Category Archives: Finance

Case Study about the Financial Cost of Wind Energy

Executive Summary: The lifetime cost of wind energy is comprised of a number of components including the investment cost, operation and maintenance costs, financing costs, and annual energy production. Accurate representation of these cost streams is critical in estimating a wind plant’s cost of energy. Some of these cost streams will vary over the life of a given project. From the outset of project development, investors in wind energy have relatively certain knowledge of the plant’s lifetime cost of wind energy. This is because a wind energy project’s installed costs and mean wind speed are known early on, and wind generation generally has low variable operation and maintenance costs, zero fuel cost, and no carbon emissions cost. Despite these inherent characteristics, there are wide variations in the cost of wind energy internationally, which is the focus of this report.

The magnitude of the unsubsidized LCOE variation has been attributed to differences in countryspecific energy production, investment cost, operations cost, and financing cost. As expected, the largest LCOE impact from country to country was the anticipated energy production component that could be due to the inherent wind regime, site selection, wind turbine design, or other factors. Market forces such as electricity market structuring or the perception of risk in a wind project investment also impacted the LCOE through large variations in both capital expenditures and financing costs. Costs attributed to the operations of a wind project ranged broadly across countries and had a sizable LCOE impact as well, though caution with the reported data for operations and maintenance costs were common. The unique factors contributing to the variations in LCOE across countries are explored further in the comparative analysis and country-specific wind energy chapters of the report. Keep reading…