Seeking Consensus on the Internalized Costs of Onshore Wind
- October 22, 2014
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What is meant by “internalized costs”?
Internalized costs are the costs which can be accurately accounted for in our current systems. In energy production, these costs typically consist of capital costs, financing costs, operation and maintenance costs, and exploration costs. Some energy options incur these costs in various stages such as extraction, transportation and refinement. Profits and taxes are excluded wherever possible in order to isolate the pure cost of production.
Internalized costs of onshore wind
Wind power costs depend strongly on several factors, the most important of which being the capital costs, capacity factor and discount rate. The current status of the internalized costs of onshore wind is well summarized in two recent reports from the IEA and BNEF.
To get an overview of capital costs, a graph compiled by the IEA Medium-Term Renewable Energy Market Report is given below.
Global real-world wind power capacity factors can be estimated from data given in the BP Statistical Review using the electricity generated at the end of each year (TWh) and the average installed capacity during that year (GW, taken as the average of the capacity at the start and the end of the year).
Discount rates were also discussed in the IEA Medium-Term Renewable Energy Market Report where examples were given for a developed nation (Germany) and a developing nation (South Africa).
The LCOE of onshore wind is given below as a function of the capacity factor for different capital costs (at 6% financing costs) and financing costs (at $1800/kW capital costs). Other assumptions include O&M costs of $20/kW/yr and a plant lifetime of 20 years. The Excel file from which these figures were compiled can be downloaded here.
The cost of using onshore wind power for heat is given below.
As outlined in the previous article on the internalized costs of nuclear, transport costs using onshore wind energy will be estimated based on optimistic projected technologically mature synfuel production technology. Since synfuel plants will be operating predominantly during solar/wind peaks in a variable-dominated system, a synfuel plant capacity factor of 30% was employed.
If you have a number that differs significantly from the estimates given above, please add it in the comments section below together with an explanation and a reference.