Financial analysis for 2-megawatt wind turbine released
Although Jamestown voters approved a bond issue for a wind turbine, it’s not an automatic that a project is economically attractive. In fact, based on analysis to date, a medium-scale (600 kilowatts) wind turbine would not be attractive for the town. A larger-scale (2 megawatts) turbine does provide positive returns. We’re now focusing on reducing costs so that the returns are as attractive as possible.
What we did
We prepared a financial analysis based on estimates of construction costs, turbine costs, turbine output and power sales price, operation and maintenance costs, bond payments, etc. We ran three cases: worst case, reduced capital cost case, and a case with reduced costs and a state grant.
One of the most important factors in harvesting wind is actually having enough wind to harvest. Fortunately we have good wind measurements right on site that allow us to accurately estimate output from various wind turbines. (Having the two Portsmouth turbines running nearby adds to our confidence.) Once up, the annual output will usually vary less than 10 percent from the long-term average. We then multiplied the expected output by the Rhode Island distributed generation power rate to calculate revenues.
On the capital cost side, we obtained installation estimates from a Massachusetts firm with experience installing large turbines. We got an estimate of delivered wind turbine costs from a leading manufacturer. Our electrical engineer gave us a worst-case estimate of costs to connect to the grid. The total capital costs came out to $5.8 million. We used conservative operation and maintenance figures.
What we found
Using the worst-case assumptions, a 2-megawatt wind turbine would produce average returns of about $20,000 per year, or $400,000 over the life of the turbine. Reducing the capital costs by $500,000, the returns increase to about $60,000 per year, or $1.1 million over 20 years.
For the third case, reducing expenses and getting a $500,000 grant from the state, the annual returns are $95,000 annually, or $1.9 million over 10 years. The second and third cases not only provide higher returns, but also require a smaller investment.
We are now focusing on reducing capital costs through value engineering. The area with the most promise is the worst-case electrical-interconnect costs. We are working with our electrical engineer and counsel to design a system that is acceptable to National Grid while minimizing costs. It appears that we may be able to save as much as 30 percent off of our worst-case interconnect assumptions by having a townowned generator lead from Taylor Point to North Road. That would allow us to meet the goal of about $500,000 of cost savings.
Foundation cost estimates have been reduced because of the existing soil boring information from the site. We’ll continue to look at every aspect to reduce costs while gaining confidence in our figures. We’ll evaluate different wind turbines as well. After that’s complete, we’ll explore grant opportunities that can further improve the returns from the project. Third party options will also be evaluated in which a private company takes on some of the capital costs and risks to provide more benefits to the town.
Portsmouth wind turbines
If you would like a guided tour of the Portsmouth wind turbines, please email me at harley@end lessenergy.com. I’ve started a list of interested people.
The author is president of Endless
Energy Corporation, a consultant chosen by the Town Council in December to conduct studies necessary to determine the costs and potential profitability of a Jamestown wind turbine.