Legendary US investor Warren Buffett hit the headlines this week when his MidAmerican Energy subsidiary made the biggest ever order for onshore wind turbines – a $1 billion order that will gladden executives of German wind turbine maker Siemens.

The turbines are part of Buffett’s previously announced plans to invest $2 billion of wind energy investments into the state of Iowa, which will soon source 50 per cent of its electricity needs from wind energy, and begin exporting that capacity to neighbouring coal states.

More importantly, however, it underlines how the cost of wind energy has fallen so dramatically in the US, and elsewhere, to the point that it is now demonstrably cheaper than new coal-fired plants, and new gas-fired generation, and is even challenging existing coal-fired generation on costs.

Recent contracts for wind energy in Texas have been written as cheaply as $25/MWh. Granted, that includes a tax credit, but it still represents wind energy at a levellised cost well below $50/MWh. This is similar to prices struck in Brazil, where 2.3GW of wind energy was recently allocated in an auction at an average price of $47/MWh. These prices have undercut coal and gas fired generation by such a margin that Brazillian authorities had to create a separate auction mechanism for those fuels, although there is no doubt whether they will bother.

Wind energy may have been around for several decades, but it is still enjoying significant cost decreases. Bloomberg estimates turbine prices have fallen 26 per cent in the last two years, and new structures and mechanisms, not to mention the interest of Buffett and other mainstream investors, are bringing down financing costs as well.

Bloomberg estimates that wind power is now within 5.5 per cent of the cost of electricity from existing coal assets, and the American Wind Energy Association says that wind farms are now profitable without subsidies – which is just as well because in many states they don’t get any, apart from mandates for renewables to be constructed – laws which are being vigorously fought by incumbent fossil fuel generators and their lobbyists.

“If Congress were to remove all the subsidies from every energy source, the wind industry can compete on its own,” AWEA’s Tom Kiernan said at a press conference at a Siemens factory in Fort Madison, Iowa, this week.

MidAmerican Energy CEO Bill Fehrman said wind farms were being used by its customers as “a hedge” in an era of reduced fossil fuel generation. MidAmerican expects to close some of its own coal-fired generation in 2015 as the cost of wind power continues to slide.

“Those coal retirements do require us to have some excess capacity or an increase in capacity,” Adam Wright, vice president of wind generation and development for MidAmerican’s Iowa utility.told Bloomberg in an interview. “If you strip away everything from all generation resources, I think wind is more competitive.”

Bloomberg says that power from coal costs about $78.30 a megawatt-hour to produce and gas costs $69.71, compared with $82.61 for onshore wind farms.

Iowa governor Terry Branstad said MidAmerican’s wind project is the state’s largest economic development effort in history, bringing needed jobs. (The blades are manufactured in the state).

“As a leader in wind generation, we welcome the opportunity to expand renewable energy,” Branstad told a press conference. “The cost of generating through wind continues to go down. The cost of generating by coal has become very expensive and more difficult. So we continue to see an opportunity in the future for wind energy.”