late 2010 for delivery in H1 2011 and H2 2011 display very aggressive pricing, with average values at €0.98m/MW ($1.33m/MW). This is a 7% decrease compared to contracts signed in 2009 (€1.06m/MW) and 19% down from peak values in 2007-08 (€1.21m/MW).

• The decrease in the Wind Turbine Price Index is partly driven by a larger proportion of US based contracts compared to the previous issue of the Index (July 2010), but pricing remains aggressive in all parts of the world.

• Low-priced power-purchase-agreements in markets with exposure to electricity prices – rather than fixed feed-in tariffs – seem to have put further pressure on turbine contracts: Italy, the UK and the US all display average pricing well below €1m/MW for contracts signed in 2010 for delivery in H2 2011. The US presents the lowest pricing of all markets so far with values averaging $1.27m/MW (€0.93/MW).

• All manufacturers covered by the survey have displayed aggressive pricing, including several contracts for leading ("Tier 1") manufacturers – in some cases below €0.90m/MW ($1.22m/MW).

• The cost of electricity generated from wind power is now at record lows: several wind farm projects in high resource areas (US, Brazil, Sweden, Mexico) display a levelised cost of energy – excluding the impact of subsidies but after including the cost of capital and maintenance – below EUR 50/MWh ($68/MWh). This compares to current estimated average costs of $67 per MWh for coal-fired power and $56 per MWh for gas-fired power.

• Onshore turbine prices per MW of capacity are now for the first time lower than they were before the surge in steel and other commodity prices. The levelised cost of wind power has been driven down not only by lower turbine costs, but also by higher yields per MW of capacity.

• Procurement officers for the developers in the survey expect prices to stabilise around current levels for 2011 and 2012, with few further reductions in the near term. They expect gradual increases in pricing from 2012–13 as global demand recovers.

The Bloomberg New Energy Finance Wind Turbine Price Index includes the cost of turbines, as well as transport to site (marine and overland) but excludes VAT, construction and connection costs.

Michael Liebreich, chief executive of Bloomberg New Energy Finance, commented: “The latest edition of our Wind Turbine Price Index shows wind continuing to become a competitive source of large-scale power. For the past few years, wind turbine costs went up due to rising demand around the world and the increasing price of steel. Behind the scenes wind manufacturers were reducing their costs, and now we are seeing just how cheap wind energy can be when overcapacity in the supply chain works its way through to developers."