Economics of The Yankee Ridge Wind Farm Project

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Economics of The Yankee Ridge Wind Farm Project

• Mark E. Hardwidge
• Rachael Jabusch

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Wind power has many advantages for
society, including environmental friendliness and
reduced reliance on foreign resources.
Ultimately, however, economics is the primary
factor determining support for most projects. If
wind power is too expensive it will receive
little support. Once it becomes a net positive
(that is, it generates a profit), it becomes a
rational short term investment, and levels
of adoption should increase rapidly.
It appears that wind power is reaching
this transition point, not because of increased
environmental concern, but because
simple economics now make wind turbines good
investments.
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The Initial Economics Model

• There are several factors influencing the
  economics of wind turbines
• Initial cost of the turbine, construction,
  connection to the power grid, and so on
• Recurring maintenance costs
• Cost of capital and inflation rate
• Cost of electricity
• Government ecological (green) incentives

http//www.windpower.org/en/tour/econ/econ.htm
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A Better Economics Model
As a scoping study, we constructed a more
in-depth model to determine the return on
investment of various scenarios, and investigated
to the sensitivity to changes in various inputs
to assess risk.

• Easy To Adjust Input Values
• Easy To Enhance Further
• Easy To Measure Sensitivity of Variables
• Verifies Initial Model Is Correct

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Investor Concerns

• Investors care about a number of things,
  including
• Return on Investment
• Payback time - A long time period increases the
  risk of the project
• Risk - Numerous factors contribute to this risk,
  ranging from changes in electricity prices to
  physical damage to the wind turbine

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Economics Model Evaluation

• Example Scenario
• 225 kW Wind Turbine
• Initial Cost 260,000
• Cost of Electricity 0.08/kWh
• Cost of Capital 5 annual
• Yield 12 annual
• 30,000 annually
• Net Present Value
• 480,000 (Profit)
• Break-Even Point
• 7 Years

• Yankee Ridge Scenario
• 1.5 MW Wind Turbine
• Initial Cost 1.2 Million
• Cost of Electricity 0.05/kWh
• Cost of Capital 5 annual
• Yield 5.8 annual
• 70,000 annually
• Net Present Value
• 1.35 Million (Profit)
• Break-Even Point
• 12 Years

Two most viable options would be either selling
to the grid, or selling to a single customer.
Overall, there is a large potential for profit
from the sale of wind power even in Central
Illinois with a low average wind speed!
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Other Opportunities
We can approximate the total electrical power
requirement of the Champaign-Urbana area to be on
the order of a few hundred megawatts. There
are a few different ways we can take advantage of
this market
Complete management Purchase (or lease) land on
Yankee Ridge and wind turbines, connect to the
electrical grid, and sell the power
Localized wind farm with a single customer
Champaign-Urbana has several customers that
could purchase 100 of the power supplied The
University of Illinois Apartment Complexes
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Suggestions

• Start Small!
• Opportunities in the area must be investigated
  more fully
• Start Soon!
• Become the leader in the area
• Starting at all would instantly make us the
  leader in the local area.