National lab report: Wind turbine prices drop as designs improve, U.S. supply chain develops
A new report from Lawrence Berkeley National Laboratory (LBNL) researchers finds that two important factors in the trend of wind turbine prices over the past decade have been the scaling up of turbine size to reduce cost of energy (COE) and the growth of a domestic supply chain as the U.S. dollar has declined against other major currencies.
The report, "Understanding Trends in Wind Turbine Prices Over the Past Decade," is authored by Mark Bolinger and Ryan Wiser of LBNL.
It appears to underline the degree to which the wind power industry is still emerging, in the sense that rapid progress in improving wind technology continues. At the same time, the sharp drop in turbine prices in recent years and the development of a domestic supply chain that now numbers more than 400 factories in 43 states is a clear sign that the industry is maturing and driving down costs. As AWEA commented in its recent quarterly U.S. wind market report for the third quarter of 2011, "Years of technological innovations and an influx of U.S.-based manufacturing have driven down the cost of wind energy and saved further on transportation. Including incentives, which all forms of energy get, U.S. wind is now close to cost-competitive with all other energy sources – even shale gas at today's unsustainable prices."
Bolinger and Wiser note that "On a $-per-kW [kilowatt of installed nameplate capacity] basis, wind turbine prices in the U.S. have declined by nearly one-third on average since 2008, after having previously doubled over the period from 2002 through 2008. These two substantial and opposing trends over the past decade – and particularly the earlier price doubling – run counter to the smooth, gradually declining technology cost trajectories that are often assumed by energy analysts modeling the diffusion of new technologies, including wind power."
They find the largest contributor to the price increase through 2008 to have been the rapid scaling up of turbine size, in average nameplate capacity, hub height, and rotor diameter. However, they add, "The incremental cost of scaling ... has been outweighed by a corresponding increase in capacity factors and a reduction in the levelized cost of wind generation. The scaling-related turbine cost increases can, therefore, be viewed as a reasoned approach to minimizing the levelized cost of wind energy."
With respect to the second-largest factor in explaining the turbine price increase--adverse exchange rate movements--they write, "Greater localization of the supply chain in recent years, however, has somewhat mitigated the price risk associated with further dollar weakness (while also delivering savings in the transport of turbines)."
The report examines seven possible drivers of wind turbine prices--changes in labor costs, warranty provisions, manufacturer profitability, turbine scaling, raw materials prices, energy prices, and foreign exchange rates--and finds that together, they "explain from 70% to 90% (depending on the year) of empirically observed wind turbine price movements through 2010."
Bolinger and Wiser add, "Changes in labor costs, warranty provisions, manufacturer profitability, and raw material prices are found to have all had lesser – though certainly not inconsequential – impacts on turbine prices, while changes in energy prices had only a negligible impact."
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