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Costs - 'Silent revolution' for onshore wind

NORTH AMERICA: Over the next two decades, onshore wind power will continue to see steady adoption globally as it becomes increasingly more cost-competitive.

Onshore wind is already moving beyond the need for subsidies such as feed-in tariffs, and will become part of the "mainstream" energy mix sooner than many expect, the authors of a high-profile report argue. What's Next for Alternative Energy? is published by Boston Consulting Group, a respected global management consultancy firm.

"There is a silent revolution under way," says Balu Balagopal, a senior partner at the group and lead author of the report. "A lot of progress has been made to steadily drive down the cost of feasibility."

Cost-competitive

The revolution comes in spite of the recession, uncertainty and variability in global climate and renewable energy policies, fluctuating hydrocarbon prices, and despite hurdles such as lack of transmission and permitting delays. Indeed, wind is already cost-competitive in many instances, Balagopal notes. Generation costs have declined substantially over the years.

"Given the relative maturity of the technology, cost declines for onshore wind will be incremental in nature," says the report. Today, prime wind sites can deliver a levelised cost of energy (LCOE) of $0.09 or $0.10/kWh. This is defined as the present value of building and operating generating a plant over its economic life. "We expect an approximately 15% reduction (in cost) by 2015, which would drive onshore wind power's LCOE to $0.07 to $0.09/kWh for prime sites and to roughly $0.10/kWh for less attractive sites," continues the report.

But the penetration of variable power - such as wind - is limited to no more than 20-25% of the total electricity on the grid, says Balagopal. Controversially, the authors cite the example of Texas in 2008, when wind generation output fell from 2,000MW to 360MW over the course of 3.5 hours.

Wind has, however, largely been vindicated in this instance. Blackouts were prevented, although the Texas grid operator did declare an emergency. The grid operator had employed poor forecasting. Several non-wind power plants were unexpectedly unavailable.

The authors also cite a Greenpeace report that describes Denmark's 20% wind penetration without disruption as "unique" because "Denmark benefits from a nearby abundant and flexible hydropower resource".

But the National Grid in the UK in 2008 studied a 40% penetration and concluded it could be done at a cost of £3.50 to £7.00/MWh ($5.50 to $11.00/MWh), only an extra 5-10% on the cost of generating onshore wind. Thermal power plants would just have to ramp up and down more often, a cost included in National Grid's estimate.

But Balagapol disagrees with National Grid's assessment, maintaining that such a scenario is not cost-effective. "The 40% penetration is not consistent with our view," says Balagopal.

Slow uptake offshore

The report is less than bullish on the prospects for widespread adoption of offshore wind over the next decade, which it says will be adopted only slowly. That's because it is still nascent and has "challenging economics" including higher capital costs and higher maintenance costs due to remote locations. Its LCOE is $0.15 or $0.16/kWh. "We expect that, for the most favorable locations, offshore wind's costs will drop to $0.12 or $0.13/kWh in 2020," it continues. "However, its slow progress to cost-competitiveness means that offshore wind will not likely exit the subsidy-driven phase by 2020."

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