WIND ENERGY SYSTEMS - Cd3wd

Chapter 8—Economics 8–15
L = (837.24) 0.12(1.12)20
(1.12) 20 − 1 = $112.09
LF = 112.09
60
=1.868
The yearly electricity bill after 20 years is 60(1.08) 20 = $279.66. The levelized annual cost of
$112.09 is equivalent to the series of actual annual costs which increase from $60 to $279.66. The
levelized cost of electricity over this period would be just the levelizing factor times the current cost,
or (0.05)(1.868) = $0.0934/kWh.
3 REVENUE REQUIREMENTS
Wind generators connected to the utility grid may not be owned by the utility but can still
be treated by basically the same economic analysis. Different ownership may change the
interest rates or the tax status, but the same analysis procedure still applies. We shall,
therefore, examine the revenue requirements of the electric utility industry in general, and
then specialize our results to wind generators.
The electric utility industry has five unique characteristics that set it apart from other
industries[3]:
1. The industry is capital intensive. For a given utility, over half of the revenue from the
sale of electricity may be allocated to sustain the capital investment. An even greater
fraction is required for generation without fuel costs, such as wind.
2. The industry’s investment items generally are long-lived, often in the range 30 to 40
years.
3. The industry has a relatively constant flow of revenue dollars on an annual basis compared
to other industries.
4. The industry’s product demand and usage is determined by the customer.
5. The industry is mandated to provide reliable, low-cost, environmentally acceptable electricity
and for the most part is regulated by government agencies.
These characteristics make the revenue requirement approach to economic studies the most
logical of the possible techniques. In this approach, the revenue that would be required to
sustain a given alternative is determined and compared to a similarly derived revenue of every
other alternative. This method determines the revenue required from the utility customers
Wind Energy Systems by Dr. Gary L. Johnson November 21, 2001