Power costs compared

Complexity made simple: Just as fuel costs have a strong influence on the cost of fossil fuel generation, wind speeds have a strong influence on wind generation costs. For this reason, wind power prices are charted above against a range of wind speeds. Wind's generation cost is also a function of the capital cost of the wind plant. The more remote the site and the more difficult to access, the higher the capital cost. Low installed costs are most likely for projects built on easily accessible flat land and able to plug into nearby electricity wires. Conversely, high wind speeds are usually found at remote sites far from power lines and low wind speeds in more densely populated areas with developed grid networks. The four price curves for wind power shown above reflect the average cost of an installed wind plant at the high end of the capital cost range and at the low end of the range, both for onshore and offshore wind power in 2007.

Interest rates are another major influence. The use of low or high interest rates has a much greater impact on the generation costs of wind and nuclear power than on fossil fuel generation because of the former's relatively high capital costs. For fossil fuel generation, fuel prices are the important element. The onshore wind curve representing cheaper installed costs last year uses a capital cost of EUR 1.1 million/MW linked to a 5% interest rate to define typical low end generation costs at a range of wind speeds. The cost ranges from EUR 36/MWh at 8.5 m/s and moves up to EUR 66/MWh at 6 m/s. The onshore curve representing the more expensive wind plant costs from last year uses a capital cost of EUR 1500/kW and is linked to an 8% interest rate to define high end generation costs, which range from a low EUR 48/MWh at 9.75 m/s to EUR 80/MWh at 7 m/s.

For offshore wind the upper end of the generation cost range is defined by an installed cost of EUR 2600/kW and an interest rate of 12% to reflect the greater risk of going to sea. Generation costs range from EUR 192/MWh at 7 m/s down to EUR 112/MWh at 9.75 m/s. The lower offshore cost range uses an installed cost of EUR 2300/kW and an interest rate of 6% -- a possible lower bound once the technology matures. The indication is that offshore generation costs are set to range from EUR 80/MWh at 8.5 m/s up to EUR 151/MWh at 6 m/s.

Generation costs for the fossil fuels are based on quoted capital costs for newly installed plant ready for operation. An 8% interest rate is assumed. Gas comes in at around EUR 49/MWh and coal around EUR 41/MWh, before the cost of carbon abatement is added.