US Wind Cost and Power Price Trends in 2017: Part 3

The US Department of Energy (DOE) recently published its 2017 edition of the annual Wind Technologies Market Report. The report is a perennial trove of data; I have split its key highlights into a three-part blog series. The first focused on broader installation, market, and industry trends and the second focused on wind turbine and wind plant technology and performance trends. This third and final blog in the series focuses on turbine cost and wind power price trends.

Part 3: Cost and Wind Power Price Trends

Wind turbine prices remain well below levels seen a decade ago. Despite increases in size, average turbine prices have steeply declined since hitting a high of more than $1,600/kW in 2008. Recent data suggests pricing in the $750/kW-$950/kW range. These price reductions, coupled with improved turbine technology, have exerted downward pressure on project costs and wind power prices.

Lower turbine prices have driven reductions in reported installed project costs. The capacity weighted average installed project cost within DOE’s 2017 sample stood at $1,610/kW. Installed costs differed by project size, turbine size, and region. Installed project costs exhibit some economies of scale, at least at the lower end of the project size range. Additionally, among projects built in 2017, the interior of the country (Texas, the central plains states, and the Midwest) was the lowest cost region, with a capacity weighted average cost of $1,550/kW.

Operations and maintenance (O&M) costs varied by project age and commercial operations date. Despite limited data availability, projects installed over the past decade have, on average, incurred lower O&M costs than older projects in their first several years of operation. The data suggest that O&M costs have increased as projects age for the older projects in the sample but hold steady with age among those projects installed over the last decade. This suggests that lessons have been learned and implemented for better wind turbine and subcomponent reliability in more current wind turbines.

Wind Power Price Trends

Wind power purchase agreement (PPA) prices remain low. After topping out at $70/MWh for PPAs executed in 2009, the national average levelized price of wind PPAs within the Berkeley Lab sample has dropped to around or even below $20/MWh—though this nationwide average is focused on a sample of projects mostly from the lowest priced interior region of the country where most of the new capacity built in recent years is located. Focusing only on the interior region (central plains and Midwest), the PPA price decline has been more modest, from around $55/MWh among contracts executed in 2009 to below $20/MWh in 2017. Today’s low PPA prices have been enabled by the combination of higher capacity factors, declining installed costs, and record-low interest rates.

The production tax credit (PTC) has also been a key enabler over time, valued at $24/MWh. When adding the value of the PTC, a $20/MWh PPA is effectively able to deliver $44/MWh in value at the project level, assuming the PTC is effectively monetized. The US wind market is in the early to middle phase of a major wind plant construction boom largely enabled by the long-term extension and phaseout of the PTC post-2021. The DOE report says that 30 GW-70 GW of wind turbine capacity had been qualified for the full PTC by the end of 2016, with another 10 GW qualifying for the 80% PTC.

Regional and nationwide trends in the levelized cost of wind energy (LCOE) closely follow the PPA price trends—i.e., generally decreasing from 1998 to 2005, rising through 2009, and then declining through 2017. The lowest LCOEs are found in the interior region, with a 2017 average of $42/MWh and with some projects as low as $38/MWh.