The cost of electricity from onshore wind energy will drop 12% in the next five years, making it competitive with fossil-fuel electricity by 2016, according to research from Bloomberg New Energy Finance (BNEF).
This price drop will be driven by a mix of lower-cost equipment and gains in output efficiency, BNEF says. The best wind farms in the world already produce power as economically as coal, gas and nuclear generators, and the average wind farm will be fully competitive by 2016.
BNEF estimates that onshore wind turbine manufacturing will display a 7% ‘experience-curve’ (i.e., a 7% cost reduction for every doubling of installed capacity) as economies of scale and supply-chain efficiencies reduce costs.
Global average turbine prices have fallen in real terms from 2 million euros/MW in 1984 to below 880,000 euros/MW in the first half of this year. In 1984, there were only 300 MW of installed wind capacity in the world, but by the end of this year, there will be over 240 GW installed.
The second factor driving down the price of wind generation is that the power output achieved by each turbine as a percentage of nameplate capacity has been rising steadily. This has been driven by the long-term move to bigger and taller turbines, better aerodynamics, better controls and gearboxes, as well as improved electrical generation efficiency. These improvements have increased capacity factors by 13 percentage points to 34% over the past 27 years, BNEF notes.
The operations and maintenance cost of wind farms has also decreased in real terms, on average, over the lifetime of the projects, as operators have become more experienced and the quality of turbines has improved. As a result of these improvements, BNEF adds, 1 MW of today's more efficient and taller wind turbines can be expected to deliver 2,900 MWh a year, compared to only 1,800 MWh of electricity per year for 1 MW of wind capacity built in the 1980s.
Taking these factors together, the levelized cost of energy (LCOE) produced from onshore wind turbines has fallen by 14% for every doubling of installed capacity between 1984 and 2011, according to the BNEF research. The LCOE from onshore wind has fallen over this time period from 200 euros/MWh to 52 euros/MWh.
This is only 6 euros/MWh more expensive than the average cost of a combined-cycle gas turbine plant in 2011, BNEF notes. That figure for gas-fired power excludes the cost of carbon emitted – if that were included, wind would already be at grid parity.
Due to structural overcapacity and growing competition in the wind industry, BNEF expects turbine prices to continue to fall over the next few years. At the same time as designers roll out yet larger turbines with longer blades designed to capture more energy – even in low-wind locations – capacity factors will continue to increase. These two changes will drive the cost of wind energy down further, to parity with conventional energy sources.
Any increase in the cost of gas, which will consequently raise the cost of energy of gas-fired turbines, would bring forward the timing of grid parity for wind, BNEF notes.
