Wind Energy Economics & Incentives

Transcription

1 Wind Energy Economics & Incentives Bruce Bailey, President AWS Truewind, LLC 255 Fuller Road Albany, NY

2 Four Drivers of Wind Energy Economics Wind Resource Technology Cost of Energy Capital Cost Wind Energy Market

3 Capital Cost Wind Resource Technology Cost of Energy Capital Cost Wind Energy Market

4 Total Capital Costs Installed Cost of Wind Plant = ~$ million/mw Turbine & Tower (~ 67% of Total Cost) Installation Balance of Plant Financing Legal Permitting Site Acquisition

5 Initial Cost Elements Financing & Legal Fees 3% Development Activity 4% Interconnect/ Subsation 4% Interest During Construction 4% Towers (tubular steel) 10% Construction 22% Design & Engineering 2% Land Transportation 2% Turbines, FOB USA 49%

6 Annual Operating Costs Project Specific Costs Operations and Maintenance Local Taxes Insurance Land Use Rights Power delivery costs Interconnect Transmission

7 Wind Energy Market Wind Resource Technology Cost of Energy Capital Cost Wind Energy Market

8 Typical Revenue Stream Power Sale: $ $.045 / KWh Levelized Production Tax Credit: $.018 / KWh Green Credit Sale: New Market, Values Vary Accelerated Depreciation Internal Rates of Return 5-Year MACRS + 50% Bonus Depreciation (2004) ~ 8-10% (after tax)

9 Values Associated With The Economics Of Wind Power Energy Sale Tax Credit Green Credit / Emissions Credit Cash Regulatory compliance value Unpriced Values Hedge value > Fuel costs increase risk cost > Pollution / CO2 tax risk Fuel diversity value

10 20+ Years of Wind Technology Growth Rotor (Meter) KW $750 1,500 Cost/kW $2,600 $1,650 $1,333 $1,050 $950 $800 per kwh MWh ,480 2,200 5,600 Bottom Line: = 49x the power, 11x the cost; = 2.6x the power, 1.8x the cost

11 Key Incentives For Large Wind Federal Production Tax Credit» $0.018/kWh, increases with inflation» Available for first 10 yrs of operation» Expires December 2007» On & off nature of PTC s has led to a cyclical industry» A long-term extension would provide the stable financial environment needed to promote industry s continued growth. Green Credits» Also known as renewable energy credits» Applicable in some RPS programs» Value typically $ /kWh

12 25 Costs of Energy from Different Energy Technologies per kwh Renewable Options: Conventional Options: Costs don t include externalities 5 0 Wind Small Hydro Fuel Cell Bio Mass Solar Thermal Solar PV Coal GT CC SC Nuclear Sources: BTM Consult, WindPower Monthly, GE Wind Energy Biomass : Direct fueled

13 Cost to Ratepayers of Imported Fuels for Electricity 2004 ($8.7 billion total) FUEL TYPE AMOUNT USED COST $ Coal 10.3 million tons $561 million Oil 31.4 million barrels $1.7 billion Electricity Natural Gas 18.8 billion kilowatt hours 241 billion decatherms $2.3 billion $2.1 billion

14 Impacts of Current Generating Practices Sulfur Dioxide» Acid rain Carbon Dioxide» Global warming Nitrogen Dioxide» Smog Health Impacts» Asthma,Mercury poisoning, etc. Safety and Security Concerns

15 Other Economic Benefits Wind power operating costs are relatively fixed. Wind power fixed prices help keep other prices lower during electric price increases Supplemental income to landowners, frequently farmers, in the form of lease payments Keeps energy dollars in state: currently 50 percent of power generated in state comes from fossil fuels purchased out of state

16 Job Growth From Wind Power Temporary (construction) and full-time (operation and maintenance) positions come from wind farms For every turbines installed, one operation-andmaintenance job is created In addition to direct jobs created, projects also support job creation within the community through the provision of goods and services (ex. lodging, meals, supplies, etc.) Phase I of the Maple Ridge project (120 turbines) created 400 construction jobs. When entirely finished in 2006 with 195 turbines, the project will create full-time jobs

17 Economic Development Wind farms bring economic development to communities through Payments in Lieu of Taxes (PILOTs) In Madison County for instance:» $150,000 per year is paid to the Town of Fenner» $60,000 per year is paid to Town of Madison and school district Other business developments receive property tax breaks: from (IDAs) and other governmental entities:» utility plants,» manufacturing facilities, and» non-profit organizations