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Wind Econonics: Changing returns on small-scale wind

UK: The UK Department of Energy and Climate Change (Decc) is proposing to reduce the feed-in tariffs for small-scale renewable-energy sources. Decc commissioned a report from consultants Parsons Brinckerhoff that analysed the costs and performance of small-scale systems.

For wind, the report studied capital costs, operating costs, wind speeds, capacity factors and the target rates of return used by developers. The data was analysed in seven capacity bands: projects smaller than 1.5kW, 1.5-15kW, 15-50kW, 50-100kW, 100-500kW, 500-1,500kW and 1,500-5,000kW.

The study reveals the average capital costs, as indicated in the chart, top. In the 1.5-15kW capacity band (average size 7.8kW) the cost was £3,991/kW ($6,106/kW), which fell to £1,103/kW ($1,688/kW) for the 1,500-5,000kW category (average size 2,911kW). The report also acknowledges that the 80kW (50-100kW capacity band) figure appears quite low relative to the overall trend.

Operation and maintenance costs also fall with an increase in project size. For the smallest size band (1.5-15kW), the central value was £66/kW a year, falling to £27/kW a year in the size bands above 500kW. In all cases there was a wide spread of values, approximately 33% above and below the central value.

Load factors are tabulated as a function of wind speed in each of the size bands. For machines in the 1.5-15kW size band, these range from 14% at a wind speed of 5.5m/s to 29% at a wind speed of 8m/s. In urban areas the corresponding load factors were lower. The larger size bands had higher load factors; for 500-1,500kW machines they ranged from 13% at a wind speed of 5.5m/s to 31% at a wind speed of 8 m/s.

Generating costs

Generating costs are not given, but sufficient information is provided to calculate them. There is a very wide range. For the smallest machines, 1.5-15kW, and based on the mid-range cost, a typical wind speed and the mid-range target rate of return, the generating cost is about £373/MWh ($574/MWh). However, using the lower end of the cost range and a lower rate of return, the cost falls to £203/MWh ($313/MWh). For machines in the 100-500kW size range the corresponding costs are £176/MWh ($269/MWh) and £82/MWh ($125/MWh), respectively.

Decc has now issued its proposals for revision of the feed-in tariffs. These have caused some consternation in the renewables industry since the levels are much lower than previously, as the figure shows.

From a peak of £280/MWh in 2011/12, the tariff for the smallest machines (1.5-15kW) fell to £160/MWh in 2014/15, and the latest proposal would almost halve this figure, to £86/MWh. For machines in the 100-500kW size range, the latest proposal would see the tariff fall to £45/MWh. When the scheme started there were six size bands, but the latest proposals have only two: less than 50kW and 50-1,500kW.

An "export" tariff, of £48/MWh is payable in addition to the "generation" tariff and this boosts revenues. In setting the tariffs, the government has also taken into account the savings that residential and small industrial consumers will make. The former will save around £163/MWh and the latter around $101/MWh. Despite the tariff cuts, the government estimates that 170MW of small wind will be commissioned in the financial year 2015/16 and the cumulative total by 2020/21 (central case) will be 1,440MW, generating 3,370GWh annually.

At a glance —  This month's report conclusions

Small-scale Generation Cost Update, by Parsons Brinckerhoff for UK Department of Energy and Climate Change. August 2015 Capital cost and O&M costs for small-scale renewable energy systems fall as project increases in size. Government proposes limiting size categories from six to two, and cutting feed-in tariffs by almost 50% to tariff to £45/MWh for 100-500kW machines.

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