Wind Energy in the 21St Century A iso by Roberi Y. Redlinger TOOLS AND MEIHC)DS FOR INFTGRXIw RESOURLI: PLANNING (with Joel Swisher and Gilberto Jannuzzi) / Wind Energy in the 21st Century Economics, Policy, Technology and the Changing Electricity Industry Robert YRed1inger Rgionol 1 naCT )I)iStfl.biitCil (!atOfl (\1. Viron Ewigy S,i'ic's, (alitoJnhl Per Dannemand Andersen S'uior Sdeutit Ri) Natknial Laboroturj Dcutnork and Poul Erik Morthorst .S'n or Rescaroi Spciilict Rise 'JctiouaI Ii.bnratorv L)n?nork 7 ,. • 4%4 j • ;\,•j UNEP United Nations Fnvironment Programme © UNEP Collaborating Centre on Energy and Environment 2002 ALL rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this pubtication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London WiT 41-1). Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2002 by PALG RAVE Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE is the new global academic imprint of St. Martin's Press LLC Scholar'y and Reference Division and Palgrave Publishers Ltd (formerly Macmillan Press LEd). ISBN 0-333-79248-3 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging- in-Publicati on Data Redlinger, Robert Y., 1963- Wind energy in the 21st century : economics, policy, technology, and the changing electricity industry / RobertY, Redlinger, Per Dannemand Andersen, and Pout Erik Morthorst. p. cm. Includes bibliographical references and index. ISBN 0-333-79248-3 1.Wind power. I.Title: Wind energy in the twenty–first century. II. Andersen, Per Dannemand, 1958– III. Morthorst, Poul Erik, 1951– IV. Title. TJ820.R43 2001 333.9'2—dc2 1 2001021717 10 9 8 7 6 5 4 3 2 1 ii 10 09 08 07 06 05 04 03 02 Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham, Wiltshire Contents List of Figures VI List of Tables ix Foreword by Klaus Toepfer xi Preface xiii List otAbbreviatwns xvi Introduction I 2 Wind Energy Resource Potential 6 Worldwide installed capacity 7 Energy in the wind 9 Wind resource assessment and data limitations 12 Global wind resource potential 20 Future medium- to long-term implementation of wind power 22 Large-scale implementation of wind power 32 3 Wind Iurbinc Technology and Industry 41 A brief history of wind power utilisation 41 Extracting energy from the wind 45 Modern wind turbine technology 51 Principal components of the wind turbine 52 Technological trends 55 Wind energy industry 59 Wind energy's interactions with the electricity grid 64 4 Economics of Wind Energy 73 Capital cost and efficiency trends 74 Operation and maintenance costs 77 Overall cost-effectiveness 80 Offshore wind turbines 82 Comparison with the cost of conventional power 85 Economics of hybrid and stand-alone wind energy systems 91 Economics of small-scale irrigation pumping 95 v vi (.ontc,its 5 Finance, Competition and Power Markets 97 Economic vs. financial viability 97 Financing wind power projects 102 Financing considerations in emerging economies 118 Competition and power markets 122 6 Environmental Considerations 149 What is the environment worth? 150 Damage costs 152 Environniental damage costs of electricity generation 158 Social considerations 163 7 Wind Energy Policy 169 lower purchase agreements 171 Investment incentives 172 Production incentives 174 Renewables set-aside 175 Externality adders 176 Environmental taxation 176 Research, development and demonstration grants 177 Government-assisted business development 178 Green marketing 179 Tradable CO, credits 179 Other policy mechanisms 180 Country experiences with grid-connected renewable energy policy 181 America 182 UK 196 The Netherlands 200 Denmark 204 Germany 206 India 209 Sweden 212 8 Summary and Conclusions 215 Epilogue 225 Notes 229 References 233 Index 244 List of Figures 2.1 30-minute averages of wind speed and wind turbine power output over 6 months 10 2.2 Measured wind speed frequency distribution and Weibull fit to the measurements 12 2.3 Wind power adoption based on two high-growth scenarios 31 2.4 Hourly electricity demand and wind power production: wind power penetration = 50 per cent 33 2.5 Excess electricity production and residual demand for conventional electricity, corresponding to different levels of wind energy penetration 36 2.6 The percentage of different technologies covering electricity demand and cxcess' electricity utilisation 38 3.1 Control volume for momentum and energy balance 46 3.2 Principal components of a wind turbine 53 3.3 Performance of the NWP-based model compared with the persistence model for the 5.2 MW Nosoni beds Odde wind farm 68 4.1 Development of average wind turbine size sold in the market and efficiency, measured as kWh produced per m2 of swept rotor area 74 4.2 Wind turbine capital costs (cx works) and other costs (USS/kW in constant 1997 $); investment costs divided by efficiency (index 1990 = 1.0) 76 4.3 Estimated and realised O&M costs over time as a percentage of investment costs, for different turbine sizes 80 4.4 Total wind energy costs per unit of electricity produced, by turbine size, based on hub height of 50 metres 81 4.5 Cost of offshore electricity production as a function of distance to land and capacity of the wind farm 85 4.6 Prolected avoided costs of conventional power compared with costs for wind-generated electricity (1996 US c/kWh), assuming zero capacity credit for wind power 87 vi' viii List of Figures 4.7 Projected avoided costs of conventional power compared with costs for wind-generated electricity (1996 US i/kWh) assuming 25 per cent capacity credit for wind power 88 4.8 Projected avoided costs of conventional power compared with costs for wind-generated electricity (1996 US (t/kWh), assuming 100 per cent capacity credit for wind power 88 4.9 Costeffectiveness of solar 11V homes vs. 3 km medium-voltage grid extension in Indonesia 92 5.1 Supply and demand curves for the Nordic electricity system 135 5.2 Illustrative price of regulating power on the Nord Pool market 138 6.1 Impact pathway approach for development of environmental damage costs 153 6.2 Example of hedonic pricing to establish monetary damage cost of noise 154 63 Travel-cost method for valuing environmental amenities 155 6.4 Estimated total environmental externality ranges, by fuel type 162 List of Tables 2.1 Worldwide grid-connected wind capacity (MW) 8 2.2 Summary wind atlas table for Hurghada on the Egyptian coast of the Gulf of Suez 14 2.3 Assumptions for wind energy in the EU White Paper 24 2.4 Development of the world market for wind turbines 26 2.5 Development of energy and electricity demand by 2020 according to the current policies' and 'ecologically driven WEC scenarios 27 2.6 Installed wind turbine capacity and wind-generated electricity in WEC scenarios 29 2.7 Projected global electricity demand - extended lEA forecast 30 2.8 Possible contribution of wind power to reduction of CO, emissions 32 2.9 Supply strategies for utilising renewable energy resources in year 2030 35 3.1 World's largest wind turbine manufacturers, ranked by MW sold in 1998 59 4.1 Cost structure for a 600 kW wind turbine (1997 USS) 75 4.2 Turbine age and development of U&M costs as percentage of investment costs 78 4,3 Annual O&M costs as a percentage of investment cost, by age and size of turbine 80 4.4 Investment costs of an existing Danish offshore wind farm (1997 prices) 83 4.5 Cost-effectiveness of stajid-alone power systems in rural China 93 5.1 Comparison of typical financing terms for US wind and gas power projects 117 6.1 Estimated environmental externality values of wind-generated electricity 159 6.2 Danish ExternE national implementation: wind energy externality values 161 ix x Lit orTable,% 6.3 Summary of potts conducted in the UK regarding oca1 public opinion towards wind energy projects 165 7.1 UK Non Fossil Fuel Obligation (NFFO) status hctwccn 1990and 1997 198 Foreword: Signposts to Sustainability Klaus Toepfer There are few signposts on the path to sustainable development more visible - and more inspiring - than the rapid evolution of the modern wind energy industry. In just two short decades, from 1980 to the year 2000, the industry grew from a few experimental tur- bines to a world marlet worth several billion dollars annually and an installed capacity of over 13 000 megawatts. These figures are not just impressive, they are several times what was considered to be even a highly optimistic scenario in the early 1990s. The modern wind energy industry is a successful example of what can be achieved when governments combine the right investment signals with adequate support for research and development. Although the development model may not be the same for other sustainable energy technologies, the lessons from wind are timely and useful. At the beginning of a new millennium, there are great hopes for wind energy to provide a significant portion of the electricity needed to serve a population that is expected to reach 9 billion people before the first five decades of this century are over.