2.8. Technical and economic peculiarities of operating a WEC as part of the grid
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Wind park construction costs. Evaluating development of the wind power industry abroad, one can already confirm that it has progressed into a self-sustaining and profitable energy sector. In certain countries of the world, like Denmark, Germany, Spain, the US and other nations, wind power is making a significant contribution to electrical energy production. Unit capacity of wind power installations produced on an industrial basis has increased from 3 MW to 5 MW. Modern wind energy converters are large technical constructions, manufactured with the use of state-of-the-art technologies and advancements made in aerodynamics, electronics, electric and computer engineering. The diameter of wind rotors produced for wind power plants of the megawatt class is between 60 m and 120 m, and tower heights range from 60 m to 100 m, or higher (Table 2.2.). Thanks to a consistent elaboration of production technologies, wind energy installations have also become much cheaper. As of today, the cost of one kilowatt of a WEC’s installed output has decreased to between $800 and $1,000. It is expected that construction costs will fall further to some $600 to $700 per kilowatt within the next ten years.
In Russia, the development of systemic wind energy application and industry is still at a beginning stage. Nonetheless, the country already has all the necessary scientific and industrial potential at its disposal [18]. The first experimental WEC models have appeared built to the current day’s scientific and technical standards. One wind power installation with a capacity of 1,500 kW (six 250 kW windmills), called the Zapolyarny (Polar) Wind Power Station, is already in operation near the city of Vorkuta in the Russian north. In the south, in the republic of Kalmykia, a 1,000 kW wind energy converter has been put into operation. In the west, the Kaliningrad region boasts of several experimental wind power installations produced in Denmark and arranged in a wind park with a capacity of over 5 MW.
In 2002, a wind park appeared in Russia’s Far Northeast, in the area of the settlement of Anadyr, which comprises ten WECs of the ABE-250С type. The wind park’s unit construction costs came to $1,800 per one kilowatt, with allowances provided for transportation expenses, taxes, duties, etc. All the pilot installations mentioned above operate in connection with the grid.
On the Kola Peninsula, a project run jointly by Russians and their Norwegian colleagues involves experimental operation of a 200 kW wind power installation located close to Murmansk. The energy this WEC produces is used to supply power to the hotel Ogni Murmanska (Murmansk Lights). This installation is “second-hand” and was previously used at a Danish farm for ten years. In 2000, it was bought by the Norwegian company “VetroEnergo AS” and installed near Murmansk.
Table 2.2
Main technical and cost parameters of WECs of differing capacities produced in the European Community [16].
|
WEC type | Capacity, kW | Rotor diameter, m | Hub height , m | Unit cost Euro/kW |
| NM 110 | 4,200 | 110 | 124 |
|
| GE Wind Energy 3,6s | 3,600 | 104 | 75 |
|
| Vestas V-90-3,0MW | 3,000 | 90 | 80 |
|
| Fuhrlander FL 2700 | 2,700 | 96 | 80 |
|
| Nordex N-80 | 2,500 | 80 | 60 | 736 |
| AN BONUS 2,3 MW/82 | 2,300 | 82 | 80 |
|
| LW 72 | 2,000 | 72 | 65 | 866 |
| E-66 Enercon | 1,800 | 70 | 64 | 886 |
| NM 64C/1500 | 1,500 | 64 | 68 | 800 |
| ECOTECNIA 1250 | 1,250 | 62 | 60 | 840 |
| Fuhrlander FL 1000 | 1,000 | 54 | 70 | 767 |
| NM 52/900 | 900 | 52 | 61 | 772 |
| Nordex n-50 | 800 | 50 | 46 | 780 |
| NM 48/750 | 750 | 48 | 60 | 771 |
| AN BONUS 600 kW/44-3 | 600 | 44 | 42 | 792 |
| LW 30 | 250 | 30 | 40 | 860 |
| VERGNET GEV 26/220 | 220 | 26 | 50 | 818 |
| Fuhrlander FL 1000 | 100 | 21 | 35 | 1,260 |
| LW 18 | 80 | 18 | 40 | 1,212 |
| VERGNET GEV 15/60 | 60 | 15 | 30 | 1,317 |
| VERGNET GEV 10/20 | 20 | 10 | 18 | 1,500 |
| INCLIN 6000 neo | 6 | 4 | 9 | 1,367 |
| INCLIN 3000 neo | 3 | 4 | 9 | 1,600 |
| INCLIN 1500 neo | 1.5 | 2.8 | 7 | 1,980 |
With all costs considered that were derived from capital repairs done in Denmark, the windmill’s transportation from Denmark to Murmansk, the construction of its foundation in Murmansk, and mounting works, the WEC came with a price tag of around RUR 4.2 million. This sum corresponds to a unit investment of $750 per one kilowatt. The energy converter’s average annual output is 350 kWh to 380 kWh, and annual operating costs are around RUR 300,000. Therefore, with a 7% depreciation taken into account, the WEC’s prime costs of power production come to between RUR 0.80 and RUR 0.85 per kilowatt, which is less than the current tariff the hotel will have to pay for the power delivered from the grid (about RUR 1.5 per one kilowatt hour).
Expected costs of WEC-produced energy in the conditions of the Kola Peninsula. When assessing the technical and economic feasibility of wind park construction, first priority is given to the issue of return expected on the invested funds. Estimating the projected costs is done with the understanding that in the absence of self financing, investment will have to come from a bank loan attracted under specific credit rate terms. Current inflation rates will also have to be factored into the costs. As a starting point, if the credit is assumed to be secured at the rate nr ranging between 18% and 20%, and the inflation rate b is between 11% and 12% (the level estimated as of 2005), then the so-called real interest rate r will reach about 7 %. Such calculation is done using the following formula:
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As a criterion to assess the profitability of introducing a new WEC, the net present value (NPV) can be used. This value is expressed as a sum of current effects (incomes) for the whole accounting period, modified to the construction’s starting point:
 |
where B1, B2,…Bn is the current effect (income) received within one year of the wind park operation (beginning from year 1 through to year n) in the course of the whole exploitation period n ;
r is the real interest rate;
and I0 is the funds invested into the construction.
According to (2.4), the NVP represents the total economic effect, either positive or negative, received from the operation of a site during the whole period of operation and adjusted to the costs at the start of the construction. This value helps make allowances for the changes in the cost of the invested funds within a particular period of time, and compare investments made today with the income expected later during the project run, within one price scale. A positive result of calculations performed in accordance with the formula (2.3) is evidence that the offered project is cost-effective, or that, in other words, the investor of the wind park will be profiting from the endeavor during the exploitation period. The higher the profit value, as a result of the equation, the more profitable the site. If the result is negative, the investor will incur losses.
Calculations made with regard to the wind park project near Lodeinoye have shown the following results: Annual average wind speed at the elevation of 10 m in the area of Lodeinoye is about 7.0 m/s. If the wind park is set up as a series of 600 kW windmills (for example, wind mills of the type Enercon E-40/6.44), then the speed of wind at the height of the hub (50 m) will be 8.7 m/s. Using the performance parameters of the WEC type (borrowed from a catalog) and wind speed frequency data (calculated according to the Weibull equation), the park’s annual output W can be estimated, which for a site of these dimensions will reach 2.35 million kWh.
Annual effect (income) B from the site’s operation depends not only on the annual output, but also on the tariff “f” that will show for how much this energy could be sold to the grid:
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The Federal Tariffs Service for the Murmansk region fixed the maximum electric power tariffs for 2006 at RUR 0.587 to RUR 0.600 per kilowatt-hour. This means the maximum tariff for WEC-produced energy at which it can be accepted by the grid will be RUR 0.60 RUR per kilowatt-hour. Calculating from that, the annual economic effect from operating an Enercon E-40/6.44 will reach RUR 1.41 million.
Investment outlay for WEC construction is determined by the specific invested capital Сwec and the WEC’s capacity Nwec: |
As was specified above, the cost of a newly-installed WEC comes to between $800 - $1,000 per kilowatt. Making the necessary allowances for the transportation expenses and custom duties, as well as the costs of the construction of the WEC’s foundation, its installation and connection to the grid, the price tag on one installed kilowatt will be between $1,000 and $1,400. Fig. 2.20 demonstrates how the NVP is developed across the given period of WEC operation at a fixed tariff on WEC-produced energy set at RUR 0.6 per kilowatt-hour and at a tariff growing yearly due to inflation in accordance with current projections (Fig. 2.21).
 |
Fig. 2.20. NVP development across the years of WEC operation at specific investments of: I - $1,000 per 1 kW, II - $1,200 per 1 kW, and III - $1,400 per 1 kW. Dashed curves: Return on WEC investment at a stable tariff of RUR 0.6 per 1 kW. Solid curves:
Faster payoff at tariffs growing in accordance with inflation levels.
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Fig. 2.21. Energy tariff growth in accordance with projected inflation levels.
After WEC construction works are over (zero operation year), only investments I0 are of concern. This value is graduated along the Y-axis of the coordinate chart. Income developed through the years of WEC operation is determined by the cost of energy produced. Invested funds pay off gradually, year after year, according to the income received, making the NVP curve go up. The dashed curves in Fig. 2.20 correspond to a fixed energy tariff equaling RUR 0.6 per one kilowatt-hour. None of these three curves cross the X-axis within the given period of time, which is evidence that the site is not making profit.
However, it would hardly seem likely that in reality, energy tariffs were to remain unchanged over the next 20 years. Judging by the current inflation levels, tariffs can safely be assumed to be growing higher. In the past years, major efforts have been undertaken by the country to cut inflation down to the European levels of between 1% and 2%. It is a challenging process. But if one takes the premise that within the next ten years inflation will be reduced from the current 12 % to 2%, and will further remain at this level, then the tariff for WEC-produced energy will increase across the next 20 years from RUR 0.60 to RUR 1.37 per kilowatt-hour (or $0.049/kWh), as shown by the curve in Fig. 2.21. At such a rate of tariff growth, the NVP will grow faster (solid curves in Fig 2.20), and the payoff period will not exceed 12 to 18 years, which is quite acceptable, since profitability will reach levels of between 7% - 25 % at the lowest.
As regards the prime cost of power produced by a wind energy converter, the following can be said: Investments into one 600 kW WEC at cwec equaling $1,000, $1,200, and $1,400 per one kilowatt and the dollar exchange rate of RUR 28 per $1 will reach RUR 16.8m, RUR 20.1m, and RUR 23.5m, respectively. Annual WEC operation costs as specified by the Catalog [17] are EUR 4,000 (or RUR 135,000) per year. With the WEC’s annual output of 2.35 million kWh, a service period of 20 years, and the specific investments specified above, the production costs of the energy generated by the WEC will equal RUR 0.41, RUR 0.49, and RUR 0.56 per kilowatt-hour, respectively. The same conclusion can be reached if one were to look back at Fig. 2.20 and calculate, taking the upper solid lines as the starting point, what the tariffs should be to transform the curves enough that, by the end of the 20-year period, the NVP would equal zero – an option with zero profitability. The end result will be the same: Levels of between RUR 0.41 and RUR 0.56 (or $0.015 to $0.020) per one kilowatt-hour. These values are not bad indeed, by European standards.
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