Return to original page
The cost of wind power contracts has fallen to $20 per megawatt-hour since 2009.
By Megan Geuss
Last week, as President Trump made bizarre and wandering remarks about "windmills" being an inferior source of energy, the Department of Energy (DoE) released the 2017 Wind Technology Report (PDF), showing that wind energy had an extremely successful year.
Still, the US is behind a number of countries in how much wind power meets electricity demand. The DOE writes that "wind power capacity is estimated to supply the equivalent of 48 percent of Denmark’s electricity demand, and roughly 30 percent of demand in Ireland and in Portugal." This year, Portugal had several days in March where renewable energy supply exceeded electricity demand.
The report noted that investors spent $11 billion in 2017 to add 7 gigawatts of wind energy to the US grid. Of course, wind is a variable source of energy, so those wind turbines are not constantly sending energy to the grid. But wind has a capacity factor comparable to hydroelectric energy: where wind is sending electricity to the grid 34 percent of the time, hydro is generating electricity some 37 to 38 percent of the time. Recently, wind has been outperforming hydroelectric electricity in the US.
Part of getting more wind energy on the grid is not just about building more wind turbines but also making those turbines capable of sending more energy to the grid. Larger rotors make it easier for gusts to create more electricity with each turn. And as turbine technology improves and gets cheaper to build, rotor diameters have increased, allowing new wind installations to have an average capacity rating of about 2.32MW per turbine, which is 8 percent more than in 2016 and 224 percent more than turbines built 20 years ago.
Another place where wind is excelling is in contract prices. The DoE estimates that owners of wind farms are entering into contracts called "power purchase agreements" (PPAs) that are as low as $20 per megawatt-hour. Wind farm owners set their prices based on a number of factors, including the cost of installing the wind farm, operating costs (which naturally include no fuel costs, unlike with fossil fuel plants), and interest rates.
Currently, the Production Tax Credit (PTC) is also helping keep PPA prices low, as it allows wind farm owners to receive a small tax credit per unit of wind-based electricity they produce. The PTC has begun phasing out already: wind farms whose construction began in 2017 will only receive 80 percent of the full PTC, and farms begun in 2018 receive only 60 percent of the PTC.
For now, the DoE forecasts continued growth in wind energy capacity additions over the next few years until 2021, when the department says wind capacity additions will start slowing.
The DoE also issued an Offshore Wind Market Update, which is shorter than the department's Wind Technology Report because offshore wind is so new in the US. Currently, the US only has one operating offshore wind farm off Block Island, Rhode Island, but several projects have advanced in 2018 along the northern Atlantic Coast.
Vineyard Wind, an 800MW project off the coast of Martha's Vineyard, announced PPA prices as low as $0.065 per kilowatt-hour, or $65 per MWh, just last month.
Vineyard Wind's price for its product and its cost to build turbines are not the same thing, but they are related—and such a low price per kWh is encouraging. In previous years, offshore wind projects had stalled in the US, in part because those projects have historically been so costly to build. But the cost of building offshore turbines has been falling rapidly. Offshore oil drillers have contributed some of their expertise to building floating turbines in the style of offshore oil rigs, and, not even two years ago, the low-end cost for an offshore wind farm was reportedly around $121/MWh.