IEA report finds cost of wind energy dropping as technology improves

IEA Wind, a cooperative technology research and analysis effort of the International Energy Agency, has released a new report which confirms that the cost of wind power generated electricity in the U.S. and Denmark is at an all-time low due to performance improvements driven by advances in wind turbines technology.

As its title suggests, the report, "The Past and Future Cost of Wind Energy," is aimed at understanding factors which have influenced the cost of delivered wind energy in the past and using that information to estimate future cost trends. Researchers from the Lawrence Berkeley National Laboratory (LBNL) and National Renewable Energy Laboratory (NREL) worked on the report along with European analysts.

According to an announcement from LBNL’s Ryan Wiser NREL’s Eric Lantz, key findings of the report include:

"- Between 1980 and the early 2000s, significant reductions in capital cost and increases in performance had the combined effect of dramatically reducing the levelized cost of energy (LCOE) for onshore wind energy.

"- Beginning in about 2003 and continuing through the latter half of the past decade, wind power capital costs increased—driven by rising commodity and raw materials prices, increased labor costs, improved manufacturer profitability, and turbine upscaling—thus pushing wind’s LCOE upward in spite of continued performance improvements.

"- More recently, turbine prices have declined, but still have not returned to the historical lows observed earlier in the 2000s. At the same time, performance improvements have continued. As a result, modeling based on capital cost and performance assumptions from the United States and Denmark for projects expected to be built in 2012–2013 suggests that the LCOE of onshore wind energy is now at an all-time low within fixed wind resource classes, and particularly in low and medium wind speed areas. [emphasis added]

"- Recent capital cost and performance trends have underscored the need for a view of the cost of wind energy that equally weighs both trends in capital cost and performance, particularly when trying to understand future costs. The technology is now at a point where an optimal cost of onshore wind energy may result from little or no further capital cost reductions, but continued performance improvements (or alternatively from continued cost reductions and more-limited or no performance improvements).

"- The LCOE of wind energy is expected to continue to fall, at least on a global basis and within fixed wind resource classes. Performance improvements associated with continued turbine upscaling and design advancements are anticipated, and lower capital costs may also be achievable. The anticipated magnitude of LCOE reductions varies widely and will ultimately be determined by an array of technical and non-technical variables.

"- Estimates of the future cost of onshore wind energy have often been the result of an iterative process that incorporates some combination of historical trends, learning curve analysis, expert elicitation, and engineering modeling. A summary of available studies shows a wide range of estimates, with a 0%–40% reduction in LCOE expected through 2030 depending on the scenario. By focusing on the results that fall between the 20th and 80th percentiles of scenarios, the range is narrowed to roughly a 20%–30% reduction in LCOE.

Tom Gray,