When I was recently considering an investment in wind energy, I wondered how much a wind turbine can really make in a year. So, I pulled up some statistics to find out the realistic profits for each machine.
How much money does a wind turbine make in a year? Wind turbines can make anywhere from $3,000 to $10,000 per year, depending on the kilowatt capacity and the payment terms of each individual agreement.
There are many ways to invest in wind turbines and make money off of the wind energy industry. With various factors that affect the profitability of each turbine, there is plenty of potentials to grow your revenue with the right investment.
The Average Cost of a Wind Turbine
When purchasing a wind turbine, there are a few separate costs to consider that will affect the machine’s profitability. The average price of a 10kW wind turbine is about $40,000 for the machine itself, calculated at a rate of $3,000 to $4,000 per kilowatt.
The cost for delivery and set up of the turbine will usually bump the price of the project up to $50,000 or even as high as $65,000.
Maintenance for each turbine is necessary at least twice a year to extend the life expectancy of the machine and ensure that all parts are working properly.
Extreme weather conditions and high levels of turbulence in the location of the turbine can slow down production and dig into profits if the issue is not addressed as quickly as possible. The average cost of maintenance is an estimated 2 percent of the purchase price per year.
This is most commonly paid at a fixed price per year, with some payment agreements calculating $0.01 per kilowatt hour. The same 10 kW turbine would produce approximately 16,000-kilowatt hours per year to be calculated at that rate.
When it comes to damage and regular wear and tear of wind turbines, additional maintenance is required for new parts. To replace a rotor, it will cost about 20 percent of the original purchase price. This process is absolutely necessary to reach the maximum efficiency and life expectancy of each machine.
Repair and routine maintenance costs will generally be cheaper for new machines and more for older ones because they will require more attention. Smaller scale turbines such as residential ones are cheaper as well but will have a slightly higher price per kilowatt of energy.
Also, keep in mind that the overall cost of a wind turbine project can be significantly lowered due to tax credits that can be applied from the purchase.
Wind Turbine Return on Investment
The return on investment period for a wind turbine depends on a variety of factors including size, location, and energy capacity. Some of these machines will have great return rates, while others will be significantly slower.
Take into consideration a smaller turbine that might be located on a farm or residential property that has a capacity of 5 kW or less. Considering the purchase price and yearly maintenance costs, this specific turbine would end up paying for itself after a period of 15 years or less.
Since the average life expectancy of a wind turbine can be anywhere from 20 to 25 years with proper care, this will mean that the 5 kW turbine would live out its remaining 5 to 10 years paying for itself.
Another turbine with a larger capacity such as a 15 kW machine, for example, would pay for itself in about 45 years, which is over 20 years after its expected lifetime.
Considering these calculations, the longer payback period for a machine with a wider energy capacity could exceed its lifetime and would most likely not last long enough for its owner to see a full return on investment.
However, the majority of wind turbine owners reported a net benefit in as little as 6 months to 1 year after the initial purchase. The energy return and consistent flow of payments generated by each turbine offers a substantial reward to owners and doesn’t make it a bad investment overall.
Power Purchase Agreement (PPA)
Wind turbine owners are usually paid through a contract called a Power Purchase Agreement, or a PPA. This is a long term agreement between the generator and consumer, where bulk amounts of energy are purchased up front with payment terms that are agreed on between both parties.
These agreements are beneficial to both sides because the owner can count on a steady stream of income coming in from their wind turbine, while the consumer has low payments on a set schedule and knows exactly what to expect throughout the entire term of the agreement.
Since the PPA is a legally binding contract, there are no additional fees that will pop up throughout the duration of electricity use for the consumer.
For the consumer, the prices of wind energy will fluctuate depending on the size of the facility and the energy capacity that is used each year. For residential wind energy use in a single family home, for example, would cost approximately 5 cents per kilowatt-hour.
The average home will use a little over 10,000 kilowatt hours each year, which would translate to a payment of as low as $500 spread over a period of 12 months. In comparison to other forms of electricity that average about 12 cents per kilowatt hour, the cost of wind energy is significantly lower.
In fact, it is more than 50 percent less than non-renewable sources such as fossil fuel power plants.
Average Yearly Revenue for a Wind Turbine
There are a few different ways to get paid from the use of wind turbines. First of all, farmers with already existing farms can gain revenue without even purchasing the turbines. This happens when someone else pays them for the ability to use their land to build wind turbines.
The lease term usually allows for a 3 to 5 year period that the renter is allowed to continue building wind turbines on the space, and can pay up to $10 per acre of land.
Payment terms vary for each contract, but they can be calculated by energy capacity or a flat rate for each turbine. Most of these leases last as long as the wind turbines’ expected lifetimes which can be up to 25 years.
On the other hand, if the owner of the land is also the owner of the wind turbine, they can make yearly revenue from the person who consumes the energy.
Depending on the individual terms of the Power Purchase Agreement, the average wind farmer can make $3,000 to $8,000 per year for the electricity that is produced by each turbine. This amount can be increased to upwards of $10,000 for larger utility-scale turbines with a capacity of two megawatts or more.
Likewise, when multiple turbines come into play at once the owner’s revenue will increase accordingly. The yearly revenue generated by 5 wind turbines instead of one could multiply the owner’s income from $3,000 to $15,000 per year.
The average wind farm has the capacity to hold anywhere from 5 to 150 wind turbines at once. One of the biggest United States wind farms is located in Northern California and is home to almost five thousand wind turbines.
The amount of money that can be generated by a wind turbine or entire wind farm is dependent on many factors with high potential for expansion and increase in profits.
To conclude, the average yearly revenue and rate of return on investment are fairly decent for most types of wind turbines. Contingent on the size and capacity of the machine that is chosen, there is great profit to be made on wind turbines as well as wind farms that are full of them.
What is the Expected Lifetime of an Average Wind Turbine?
The average lifetime that is expected for a wind turbine depends on the quality and age of the machine as well as the climate in the area. Locations with higher winds can cause premature damage and shorten the life span of a wind turbine.
Offshore turbines, however, tend to endure much less turbulence in the air than an onshore machine, which limits the wear and tear that comes with high-speed winds. These types of turbines will generally extend toward the higher end of the 20 to 25-year life expectancy spectrum.
What Kind of Tax Incentives Are Offered For Wind Turbine Purchases?
In recent years, it has been reported that the tax credit for wind turbines can cover up to 30 percent of the purchase price including delivery and installation. This applies to one main location as well as an additional place if necessary.
There are no limits to how many credits can be claimed up to the year 2021. For the same 10 kW wind turbine that was mentioned before with an estimated average purchase price of about $50,000 inclusive of delivery and installation, the tax credit could be up to $15,000. This would cut down the entire cost of the wind energy project to almost half of what is initially paid.
If you’re serious about learning more about wind energy, I recommend the Wind Energy Handbook on Amazon. This book is great for both students and professionals, and it holds invaluable information on the subject of wind power.