How Quickly Do Wind Turbines Pay For Themselves?

Wind energy utilization is excellent.

There is a reason why wind or other renewable energy sources haven’t yet taken the lead, despite the fact that it produces electricity utilizing the endless wind’s power without any additional inputs, CO2 emissions, or pollutants.

Simply put, fossil fuels are more economical even with the massive amounts of energy needed for extraction, transportation, and processing.

Calculating the payback period of a wind turbine may be difficult. It depends on a number of factors, such as the cost of electricity, the price of the turbine, and the amount of power it generates.

The estimated payoff time period for a 2.6 MW turbine in the example in this article is roughly 6 years and 7 months.

The Price of a Wind Turbine

Although they are expensive upfront, wind turbines require little operation and maintenance once they are in place.

Cost of Construction

The most expensive project is the construction of the turbine. The blades themselves can represent up to 25% of the total manufacturing costs due to their distinctive composite material structure.

More than half of the costs associated with production may be attributable to the sensitive machinery inside the nacelle.

Installation Cost

Wind turbine installation and transportation are challenging tasks.

The massive tower and gearbox can be broken down for shipping and installed on location, but the blades must be shipped complete.

In order to ensure a safe delivery, entire roads may be closed when shipping oversized goods.

Because wind farms are often built in isolated areas, it is more expensive to build essential infrastructures, such as power plants, distribution lines, and access roads.

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Costs of Operation and Maintenance – Post-Installation

After installation, costs for operations and maintenance must be considered.

This covers payments for management and legal services, maintenance and repair costs, land use charges, and numerous other expenses.

Briefly stated: Typically, the entire cost of a 1.5 MW to 3 MW turbine is one million dollars per MW. Assuming a 25-year lifespan for the turbines, the typical turbine will cost around 37 USD per MW/h of power produced over its lifetime.

Estimates of Profit from Investment in Wind Turbines

Example/Demonstration

Let’s take an onshore 2.6 MW turbine as an example, which the NREL estimates will cost $37 per MWh to build and run over 25 years.

Let’s now compute the payback time of the above turbine by applying simple statistics:

Step 1: Note the turbine’s overall cost

The turbine’s overall costs are as follows:

Type of Cost/Area of Expenditure Cost (per MWh) in USD Gross or total cost (USD)
Manufacturing and construction 25.2 2,352,420
Operation and maintenance 11.5 1,073,525
Inflation 0.3 28,005
Total Cost 37 3,453,950

While O&M and inflation are continuous expenditures that won’t materialize until the turbine is in use, manufacturing and building are the initial costs.

You will repay the initial costs. The duration of the turbine’s life and the recurring costs will be deducted from the yearly revenue.

The turbine will produce 3,734 MWh annually and has a life expectancy of 25 years.

Annual Energy Output 3, 734 MWh
Average Electrical Cost in the USA 10.65 c/kWh
Annual Revenue 397,671 USD

Step 2: Deduct annual costs

Once the turbine is built and running, operations, maintenance, and inflation begin. We, therefore, divide these expenses over 25 years and deduct them from the yearly revenue.

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We get the following figures after the annual cost deduction:

  • Yearly Gross Revenue = 397,671 USD
  • Operations and Maintenance = 42,941USD
  • Inflation = 1,120.20 USD
  • Yearly Net Revenue = 353,609.80 USD

Step 3: Compute the Payback period

We may compute the payback time simply by dividing the annual net revenue by the initial cost of manufacturing and building. In our current example, we obtain the following figures:

  • Manufacturing and Construction = 2,352,420 USD
  • Yearly Net Revenue = $353,609.80 USD
  • Payback Time = 6 years and 7 months

The turbine’s initial manufacturing and installation costs can be recovered in approximately 6 years and 7 months.

After that, the turbine will produce electricity without restriction for an additional 19 years. Expenses for O&M and inflation will always exist, regardless of how long the turbine is in use.

Some Factors affecting the Payback Period of Wind Turbines

This (above) example is a shortened version of a real cost study despite being comprehensive. The payback period might vary significantly and is impacted by a number of factors.

Location

Location appreciably impacts the wind turbine’s return on investment.

The cost of labor and raw materials in the area has an impact on the cost of building, production, and transportation.

The performance of the turbine is determined by the average wind speed at the location; the quicker it spins, the more power it generates (up to a point).

Local Cost

The shifting local electricity price affects how much money the turbine makes.

Subsidies

Other countries that are known to support the production and installation of wind turbines include the UK, China, and Japan.

The original cost of the turbine, the payback period, and the return on investment can all be considerably impacted by this.

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The US offers per-kWh tax incentives for wind energy installations.

By subtracting the annual taxable revenue per kWh of power sold, wind farms can reduce some of their expenses.

By using a home wind turbine to produce more electricity than it consumes, you could even qualify for net metering benefits by redistributing the excess energy into the grid.

Environmental Payback

There is also the idea of environmental payback or the amount of time it takes to balance the carbon that was used in their creation and installation.

The amount of time needed to offset a wind turbine’s carbon footprint is short, unlike the economic payback period.

According to several intensive studies on turbines, most turbines’ environmental impact is caused by producing the turbines and obtaining raw materials including steel, concrete, and carbon fiber.

And the energy used by these processes would be recovered in about six months. The energy payback period will be roughly a year in the worst-case situation if the turbines don’t operate as well as anticipated.

Wrapping Up

Getting a solid return is essential with investments of any kind. The same is true of wind turbines.

We discovered that it will take a 2.6 MW turbine roughly six years to recuperate the original investment for the scenario in this article.

This time is reasonable. But the payback period may differ greatly in practice.

The cost of labor, power, and raw materials all contribute to the overall cost of the turbine.

The economic viability of a wind farm may depend on whether or not government subsidies are offered. Wind energy needs incentives and subsidies to compete with fossil fuels.

However, as wind turbines become more effective, their cost to build them decreases and their output rises, improving the return on investment.

References:

  1. https://www.semprius.com/how-long-does-it-take-a-wind-turbine-to-pay-for-itself/
  2. https://www.newscientist.com/lastword/mg24332461-400-what-is-the-carbon-payback-period-for-a-wind-turbine/