03 November 2011

By Kari Williamson

The fall in wind turbine prices are partly due to an R&D and market success story, but also partly due to the elevated price levels in 2008 after wind turbine prices had doubled in the period 2002-2008.

The report examines 7 drivers of wind turbine prices in the United States, with the goal of estimating the degree to which each contributed to the doubling in turbine prices from 2002 through 2008, as well as the subsequent decline in prices through 2010.

In aggregate, these 7 drivers – which include changes in labour costs, warranty provisions, manufacturer profitability, wind turbine scaling, raw materials prices, energy prices, and foreign exchange rates – explain 70-90% (depending on the year) of empirically observed wind turbine price movements through 2010.

Turbine scaling – i.e., the rapid increase in average wind turbine capacity, hub height, and rotor diameter over this period – is found to have been the largest contributor to the wind turbine price doubling through 2008 (and has continued to pressure prices higher to this day).

The cost of scaling is not without benefit, however, according to Berkeley Lab research scientist Mark Bolinger, one of the study’s authors.: “Although larger and taller turbines do cost more per kilowatt of rated capacity, they are also generally able to access better wind conditions and capture more of the wind’s energy, resulting in higher capacity factors and a lower overall cost of electricity.”

Scaling-related turbine cost increases can, therefore, be viewed as a reasoned approach to minimising the levelised cost of wind energy.

Currency impact

An extended period of US dollar weakness – which likely increased the dollar-denominated price of wind turbines and components imported into the US – is estimated to have been the second-largest contributor to the turbine price doubling through 2008.

The risk of further dollar weakness pressuring wind turbine prices higher, however, has been somewhat mitigated by greater localisation of the supply chain in recent years.

“Almost two-thirds of the cost of an average turbine installed in the US today comes from domestically manufactured components, up from roughly one-third just five years ago,” notes Berkeley Lab Staff Scientist and report co-author Ryan Wiser. “This increase in domestic content reduces not only foreign exchange rate risk, but also transportation costs.”

Changes in labour costs, warranty provisions, manufacturer profitability, and raw material prices are all found to have had lesser – though not inconsequential – impacts on wind turbine prices, while changes in energy prices had only a negligible impact.

The report was funded by the Wind & Water Power Program within the US Department of Energy’s Office of Energy Efficiency and Renewable Energy.