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Economics from the Windicator
1 January 2009
The collapse of oil prices has weakened the economic argument for green power, but low oil prices are not expected to last for long. Moreover, as our annual analysis of power generation costs in this issue reveals, the lowering of interest rates that is accompanying the general financial turmoil will benefit wind more than the fossil fuels. A 2% reduction in project interest rates brings down generation costs by about 12% for wind, but only by about 5% for coal. Further improvements in wind economics are also likely to result from the big investment in research and development (R&D) being undertaken by the likes of Siemens and GE Energy as well as by the big pure-play wind turbine producers like Vestas and Gamesa. Governments, too, are likely to put more money into R&D programs as part of their economic rescue packages. Wind turbine technology is far from fully developed, as ongoing evolution of drive-trains illustrates (Windpower Monthly, November 2008). The potential for costs to come down is there.
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