WindFarmEconomicAnalysis

MarkWeber&Energy3
Aninvestigationintotheeconomics
ofwindfarms

ExecutiveSummary
ValueDrivers
ElectricityPrice
ExchangeRate
AnnualGeneration
TurbineCost

Subsidies
UKandGermanyoffergoodreturn
31/03/2010

MarkWeber

Contents
MEMProjectObjectives
ProjectScopeandDataSource
UnderstandingeconomicsinNewZealand
UnderstandingeconomicsInternationally
ImpactforNewZealandinthefuture
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MarkWeber

TheProject
PartofMEMDegree
1yearmastersprogram
7monthsofcourses

700Hours
Paid!
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MarkWeber

TheobjectiveofanMEMprojectisto
completeaInvestigativeassignment
inindustry
UndertakenforEnergy3

Energy3wishedtounderstandrelative
driversandeconomicsforaprivateinvestor
Drawoutinsightsonwindenergyeconomics
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MarkWeber

Theprojectscopeexamines10NZprojects
andtwoconceptualdevelopments
internationally
GeneralInformation
Difficultyattainingfinancialinformation
AnnualGeneration
PowerPrice
RatedCapacity
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MarkWeber

Theprojectusedonlypublically
availableinformation

Keysourceswere

NZWEA
NewZealandElectricityCommission
ReserveBankofNewZealand
Variousinternationalenergyandeconomic
websites,booksandjournals

KeyAssumptionwere
1.23million/MWforanaverage2MWmachine
Turbinecostmakesup82%ofaprojectsCapital
Expenses
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Economicspackagewasdevelopedforthe
projectanddeliveredonarangeof
measures
Wind Farm Name
Location
Owner
Commissioned
Description
Wind Turbines
Model
Rated Capacity
Wind Speed
Total annual generation
Wind Farm Efficiency
Installed Cost ($ 2009)
LRMC ($ 2009)
Carbon Displaced (@625t/GWhr)
Homes supplied (@ 80GWhr/home)
Project Rate of Return (post tax)
Project Lifecycle NPV ($ 2009)
NPV at 1 Jan 2010 ($ 2009)

Units
Nos
Model
MW
9.3 m/sec
314.505 GWhr
39.56
2,214
84.87
196566
39313

10.77 %
17,167,371 NZ$
85,279,227 NZ$

Project Life
Taxation Rate
Discount Rate (Nominal)

31/03/2010

%
NZ$/Kw
NZ$/MWhr
tonnes
homes

20 Years
30 %
10 %

MarkWeber

Data Source
Owner
Owner
Owner
NZWEA
Electricity Comission
calculated
calculated
calculated
calculated
calculated
calculated
calculated
calculated
Assumed
Assumed
Assumed

TheresultsforNewZealandshowed
thatwindfarmingiseconomic
ComparisonofInstalledCostvsLRMCvsIRRbetweenNewZealandwindfarms
BubbleSize=LRMC(2009)NZ$/MWhr
3,500

Installedcost($2009)NZ$/Kw

3,000

92.30

98.11

2,500

84.87

100.99
2,000

79.98

73.15

78.04
72.61

1,500

52.31

63.35

1,000

500

Average = 11.43%
0
7.00

8.00

9.00

10.00

11.00

12.00

13.00

14.00

15.00

16.00

17.00

IRR%
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RelationshipbetweenIRRLRMC
andInstalledCost
10000.00

NewZealandwindfarmsIRR,LRMCandInstalledCost.
RankedbyIRR

InternalRateofReturn(%)(post
tax)

1000.00

LogScale

InstalledCost(NZ$/kW)($2009)
LRMC(NZ$/MWhr)($2009)

100.00

Linear(InternalRateofReturn(%)
(posttax))
Linear(InstalledCost(NZ$/kW)($
2009))

10.00

Linear(LRMC(NZ$/MWhr)($
2009))
1.00

WindFarm
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10

Valuedriversdeterminedwith
sensitivityanalysis
PercentagechangeinIRR,LRMCandInstalledCostto20%increaseinvaluedrivers
DiscountRate+20%
SubsidyRevenues+20%
CarbonRevenue+20%

ValueDriver

ElectricityPrice+20%
Generation+20%

IRR

O&M+20%

LRMC
InstalledCost

LandLease+20%
ForexNZ$/Euro+20%
TurbineCost+20%
30.0

20.0

10.0

0.0

10.0

20.0

30.0

PercentageChange
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11

Theanalysishighlightedfourmain
ValueDriversinNZwindenergy
1.
2.
3.
4.

ElectricityPrice
ExchangeRate
AnnualGeneration
TurbineCost

Internationallythedriversarethesame

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12

W in d F a rm E f f ic ie n c y (% )

2,603

140.19

27.05

2010

Vestas V52 0.85 MW

100

15.29

2,589

212.60

17.01

6.5 91,432,763 121,270,532

2010

Vestas V52 0.85 MW

10

15.13

3,254

168.38

27.05

8.1 13,891,860 19,845,728

Vestas V52 0.85 MW

10

11.79

3,236

259.69

17.01

6.5

4,106,420 12,203,723

Vestas V52 0.85 MW

100

10.98

2,589

146.73

23.97

Vestas V52 0.85 MW

100

9.86

2,597

97.02

36.99

Vestas V52 0.85 MW

100

8.74

2,710

97.41

Vestas V52 0.85 MW

100

8.63

2,627

135.00

8.1 186,524,570 196,633,843

28

10

201.450

W in d S p e e d (m / s e c )

T o t a l a n n u a l g e n e ra t io n (G W h r)

L R M C (N Z $ / M W h r) ($ 2 0 0 9 )

18.40

D is c o u n t R a t e (% ) (N o m in a l)

I n s t a lle d C o s t (N Z $ / k W ) ($ 2 0 0 9 )

100

T a x a t io n R a t e (% )

I n t e rn a l R a t e o f R e t u rn (% ) (p o s t t a x )

Vestas V52 0.85 MW

N P V a t 1 J a n 2 0 1 0 (N Z D ) ($ 2 0 1 0 )

N u m b e r o f T u rb in e s

P ro je c t L if e c y c le N P V (N Z D ) ($ 2 0 1 0 )

Internationalsummarydata

Location

Currency

Commissioned Wind Turbines

85 MW

United Kingdom

NZD

2010

85 MW

Germany

NZD

8.5 MW

United Kingdom

NZD

8.5 MW

Germany

NZD

2010

85 MW

Denmark

NZD

2010

85 MW

Australia

NZD

2010

85 MW

New Zealand

NZD

2010

85 MW

United States of America NZD

2010

8.5 MW

Denmark

NZD

2010

Vestas V52 0.85 MW

10

8.32

3,236

180.14

23.97

7.5

-2,414,947

9,268,671

30

10

17.850

8.5 MW

Australia

NZD

2010

Vestas V52 0.85 MW

10

7.58

3,247

117.47

36.99

9.8

-4,174,497 10,388,831

30

10

27.540

8.5 MW

New Zealand

NZD

2010

Vestas V52 0.85 MW

10

6.59

3,387

117.76

40.98

10.7

-6,229,795 21,501,767

30

10

30.515

8.5 MW

United States of America NZD

2010

Vestas V52 0.85 MW

10

6.29

3,283

163.63

26.03

7.9

-5,879,623

7,357,122

34

10

19.380

Average

55

10.63

2,946

153.00

28.67

8.4 22,685,335 72,412,158

28

10

117.420

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15

10

126.650

28

10

20.145

15

10

12.665

7.5 19,604,955 91,904,491

30

10

178.500

9.8

4,688,761 101,996,374

30

10

275.400

40.98

10.7 -13,945,350 203,906,028

30

10

305.150

26.03

7.9 -15,381,097 72,668,785

34

10

193.800

13

CountryRankintermsofIRR
CountryRank(IRR)
1.
2.
3.
4.
5.
6.

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UK
Germany
Denmark
Aus
NZ
USA

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14

Visualcountrycomparison

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15

Subsidiesplayamajorrolein
windfarmviability
Percentageofpowerprice
IRRIncrease
Subsidiesmakewindviable

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16

UKwithoutsubsidy
Cashflow Profile (nominal post tax)

250,000,000

200,000,000

150,000,000

100,000,000

50,000,000

-50,000,000

-100,000,000

-150,000,000

-200,000,000

-250,000,000
Free Post Tax Cashflow

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MarkWeber

Cumulative

17

UKwithsubsidy
Cashflow Profile (nominal post tax)

1,000,000,000

800,000,000

600,000,000

400,000,000

200,000,000

-200,000,000

-400,000,000
Free Post Tax Cashflow

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Cumulative

18

Thingstorememberfor
developersandinvestors
Investment
Manipulatekeyvaluedrivers
InvestinUKorGermany

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19

ImprovingNZattractivenessto
overseasinvestment
Legislative
EconomicStimulus

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20

FutureInvestigation
InternationalLargeFarmVSDGcomparison
DifferenceinDGandLargeScaleProfitability
subsidies
Costs

Mostattractivecountriesforinvestmentin
DG

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21

Thankyouforyourtimeand
attention.

AbigthankyoutoKenHumphrey
andEnergy3
31/03/2010

MarkWeber

22