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Wind Farm Costs Decrease Ahead of Subsidy Cuts

Costs Fell 38% in Four Years

Written by Swagato Chakravorty
Posted November 5, 2012

Wind power costs have decreased noticeably over 4 years, according to a new report.

Costs have dropped by 38 percent; average price of operation and maintenance contracts for onshore farms dropped to $25,000 per megawatt this year from roughly $39,000, revealed a report from Bloomberg New Energy Finance.

But they still have a ways to go to achieve parity.

From Bloomberg:

“Wind power has done much to improve its competitiveness against gas-fired and coal-fired generation in recent years via lower-cost, more technically advanced turbines and more sophisticated siting and management,” Michael Liebreich, chief executive officer of London-based BNEF, said in the statement.

Governments in both the U.S. and the U.K. are caught in fierce debates over how to deal with the emergent wind sector. While Britain has advanced quite far in subsidizing and supporting the wind industry, the U.S. has a long way to go.

But Britain's Cameron-led government is considering ending subsidies once existing renewable energy goals are achieved after just recently deciding to slash onshore subsidies by 10 percent.

And in the U.S., President Obama is pressing Congress to renew vital wind tax credits that are set to expire at the end of this year. These tax credits are quite a serious matter, since allowing them to expire could see the market for wind towers crash from a present level of $2 to $2.5 billion to a mere $100-$500 million through 2013.

All of this makes the decreasing costs an extremely good development for both emergent and established wind developers, such as Vestas Wind Systems A/S (CPH: VWS). Most of these developers expect contract terms to remain stable through 2015.

Enercon GmbH and Vestas are widely viewed as the best or most reliable service providers, the report states, and that industry trust seems to be reflected by Enercon’s contract history—their costs remained 20 percent lower than the average between 2008 and 2012.

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