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Wind Power Price Trends in the US
Figure 1: Annual and Cumulative Growth in US Wind Power Capacity
project developers with little need to place additional turbine orders
(i.e. most developers already have enough turbines on hand to meet
9 27
their short-term needs).
8 24
7 21
6 18
Given the upward trend in turbine prices for most of this decade, it
5 15 should come as no surprise that installed project costs have also
4 12
been increasing, and by roughly the same amount (~US$700/kW
3 9
Annual capacity (GW)
2 6
Cumulative capacity (GW)
through 2008). What might be surprising given the apparent recent
1 3
softening in turbine prices noted above are expectations for
0 0 installed costs to increase even further among the 6GW of wind
3 9 3 4 5 8 0 2 3 5 7 8
19811982198 19841985198619871988198 199019911992199 199 199 19961997199 1999200 2001200 200 2004200 2006200 200
projects expected to be built in 2009 and 2010 (see Figure 5).
Annual US capacity (left scale) Cumulative US capacity (right scale)
However, once again this continued upward trend reflects the
Figure 2: Cumulative Capacity-weighted Average Wind Power Prices
predicament of US wind project developers, many of whom locked
Over Time
in high turbine prices through long-term frame agreements signed
70
at the peak of the market in late 2007 and early 2008. Before the
Sample includes projects built from 1998 to 2008
60
reported softening in spot turbine prices can begin to flow through
50
the development pipeline to any significant degree, these developers
40
first need to work through their backlog of higher-priced turbines.
30
20 Capacity Factor
10 Offsetting the rise in installed project costs, at least to some degree, has
Wind power price (2008 US$/MWh)
0
Year: 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
been a notable increase in capacity factor among more recently built
Projects: 7 10 20 33 49 62 80 98 117 145 projects. Figure 6 shows capacity factors in calendar year 2008 for a
MW: 450 562 702 1,415 2,268 3,069 4,083 5,165 7,654 9,873
sample of 183 wind projects totalling more than 14.1GW (accounting
Cumulative capacity-weighted average wind power price (with 25 and 75% quartiles)
for 84% of nationwide installed wind capacity at the end of 2007) and
Figure 3: 2008 Wind Power Prices by Project Vintage
broken out by project vintage. Although the range of 2008 capacity
factors among individual projects built within any given period is quite
80
large, the capacity-weighted average capacity factors improved steadily
70
and significantly through the 2004–2005 project vintage before
60
50
levelling off among projects built in 2006 and 2007.
5
All else being
40
equal, projects with higher capacity factors require less revenue per
30 unit output.
20
10
Wind power price (2008 US$/MWh)
Financing Terms
0
Year: 1998–1999 2000–2001 2002–2003 2004–2005 2006 2007 2008
As wind projects are so capital-intensive (i.e. most of the cost of a
Projects: 14 20 28 23 13 22 25
MW: 624 805 1,648 1,331 757 2,938 1,769 wind project is incurred before the project even begins generating
Capacity-weighted average 2008 wind power price (by project vintage)
power), financing terms can have a significant impact on
Individual project 2008 wind power price (by project vintage)
Polynomial trend line wind power prices. As was the case with higher capacity factors,
improvements in wind project financing terms earlier in the decade
price trends shown in Figures 2 and 3, and where wind power prices also helped to mitigate the impact of rising installed project costs on
might be headed in the near term, the rest of this article examines each
of these three primary drivers in turn: installed project costs, capacity
factors and financing terms. The number of tax equity
investors still seeking
Installed Project Costs
Installed project costs are primarily a function of wind turbine prices,
investments in wind projects has
which account for 70–80% of total installed costs. Berkeley Laboratory
declined precipitously.
has gathered data on 58 US wind turbine transactions since 1998,
totalling more than 21,100MW, including 10 transactions equalling
4,500MW in 2008 alone. Figure 4 depicts the reported prices from wind power prices. Specifically, the cost of tax equity provided to
these transactions. As suggested by the trend line, turbine prices high-quality projects reportedly dropped by roughly 300 basis points
increased by roughly US$700/kW on average from the bottom in 2001 (3%) through 2007, while spreads on debt instruments narrowed at
through the peak in 2008. However, more recently, falling commodity the same time as the scope and tenor of debt offerings increased.
prices, a stronger US dollar and slackening demand due to the global
recession have begun to place downward pressure on turbine prices. However, since mid-2008 the global financial crisis has eroded many of
The beginnings of such a reversal can be seen in Figure 4, although those earlier gains. The number of tax equity investors still seeking
sample size since mid-2008 has been extremely limited as the finance- investments in wind projects has declined precipitously, and the few
induced slowdown in development activity has left most US wind who remain in the market are charging significantly more – in the order
MODERN ENERGY REVIEW VOLUME 1
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