Economics from the Windicator

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The continuing rapid growth rate is not without its problems. Gaps in the supply chain are limiting wind turbine production at all the major manufacturers, who for months have been reporting full order books to 2008 and beyond. With demand outstripping supply, wind turbine prices are likely to continue rising, as already reflected in installed costs for completed wind farms. The average installed cost of EUR 1.2 million per megawatt in 2005 (Windpower Monthly, January 2006) is likely to be higher this year. Lower prices are still being reported, however, particularly for large projects and in the developing world. One consolation is that fossil fuel prices are still high and on an uncertain trajectory. With more stable generation costs, wind is now the preferred electricity generating option for a number of American utilities. The competitive position of wind is also being helped by the fact that interest rates are still generally low. That keeps electricity generating costs down, though it also keeps down the cost of nuclear, now emerging as a stronger competitor, at least in the eyes of some governments.

Progress in offshore wind is still disappointingly slow, although the contract prices for the electricity from the next two Danish offshore wind stations, at around EUR 65/MWh, are worth noting. The price does not include transmission costs and is based on a "public sector" discount rate, but it is roughly on a par with base load electricity prices in the UK. Base load electricity prices in Scandinavia are lower, but these are more influenced by hydro costs; the UK prices are strongly influenced by gas prices.

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