Berkeley Lab Plots 2011-12 Decline in Wind Turbine and Operation and Maintenance Costs

---

Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar land, Texas)--A report from Berkeley National Lab in California shows that wind turbine prices have dropped significantly while technological advancements have continued to increase in hub height and rotor diameters.

Price data (which was announced from 1997 through 2011) was gathered for 96 U.S. wind turbine transactions that had a total capacity of 26,600 megawatts (MW). Twelve of the transactions from 2011 had a total of 2,630 MW.

After hitting a low of about $700 per kilowatt (kW) from 2,000 to 2002, average wind turbine prices increased by approximately $800 per kW (which was over 100%) through 2008 to an average of more than $1,500 per kW. The increase in turbine prices over this period was caused by several factors. The U.S. dollar declined in value relative to the euro. Materials, energy and labor prices increased. There was a general increase in turbine manufacturer profitability due in part to the strong demand growth and turbine and component supply shortages. Costs for turbine warranty provisions increased, and there were increases in turbine sizes, including the hub height and rotor diameter.

In 2011, turbine transactions were reported in the $1,150 to $1,350 per kW range, and in the first half of 2012, prices were reported in the $900 to $1,270 per kW range, depending on the type of technology. This fall in prices was accompanied by improvements in turbine technology, more favorable terms for purchasers, including reduced delivery lead times, and less need for large frame-agreement orders. Longer initial operations and maintenance contract duration improved warranty terms. More stringent performance guarantees were all favorable trends for purchasers.

Turbine prices peaked in 2008 and 2009, and installed costs only started to turn the corner in 2011. The lag between average installed project costs reflects the passage of time between the signing of an agreement and the actual installation and commissioning of the agreement.

In 2011, the capacity weighted average installed project cost was $2,100 per kW. This amount was down nearly $100 per kW from the 2009/2020 reported cost. The preliminary estimate for 20 projects that totaled 2,600 MW in 2012 suggests that installed costs will continue to decline as they follow lower turbine prices. From 2009 through 2011, Texas came out as the lowest-cost region, and New England was the highest-cost region. All other regions came close to the national average.

The report says that newer projects appear to show improvements in operation and maintenance costs, while stating that there are limitations in the underlying data. Operation and maintenance costs and premature component failure continue to be the key challenges for the wind power industry. A total of 4,339 MW (which covers 47 projects) is charted for 2011 operation and maintenance cost data. For 24 projects in the sample constructed in the 1980s, operation and maintenance costs were $33 per megawatt hour (MWh). This amount dropped to $23 per MWh for the 1990s projects and to $10 per MWh for the 69 projects installed since 2000.

The Berkeley Lab report gives sample detail and methods, which back the findings that are sometimes qualified as illustrative.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.