Wind Farm Cost Reductions Since the Mid-1990s
You know that one of my favorite sports is bagging on forecasts of all types, so when I come across one that’s pretty decent, I think it’s worth highlighting. Here, we see that the Department of Energy’s 1996 forecast (drawn from here) does pretty well. They overprojected the price declines up until 2000, but as you can see in the bottom graph (from Ryan Wiser’s 2007 Berkeley Lab report), the wind industry quickly caught up as the price of wind electricity dropped from 6 cents a kilowatt hour to 4 from just 1999 to 2002.
(The scales of the charts above are different: One is cents per kilowatt hour, the other in $ per megawatt hour. Basic conversion: $10/MWh = $0.01/KWh. My apologies. I’d love to play Remake the Chart today, but I’ve got a few thousand words to write.)
Note, too, that the DOE projection shows the cost reduction curve flattening out around the 3-4 cent range, which is exactly what’s happened. What they did miss is that the price spread for different projects is wide. They anticipated that wind power projects would only vary half a cent up or down from the average. In reality, the variance is 1.5 cents either way, so the range extends from some projects making power at 2 cents a kilowatt hour to other projects that make electricity at 5 cents a kilowatt hour.
It’s worth noting that all of the costs cited here for wind are easily competitive in the wholesale electricity market. For example, in 2005, a good year for wind and bad one for natural gas prices, wind was off-the-charts cheap:
