Project Pricing

Each Project, Like Each Piece of Land, is Unique.

WHI Vertical Axis Wind Turbine Systems (WHI VAWT Systems) are competitive with on-shore conventional wind technology(HAWTs).  It is important to note that the wind industry has had decades to standardize costs for HAWTs, and thus have set up standardized financing, yet the project costs still need to be considered for each site. US dollars are used as the reference currency in the following discussions.

With WHI VAWT Systems, we have to consider the same variables, yet we are working on a smaller scale. WHI is not selling just turbines:  we are selling turbine systems that can capitalize on the coupled vortex effect, and energy enhancing effect that builds on the relationship among the turbines.  Certainly, one WHI turbine is effective, but that will not be the norm.  Arrays of turbines need to configured uniquely for each site, and thus the following factors need to be considered in estimating a project cost/benefit analysis.

Cost Side

Categories of Costs to be Considered for any WHI VAWT System Project

Onsite Conditions

Access to the site and around the site

Pre-existing improvements or conditions

Elevation and grades

Weather conditions

Access to the grid or load

Natural conditions such as forests, rocky hillsides, etc.

Ocean or salt-water proximity

Wildlife fly-ways

Desert/sand activity

Transportation of the Turbines

Manufacturer to the site, via ports, train, trucks

Costs vary with access, availability of low cost transport, infrastructure need to support transport

Local Workforce Costs

WHI Turbine Systems generate local economic development. They are low-tech compared with conventional wind energy.

Local workers can be employed for installation support with appropriate training and supervision.

Local workers can be trained and employed for on-going operations and maintenance of the turbines.

Each area is unique in its labor laws and conditions, and each site’s development must be based on accurate local information.

Size of the Project

Like in many developments, one installed turbine will be more costly “per unit” than twenty.

Discounts are available for larger orders on the manufacturing side.

In some areas, qualified local manufacturers can produce turbine parts, and depending on the local economic development appetite to bring in new manufacturing jobs to the region, larger projects justify different per/unit costs.

Turbine Unit Cost

Given the complicated nature of pricing a project, conventional large wind developers or manufacturers do not quote prices for manufacturing until they know the timing, market conditions, and manufacturing variables when the order is actually placed.

WHI Turbine Systems are competitive with today’s high end on-shore conventional HAWTs. The unit price for a given turbine depends on the size of the order and where it is manufactured. Currently, WHI is manufacturing in Denmark, yet is open to consider qualified manufacturers in country, supporting the local economy.

Capital Costs

Often, wind projects are financed.  Changes in the cost of money or financing terms can radically change the pricing of a project.

Some governments are supporting renewable projects with direct subsidies, tax credits, accelerated depreciation and other incentives.

The pool for available capital for renewable energy is expanding dramatically:

“The global insurance industry has promised to lift its “climate-smart investments” – from $42 billion to $84 billion by end of 2015 – and “is set to transform its mainstream asset management by placing more emphasis on climate risk”.  Beyond the UN’s Framework Convention on Climate Change in Paris (November 2015) the industry will further commit to increasing the amount invested in climate-smart investments to ten times the current amount, $420 billion, by 2020.”
By on October 7, 2014  Equity Investor
Development Costs

Project permitting costs, including relevant studies in some areas

Land leases, where appropriate.  In the US, many large wind farms are leased, averaging 3% of energy sold as annual payment.

Security during installation and beyond

Electrical integration with the grid or load

Revenue Side

The following revenue elements need to be taken into account to formulate various “pictures” of the ROI potential

  • Wind speed at 10m above the ground:  energy produced is the cube of the wind speed
  • Market forces at the time of the sale of electricity
  • Lont-term purchase contract terms
  • Useful life of WHI VAWT Systems is 25 years (lower cost replacement parts)
  • Ability to sell excess power into a grid system
  • Feed-in-tariffs in many regions
  • Tax Credits and accelerated depreciation in some regions
  • Turbine efficiency

Standard Ways of Formulating Project Costs and Measuring Competing Energy Value

Would you rather have a project that costs US$2,000/kW fully installed or a project that has a US$.09 Levelized Cost of Energy (LCOE)?

It depends….both tell you relevant information yet either, alone, gives an incomplete.  Additional factors, including intangible health benefits and environmental consequences are not included in either of these standard ways of understanding value.

The two most common methods for evaluating wind energy projects are 1) price-per-kW installed and 2) the overall Levelized Cost of Energy (LCOE).

To understand the meaning of any single pricing comparison, there needs to be a strong contextual understanding of the variables:  the methods tell you very different but complementary information

Most importantly, a specific project must be evaluated in its own market context before any blanket comparison to global averages is meaningful.  For example, two 10MW projects that use the exact same technology can have radically different $/kW but have equal LCOE:  the difference relies on specific cost and revenue variables unique to the site and markets.

The pricing methods are not complicated in themselves, however, it takes time and experience in the wind industry to begin understanding how the methods become meaningful.  Again, externalized costs such as environmental, health, or risk of the safety of employees are not routinely taken into account in conventional calculations.

What does $/kW Measure and What Does it Leave Out?

$/kW measures up-front project capital costs.  The industry typically will use $/kW to mean “$/kW Installed” or “Turnkey Costs,” which is the total costs of the project to be fully installed and commissioned.  Example:  A fully installed $/kW of $2000 for a 100MW project would be a $200,000,000 project cost.

$/kW alone is a very poor indication of a proect’s financial viability:  the profitability potential is not included in the formulation.  The exact same technology, e.g. GE 1.5 MW turbine, can have a very different $/kW installed cost due to a variety of factors.  The two most common are the scale of the project (1.5MW versus 150MW) and site access/conditions.  $/kW does not account for the revenue side of the project:  the three largest influencers are average wind speed at the site, turbine efficiency, and power purchase contract terms.

Example:  Los Angeles Department of Water and Power, the largest publicly owned utility in the US, developed two large wind farm sites in different locations, with radically different $/kW – and both generated energy and value.  One had a per kW cost of approximately $2000 and one had a per kW cost of approximately $4000.  Both are profitable given the market conditions and the wind conditions at the sites.  If energy produced is the cube of the wind, then wind speed (which is not considered in $/kW) is a major factor needed to evaluate value.  LADWP has moved from 4% renewable energy in their portfolio to 15% renewable and will hit its 2020 legal requirements for California of 20% by 2020.  Randy Howard, Assistant General Manager and former Director of Power Purchasing at LADWP has agreed to install four WHI turbines on the Pine Tree Wind Farm in the Tehachipi Mountains, east of Los Angeles.

Where is WHI in $/kW calculations?  WHI is price competitive today, with no economies of scale considered, for projects that have certain market dynamics and wind speeds.  Price is only a single and narrow aspect of where WHI adds value to major developers.  Access to new site locations, less resistance from local communities due to visual impact, and modular nature of turbine design play a part in overall project viability and acceptance.

Levelized Cost of Energy (LCOE)

The U.S. Renewable Energy Labs defines LCOE as “a cost of generating energy for a particular system.  LCOE is an economic assessment of the cost of the energy-generating system including the costs over its lifetime:  initial investment, O&M (operations and maintenance), cost of fuel, cost of capital.”  In other words, LCOE is a break-even cost of any particular energy project.

The LCOE is only an estimate of the financial performance and economic value of a wind turbine.  Each project will need to be evaluated on its own merits and use consistent LCOE formula methodology, or other comparable methodology.  Regional wind speeds, Operations and Maintenance fixed and variable costs, and current macro-economic market forces are to be considered for accurate results.

Contact WHI’s team and we will assist you in forming a comprehensive picture of project cost for your unique project conditions.