Wind energy in the world: costs of construction and efficiency of WEUs

The main reason for the development of alternative energy sources is the reduction in unit capital costs for project implementation and increased efficiency of their use and as a result, reduced weighted average normalized electricity cost (LCOE). Based on the database of the International Renewable Energy Agency (IRENA), which includes

• The IREA Renewable Cost Database - includes data on costs and performance for about 21,000 projects with a total capacity of around 2,100 GW;
• The IRENA Auction and Power Purchase Agreement (PPA) Database - a database of auctions and power purchase agreements (PPAs), which contains data for about 13,500 projects in the field of renewable energy.

Data on the cost of alternative energy sources, their efficiency, and electricity costs have been obtained.

Note: The following material presents average weighted values that may differ for different countries and projects depending on individual features of each project.

Construction Costs

The installed capacity of onshore wind energy installations increased more than fourfold from 178 GW to 769 GW respectively between 2010 and 2021 years. The main reason for such growth is the development of technologies in the field of wind energy and a decrease in capital costs for project implementation. The primary impetus for the development of wind energy is an increase in wind turbines. An increase in rotor diameter of wind turbine blades combined with an increase in tower height allows installing wind turbines at places that have lower wind potential, and secondly, the rotor of a wind turbine is located at altitudes where higher wind speeds prevail. These changes lead to increased efficiency of using wind turbines and, as a result, reduced electricity costs.

One of the reasons for the growth of wind energy is also the reduction in costs of wind energy installations. In recent years, there has been a sharp decrease in the cost of wind turbines produced in China. As of 2021, the average cost of similar contracts to purchase wind turbines was $550 per kW. It should be noted that due to reduced demand for wind turbines (mainly due to the coronavirus pandemic) in some projects, a price level of $425 per kW on delivery of wind turbines has been fixed. In connection with the fact that the cost of a turbine accounts for about 70% of total capital costs for implementing a project in the field of wind energy, there is an observed reduction in overall capital costs.

It should be noted that in recent years, the rates of decrease in unit capital costs have slowed down, and in some regions during 2020-2021 years, on the contrary, an increase in costs has been observed. One of the main factors for cost increases is a significant rise in prices of raw materials and components for manufacturing wind turbines. For example, from 2020 to the end of 2021, steel prices increased by 50% and continue to grow, while the total weighted share of steel in onshore wind energy project is about 24% (including foundation of a wind turbine), also some raw materials showed significant price increases: copper - 60%, neodymium - 300%.

The data on the cost of wind energy installations are based on the International Renewable Energy Agency (IRENA) database, which includes information on costs and performance for about 21,000 projects with a total capacity of around 2,100 GW.

However, the existing data indicates that not all increase in material costs observed up to this point has been reflected in equipment prices, as turbines were supplied under previously signed contracts. This situation led to a reduction in production margins for wind turbines. If material prices remain high, then price pressure will be more pronounced and the overall capital expenditures are likely to increase on many markets of wind energy technology. One factor contributing to increased construction costs in subsequent years may be logistics. Disruptions in supply chains not only led to delays in project implementation but also additional penalties for turbine manufacturers. All these factors are likely to lead to an increase in capital expenditures on wind energy projects by 8-12% from the current level of costs.

Efficiency of Onshore Wind Farms

As a criterion for evaluating the efficiency of renewable energy sources, such an indicator as the capacity factor (CF) is used. CF represents the ratio of electricity generated by a power plant during a specified time interval to its installed capacity and the same time interval expressed in percentages. The efficiency of wind farms depends on two factors: the wind energy potential of the construction site area and the technological advancement of the turbine.

During 2010-2021, the efficiency of onshore wind farms increased by 44% and reached 39% in 2021 (in 2010 – 27%).

The main factors influencing the increase in efficiency of wind turbines are continuous improvements in technologies for wind energy installations and the use of areas with high wind potential by developing technologies in related fields, such as logistics and construction in mountainous terrain. An analysis conducted in various countries showed that the greatest impact on the efficiency of wind energy is exerted by the development of modern turbine technology. The largest role is played by the use of larger turbines with greater hub height (hub) and a larger rotor diameter.

Average rotor diameter and hub height for onshore wind turbines by country, 2010-2021.

Not all improvements in the capacity factor are a result of advances in construction and design technologies for turbines, as thanks to achievements in remote sensing, improvement of computational technology, and methods for determining wind resources and analyzing placement of turbines with the aim of minimizing losses in electricity generation, it has become possible to choose better sites for wind farms and optimize their configurations.

It is worth noting that not all countries observe a high increase in efficiency. For some countries, there is a decrease in CF, the main cause being limited access to areas with more favorable wind characteristics or improvements in economic indicators of onshore wind energy projects, allowing for implementation in regions with lower wind speeds previously considered unprofitable.

Normative Cost of Electricity

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