Page 306 - Fluid Power Engineering

272 Chapter Thirteen

milestones are obtaining permits, delivery of turbine, con-
struction contract, start of construction, and commercial op-
eration date. These penalties should be taken into account as
either lost revenue or increase in cost.
Lower prices for delivery of energy that is in excess of planned amount.
PPA may have a clause for lower prices, which must be ap-
plied to the revenue.

Market-Based Pricing
Market-based pricing is available as an option to wind project owners
that do not wish to sign long-term fixed price PPA. Because of the
unpredictability of the spot price of energy, investors will not fund
wind projects that rely on selling 100% of energy in this market. This
option is rarely exercised in isolation; some projects choose to sell a
small percentage of electricity on the spot market to avail of market-
based pricing.

Feed-in Tariff (FiT)
FIT is a common pricing model in Europe, Canada, and several other
countries. This provides the most simple and predictable model for
pricing from the point of view of renewable energy investors. In this
model, the price of energy is transparent, fixed, and applies to all pro-
ducers of renewable electricity. Utilities are mandated by legislation to
provide access and a fixed price for electricity that is normally based
on cost plus normal profit margin. The feed-in tariff is specific to the
type of renewable resource, for instance, solar usually has a higher
feed-in tariff compared to wind; in some cases, it may depend on the
sizeoftheproject.Feed-intariffhasprovedtobethebestmechanismto
promote renewable energy. An example of FiT in Germany in 2005 is: 3

For onshore wind projects, pricing is 8.7 eurocents per kWh

for the first 5 years and then 5.5 eurocents per kWh from 6 to
20 years
For offshore wind projects, pricing is 9.1 eurocents per kWh

for the first 12 years and then 6.2 eurocents per kWh from 13
to 20 years

As of 2009, FiT for wind energy is essentially nonexistent in the United
States, although several states are considering enacting FiT legislation.

Retail rate through net-metering Net-metering is a popular pricing
mechanism for small wind projects, where the renewable energy
source, the demand center (house, factory, or office), and the grid are
all connected to the same meter. The meter runs backward when the
energy production is greater than demand, that is, renewable energy
is injected to the grid. The meter runs forward when the renewable