ECONOMICS

Economics calculator


Guide
        Below, the features of the wind energy economics calculator are explained.

Built-in Examples
        To kick start you to get working right away we have included some data examples for wind turbines, which you may select from the pop up menu. The offshore example is taken from the Danish power companies' report on offshore wind turbines. Details may be found in our report on the energy balance of wind turbines, which you may download from the publications section.

Project Lifetime
        Danish wind turbines have a design lifetime of 20 years. With offshore wind conditions (low turbulence) it is likely that the the turbines will last longer, probably 25 to 30 years. Since offshore foundations are designed to last 50 years, it may be interesting to calculate two generations of turbines on the same set of foundations, possibly with a repair overhaul after 25 years.
        Read more on the page on Installation/Operation/Maintenance.


Wind Turbine Price
        Prices may vary due to transportation costs, different tower heights, different rotor diameters etc. You can use the example prices, or you can type a price of your own directly in the box to the right.
        Read more on the page Turbine Costs.


Installation Cost
        Costs may vary with the location, particularly with costs for road construction and grid connection. 30% of turbine cost is a fair average for Denmark.
        Read more on the page on Installation/Operation/Maintenance.

Income from Electricity Sales
        This optional data item is interesting for individuals who want to invest in a wind turbine. You may also include capacity credit, if any. Specify the number of kilowatt hours you found using the Power Density Calculator, and the tariff (payment) per kilowatt hour. You may also enter an amount directly in the box to the far right in the form.The data is not needed to compute the cost of electricity.
        Read more on the page on Income from turbines and the page on Electrical Tariffs.

Operation and Maintenance
        You may include either a fixed amount per year (by typing directly into the box to the right) or a percentage of the cost of the turbine. Costs could include a service contract with the manufacturer. You may specify a fixed cost per kilowatt hour instead, if you wish.
        Read more on the page on Installation/Operation/Maintenance.


Net Present Value
        Here you specify the real rate of interest to tell the programme how to evaluate future income and expenditure. The Net Present Value of your project is the value of all payments, discounted back to the beginning of the investment. If the figure is positive, your project has a real rate of return which is larger than your real rate of interest. If the value is negative, the project has a lower rate of return.
        To compute the real rate of return, the programme takes the first payment listed at the bottom of the calculator (number 01) and divides it by (1+the real rate of interest). It then divides the next payment (number 02) by (1+the real rate of interest) to the second power, and so forth, and adds it all up together with the initial investment (number 00).


Real Rate of Return
        The real rate of return tells you the real rate of interest which makes the net present value of your project exactly zero. In other words, the real rate of return tells you how much real interest you earn on your investment. (The programme does not use your real rate of interest for anything, it computes one for you).
        Computing that rate is a bit tricky, since it requires that the programme makes a guess to find the answer that makes the net present value zero. If it guesses to high, the net present value becomes negative. If it guesses too low, it becomes positive. But the programme uses a very clever, blazingly fast technique called Newton-Rapson iteration which means that the guesses improve dramatically each time. After 5 guesses it has found your answer with 5 digit precision.


Electricity Cost per kWh
        The cost is calculated by finding the sum of the total investment and the discounted value of operation and maintenance costs in all years. We then divide the result by the sum of the discounted value of all future electricity production, i.e. we divide each year's electricity production by (1+i) to the n th power, where n is the period number (01 to 50. If you have specified an income from electricity sales, that amount is not used, or more accurately, it is subtracted from all non-zero amounts specified in the list of payments in period 01 to 50.

Payments
        The payments in these boxes are the results of your specifications above, and they are used to calculate the net present value and the real rate of return. The boxes are also used to calculate the cost of electricity after subtracting any income from electricity sales from all non zero boxes in period 01 to 50.


Wind Turbine Economics Calculator