IC = initial capital or CapEx, the capital expenditure, in $. For the interested reader, has a good discussion on the rate, and says this of the variable: It’s the fraction of the Total Installed Cost that must be set aside each year to retire capital costs which include interest on debt, return on equity, and so forth. P cost to gen = + (1)įCR = fixed charge rate. However, for the calculations here, I will use 7.2 ¢/kWh because it is a good national average.Īccording to NREL (National Renewable Energy Laboratories), the formula for calculating profitability or the cost to generate power ( P cost to gen ) with a wind turbine or farm is: People in some areas of the country pay an average as high as 25 ¢/kWh for their power. These figures vary by region, state, regulated versus non-regulated, and a number of other things. The costs for transmission are extra and not addressed here. This value is necessary for calculations, not the wholesale value. And according to PacifiCorp annual reports (a Mid-American Subsidiary) the average revenue (cost to buyers) is 7.2 ¢/kWh. Most all data provided is sourced from national and government resources.įor example, according to EIA (Electricity Information Administration), the average wholesale cost to generate electricity for 2007 was 5.72 cents per kilowatt-hour (¢/kWh) (2007 is their most recent data). Due to this annoyance, I have researched and so provide here links to several equations and figures for costs and calculating costs for a few figures that surround the generation of power by wind. I have become increasingly tired of comments and discussion around the web in which random people make even unfounded claims regarding the profit and cost aspects of wind power generation. This is because, in part, financial terms are unfamiliar to the average reader and the discipline’s ideas change with time and technology.
We also learned that Financial calculations are not for lovers of certainty or for the faint of heart.
In that effort, we have learned that the article provides one way among several to get a handle on the cost of producing power by wind-turned generators, and a few other related costs. (2018 Editor’s note: The sudden interest in this article led to a review that uncovered a couple errors and hence their corrections.
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