Wind Power Economics - Simple Payback

Additional factors that determine your Energy Production will be the Size and type of wind turbine technology you choose, the Warranty and the Planned Maintenance Schedule (PMS) required by that hardware.

Further consideration effecting energy production will be the Wind Resource available at the site, and the Availability of the Hardware to respond to the wind resource (See Manufacturer). The Capacity Factor for a wind generator can be defined as a ratio of Average Delivered Power/Rated Power. Choose your hardware considering the impacts of Emergency Services, Repairs, Ease of Service and Insurance.

Financial issues that affect a wind project are the Cost of Capital (Interest Rates), Inflation, Legal fees that deal with the negotiation of Contracts, Easements, Permits, Titles and Variances, as the site requires.

In the later Chapter Green Tags, additional front-end leverage of your wind project can be achieved with State Rebates, Federal and State Tax Credits, Property Tax Abatements, Production Tax Credits and other instruments that provide you financial leverage on the front-end of your project.

An Economic Analysis can be performed on your Wind Project to determine the overall costs and productivity. A Simple Payback is a very effective tool to give you a scenario for the productivity of your wind project. The Simple Payback can be calculated by the following general equation:

Simple Payback = IC/(AKWH*$/KWH – IC*FCR – AOM)

The equation uses the following terms:

SP = Simple Payback

IC = Installed Cost

AKWH = Annual Energy Produced in KWH each year

$/KWH = Dollars/KWH Price earned by Energy Production

FCR = Fixed Charge-Rate (Cost of Capital) expressed as decimal

AOM = Annual Operations and Maintenance Costs in Dollars

Using this equation we can get a good number for our Simple Payback. Let’s use an example to illustrate this equation.