When the practicality of wind energy came up in one of my recent conversations, I thought about what is actually required to use this method of electricity. So, I did some research to find out the real cost of harnessing, transmitting, and using wind energy.
What is the cost of harnessing, transmitting, and using wind energy? The cost of harnessing and transmitting energy will be based on a variety of factors including the type of wind turbine, price for installation and maintenance, as well as the amount of land that is required to host them. On the other hand, the price of using wind energy is approximately 5 cents per kilowatt-hour.
Wind energy is not only a clean and natural source of electricity, but it is also very cost effective to use. The investors and distributors of wind energy can also turn a substantial profit over the lifetime of each turbine machine.
Related: Is Wind Energy Effective?
The Cost to Buy Electricity From a Wind Energy Company
Wind energy is currently one of the cheapest sources of electricity on the market, with prices that continue to get lower as the industry grows. The average cost of wind energy per kilowatt-hour is about 5 cents, with even lower prices in some areas.
These averages are a huge step down from those of more traditional sources of electricity.
The electricity that is generated by oil, for example, has a national average of just over 8 cents per kilowatt-hour. Natural gas, on the other hand, is going at the rate of about 7.5 cents for each kilowatt-hour that is used.
An estimate of the cost of fossil fuel energy, in general, is approximately 9 cents per kilowatt-hour. The cost of wind energy is almost half of all of these alternative sources.
Not only is wind energy the most environmentally friendly option for electricity sources, but it is also one of the most cost-efficient for everyone involved. Consumers can enjoy significantly cheaper rates to power their homes and businesses, while investors and generators can enjoy huge profit margins, which I will get into later in this article.
One of the reasons why wind energy is so cost-effective for consumers is the fact that most wind energy is purchased up front in bulk to be spread out among a certain amount of time.
This transaction is completed when a Power Purchase Agreement, or PPA, is signed by both the generator and the person who will be using their electricity.
These agreements are legally binding contracts that outline a price and payment schedule that both parties agree on. Once it is signed, these prices cannot be changed throughout the entire duration of the contract.
This is beneficial to both sides, because the consumer will never have to worry about an increase in costs or any additional fees coming out of nowhere, and the owner of the turbine can always count on a steady and consistent income coming in right on schedule.
These contracts can also significantly lower the price of wind energy per kilowatt-hour. As mentioned before, wind energy is usually approximately 5 cents per kilowatt-hour or lower in some circumstances. When a PPA is in use, however, these prices can drop to about half of the initial value.
This is due to the fact that a bulk amount of energy is purchased up front at a lower cost, which automatically lowers the monthly payment and average price per kilowatt-hour when that number is divided through the year.
Power Purchase Agreements are essentially wholesale purchases and can be directly comparable to a contract of that nature. Imagine a purchase discount that is offered to a distributor or retailer in any kind of business that purchases a large number of items all at once.
The cost of each item would significantly drop down when the total discounted price was divided among the quantity.
This is nearly the exact same process that wind power companies and consumers of the energy follow when coming up with prices for long-term electricity deals.
It was reported in the year 2017 that purchasing long-term agreements from wind energy providers can deduct the price per kilowatt-hour to as low as 2 cents.
Certain regions within the country will be able to offer slightly cheaper rates for kilowatt hours of wind energy. Currently, the central area of the United States has the lowest cost of electricity generated by wind.
The Cost to Produce Wind energy
The amount of money required to produce wind energy depends on a variety of factors and expenses that are added together.
The first essential purchase for starting any kind of business that can produce wind energy will be the wind turbines that will actually generate the electricity. The cost of a wind turbine can vary due to the size and capacity of each individual machine.
Just like almost any product on the market, wind turbines that are able to produce more energy will cost more to purchase and assemble than smaller ones with less of a kilowatt capacity. The sizes of wind turbines range from residential, which is the smallest kind, to large utility-scale turbines that can produce millions of watts of electricity each year.
Wind turbine prices can be anywhere from $40,000 to $50,000 for just the machine and equipment alone, assuming it is an average size of about 5 to 15 kilowatts. Just as a general reference, imagine a smaller-scale residential turbine that has an energy capacity of about 5 kilowatts.
To give you a better idea of the size and electricity potential for this particular machine, it will produce just over ten thousand kilowatt hours per year, which is almost the exact amount that would be required to power a typical home.
The price of this specific machine would most likely fall into the $40,000 range for the equipment itself.
Once the turbine is purchased, the additional price of delivery and installation will be added to the total cost of the project. These fees can add an extra ten to twenty thousand dollars to the base price, making the total cost of a wind project upwards of $60,000. However, there are certain methods in which the turbines can be installed that will lower the price slightly.
Usually, wind turbines that are installed with guyed wires to hold them up against the wind are a little bit cheaper to install than standalone wind turbines. However, the guyed wires are not as aesthetically nice as the turbines that are able to stand up on their own, nor are they necessary for the machine to be able to function properly.
Aside from the initial cost to invest in a wind turbine including delivery and installation, there will be additional expenses throughout the lifetime of the machine to make sure that it is working properly.
The average maintenance costs for a single wind turbine will be approximately 2 percent of the original purchase price per year going forward. Alternatively, this can be calculated at a fixed price per kilowatt-hour of close to one cent.
So, for the residential-scale 5-kilowatt turbine that produces an average of 10,000 kilowatt-hours per year, the cost of maintenance would be around one hundred dollars per year. Since most wind turbines have a life span of about 20 years at minimum, this could be up to $2,000 calculated across the entire period the turbine is in use.
Since wind turbines are expected to last anywhere from 20 to 25 years at most, there will most likely come a time where some of the equipment needs to be fixed or replaced due to any kind of damages on the machine. Although this can potentially become expensive depending on the affected components of the turbine, repairs and replacements are absolutely necessary to ensure maximum efficiency.
The prices for new parts are usually a fixed percentage of the original purchase price. For example, if something happened to the rotor of the same 5-kilowatt wind turbine as mentioned earlier, it would cost approximately 20 percent of the original price of the wind turbine.
When calculated at this rate, the cost to fix something like this would be about $8,000. However, if the owner chose to ignore the need for a repair because of the high cost, they would more than likely lose money in energy production throughout the remainder of the wind turbine’s life cycle.
The final major expense that is required to begin producing and distributing wind energy will be the land that the wind turbines will operate on. Luckily wind turbines do not require a lot of space because they hold themselves up vertically.
Although they are tall and extend several feet into the sky, the width of each machine is very minimal. As a result, multiple wind turbines can be scattered around the same area without running into each other or causing any kind of interference.
The size of land that will be needed to produce wind energy will depend on the number of turbines that will be installed. Some turbine owners choose to rent spaces on existing farms to place their machines and pay a negotiated monthly fee as indicated on their lease.
In some cases, this can be a more cost-efficient option for starting wind farms that might not want to purchase land right away.
Although there are relatively high upfront expenses that come with a wind energy investment, there are ways to save a lot of money on a wind project overall.
Since wind energy is a clean and renewable source, there are tax incentives in place for the purchase and installation of wind turbines anywhere in the United States.
Tax credits can supplement for up to 30 percent of the total costs of wind turbine purchases at one to two different locations. This means that a $60,000 wind energy project could be dropped all the way down to approximately $42,000 with the addition of a tax refund. *
The Use Of Wind Energy In The United States
Just like any other traditional method of electricity, the energy that is harnessed from wind can be used for virtually anything. This includes the electrical powering of houses, schools, businesses, large facilities, and more.
Wind energy even has the potential to power entire neighborhoods and communities by itself as well, although there are very few areas of the world that have adopted the wind as their primary source of electrical power.
Currently, wind power accounts for approximately 5 percent of the total electricity use in the United States.
In the year 2016, it was reported that enough energy was generated from wind throughout the entire country to power the states of Colorado, Oklahoma, and Kansas in the previous year alone. You can read more details on these statistics by following this link.*
On an even bigger scale, wind energy accounts for about 6 percent of all electricity use in the world. However, some countries have made goals to be powered on wind energy alone within the coming years.
Although there is no country that is one hundred percent powered by the wind as of yet, multiple regions across the globe have made wind energy a substantial portion of their everyday electricity sources.
The wind energy industry is growing rapidly with tons of potential in future years. Not only is the demand for wind energy and the installation of new wind turbines around the world increasing each year, but so is the demand for wind energy-related jobs.
In fact, the job outlook for wind turbine technicians was shown to be very positive, with a growing increase of 96 percent demand every year.
In conclusion, the initial cost to begin harnessing and transmitting wind energy by a wind turbine can be relatively expensive upfront. However, the investment will quickly pay off with the consistent flow of payments throughout the rest of the time each turbine is in use.
Additionally, wind power is significantly cheaper for consumers than any other traditional method of electricity.
With rates per kilowatt of almost half of the amount it costs to use fossil fuel energy, wind energy is one of the cheapest sources of electricity in the world. Even better, it can be used to power anything that requires electricity. Overall, the wind energy industry can be very beneficial for everyone who is involved, from investors to consumers.
How is Wind Energy Distributed to the Masses from Wind Turbines?
After a turbine harnesses energy from the wind and converts it to usable electricity, it will send the newly produced electricity downward through its tower and into a series of underground cables.
The electricity will travel through this network of cables until it reaches a place called an electrical substation, which will multiply the electrons and send them through a power grid.
Between the time the electricity gets to the consumer from the substation its voltage will fluctuate, whether it is multiplied or deducted. When it finally reaches the distribution center, the extremely high voltage will be taken down to a usable amount before it is distributed to the consumers in the area.
How Do Wind Turbines Convert the Wind’s Energy Into Electricity?
Each wind turbine will use its internal components to intake energy from the wind and push it through an entire system before usable electricity is ready for distribution.
This entire process starts when the wind turbine’s anemometer takes note of the wind speeds and sends a signal to the controller piece within the nacelle. The controller will signal the rotor blades to begin spinning according to the current speed of the wind.
When the blades are rotating, the wind’s kinetic energy will pass through the center of the machine and will be received by the internal components of the nacelle.
The energy will then go through a process where it is converted into mechanical energy and further transformed until electrons are created and electricity can be passed through the system to the consumer.
What Is The Return On Investment (ROI) For A Wind Project?
The rate of return on investment for wind turbine projects is known to be relatively quick. Most wind turbine owners have reported seeing a net benefit within 6 months to 1 year of initial purchase. Additionally, some wind turbines can end up paying for themselves, in the long run, depending on the size and capacity of the machine.
For example, a smaller residential wind turbine with a capacity on the lower end of the scale will pay for itself in approximately 15 years or less. This leaves about 5 to 10 years of its average expected life span with no additional expense for the owner.
A larger utility-scale turbine, on the contrary, will take about 40 years total to begin paying for itself. This time frame will outlive the actual turbine, so an investment like this will most likely never generate a completely positive cash flow for the owner.
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.