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Average U.S. Wind Cost Hits 2¢ Per Kilowatt-Hour

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Average prices for wind power in the United States fell to 2¢ per kilowatt-hour last year, a stunning drop from a threshold of 7¢ in 2009, with inexpensive projects in the central part of the country leading the way, according to a new report from the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy.

Greentech Media is still warning of “comparatively tough times” on the horizon with the federal Production Tax Credit [1] (PTC), described by analysts as a “core motivator for wind power deployment,” due to be phased down through 2024.

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But so far, “bigger turbines have enhanced wind project performance, while lower turbine pricing continues to push down installed project costs,” Greentech notes, citing the DOE report. “The average installed cost of wind projects in 2017 was US$1,610 per kilowatt, down $795 per kilowatt from the peak in 2009.” DOE “reports that all low-cost projects are located in the U.S. ‘wind belt,’ where wind speeds can top 8.5 meters per second.”

In the short term, DOE sees “wind additions” growing from eight gigawatts in 2018 to 10 to 13 GW in 2020, before slowing down between 2021 and 2025, partly due to the PTC phaseout. “At the same time,” the report notes, “the potential for continued technological advancements and cost reductions enhances the prospects for longer-term growth, as does burgeoning corporate demand for wind energy and continued state [Renewable Portfolio Standard] requirements.”

In an industry review published earlier this month, Wood Mackenzie Power & Renewables states that the PTC makes wind the cheapest new generation source across most of the U.S. The decline of the tax credit will slow the industry’s cost reductions from 5% to 3% per year, while solar prices continue to fall with a boost from the federal Investment Tax Credit. The WoodMac report contains a base case scenario in which solar “could undercut wind prices through 2027,” Greentech reports.

Even so, “post-PTC wind will still come in cheaper than new combined-cycle natural gas in 20 states,” with that number growing to 28 by 2027.