FIGURE G-12 Hydrogen from wind power availability. SOURCE: U.S. Department of Energy, National Renewable Energy Laboratory.

provements include enhanced performance at variable wind speeds, thereby capturing the maximum amount of wind according to local wind conditions, and better grid-compatibility. These advancements can occur through better turbine design and optimization of rotor blades, more efficient power electronic controls and drive trains, and better materials. Furthermore, economies of scale and automated production may also continue to reduce costs (Corey et al., 1999).

Economics of Wind Energy

Larger turbines, more efficient manufacturing, and careful siting of wind machines have brought the installed capital cost of wind turbines down from more than $2500/kW in the early 1980s to less then $1000/kW today at the best wind sites. However, on-stream capacity factor for wind is generally in the range of 30 to 40 percent, which raises the effective cost. While this decrease is due primarily to improvements in wind turbine technology, it is also a result of the general increase in wind farm size, which benefits from economies of scale, as fixed costs can be spread over a larger generating capacity. As a result, wind energy is currently one of the most cost-competitive renewable energy technologies, and in some places it is beginning to compete with new fossil fuel generation (Reeves, 2003).

Worldwide, the cost of generating electricity from wind has fallen by more than 80 percent, from about 38 cents/ kWh in the early 1980s to a current range for good wind sites located across the United States of 4 to 7 cents/kWh,19 with average capacity factors of close to 30 percent. The current federal production tax credit of 1.8 cents/kWh for wind-generated electricity lowers this cost to below 3 cents/kWh at the best wind sites. This is an order-of-magnitude decrease in cost in two decades. Analysts generally forecast that costs will continue to drop significantly as the technology improves further and the market grows around the world (Corey et al., 1999), though some do not (for example, the EIA). In the committee’s analysis, for possible future technologies it is assumed that the cost of electricity generated using wind turbines decreases to 4 cents/kWh (including transmission costs). This assumption is based on a wind tur-


Cost of electricity (COE) estimates from the National Renewable Energy Laboratory (NREL), Lawrence Berkeley National Laboratory (LBNL), Northern Power, and GE regarding the current cost of wind-generated electricity excluding the federal production tax credit (PTC) subsidy of 1.8 cents/ kWh. NREL: Personal communication with Lee Fingersh: 3.2 to 5 cents/ kWh today, depending on location; August 2003. See the web site Accessed December 10, 2003.

LBNL: Personal communication with Ryan Wiser: Wind prices are about 4.3 to 5.3 cents/kWh throughout the Midwest, 5.8 cents/kWh in the Mid-Atlantic, around 5.8 to 6.8 cents/kWh in California, and perhaps 4.3 to 5.8 cents in the Northwest; August 2003.

Northern Power: 4 to 6 cents/kWh for wind farms greater than 50 MW located at good wind sites, while for one or two turbines located at a marginal wind site, prices can be as high as 8 to 12 cents/kWh or higher. Dan Reicher, Northern Power Systems, “Hydrogen: Opportunities and Challenges,” presentation to the committee, June 2003.

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