Facts: Economic viability

The production costs of wind energy on land have been reduced sharply due to the gradual advancement of turbine technology. In Germany, according to the "Bundesverband Windenergie" (German wind energy association), wind turbine power in 2000 cost nearly half what it cost in 1990.

Sharp reduction in costs

According to the European Wind Energy Association (EWEA), the electricity generation costs (not including cost-intensive connection to the grid) of modern wind turbines at good, windy sites are currently approx. €0.051/kWh. The EWEA forecasts that costs at good onshore sites can drop to €0.032/kWh by 2013, meaning that wind power is well on its way to becoming competitive. This forecast does not even take the external costs of the conventional power supply into account.

External costs of power production

The European Commission's ExternE research project came to the conclusion in 2001 that the cost of average power production in the EU is €0.04/kWh. The University of Stuttgart's Institut für Energiewirtschaft und Rationelle Energieanwendung (IER) (institute for energy economics and rational use of energy) estimates that power production costs for cogeneration plants built in 2005 will be €0.036/kWh. The IER also estimates that power from lignite-fired power stations costs €0.031/kWh and from coal-fired power stations €0.028/kWh. According to the ExternE research the IER also carried out for Germany, the external costs for power production from coal or lignite in Germany are another €0.03 to €0.06 per kWh. Wind energy, whether harnessed on land or at sea, has extremely low external production costs in comparison.

cost of average power production in the EU	€0.04/kWh
cogeneration plants built in 2005	€0.036/kWh
lignite-fired power stations	€0.031/kWh
coal-fired power stations	€0.028/kWh
additional external costs for power production from coal or lignite in Germany	€0.03 - €0.06/kWh

source: ExternE /IER

Offshore experience to date

The power production costs of pilot offshore wind farms abroad located close to shore are within a range from €0.06 to €0.08 per kWh. For projects that were realized in recent years generation costs at the lower end of this bandwidh were observed. Estimates for German wind farms more distant from the coast have been made. The calculation made by the Deutsches Windenergie Institut (DEWI) (German wind energy institute) on behalf of the German Engineering Federation (Verband Deutscher Maschinen- und Anlagenbau - VDMA), calculated that a 450 MW wind farm located 30 to 40 kilometres from the coast would have power production costs of €0.074 to €0.081 per kWh, this calculation based on the 2 MW turbines available today. However, present-day planning in Germany mainly intends to use 4 to 5 MW turbines, which would probably lead to a reduction in production costs.

Pilot experience is important

The spread in different economic viability analyses is quite large due to several uncertainty factors and the lack of experience. Not until pilot projects are actually running will there be clarity over the real power production costs of wind farms far from the coast. This information will be very important for the financing of offshore wind farms. It will be crucial to see whether these farms can operate economically within the framework of the Renewable Energies Act, which guarantees an average feed-in reimbursement of about €0.07/kWh for 20 years, if offshore wind farms start operating before 2006.