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Financial Modeling of W ind Projects 275

One of the mechanisms is the clean development mechanism (CDM)
that creates certified emission reduction (CER), which are monetized
by trading in an exchange.
Figure 13-1 contains data collected by Lawrence Berkeley National
2
Laboratory(LBL) onthesalepriceofelectricityintheUnitedStatesfor
projects with a PPA that has a bundled price for electricity and RECs.
The LBL database contains 42% of wind capacity installed between
1998 and 2008. The average bundled sale price of energy was about
$51.5/MWh for 1,769 MW of wind projects installed in 2008. Note
these prices do not include federal or state incentives. In 2008, the
production tax credit was $20/MWh.

Revenue Computations
After the price of electricity has been determined, the next step is to
multiply it by the amount of energy produced in the time period. The
time period for a preliminary financial model is a year, while it is a
month for detailed financial model. Revenue is therefore:

R(i) = pr(i) · en(i)

where i is the period, R(i) is the revenue in period i, pr(i) is the total
price (including credits) in period i, and en(i) is the energy production
in period i.

Capital Costs
The capital cost of a wind project is called the total installed cost (TIC),
which includes all the costs until commissioning of a project. TIC is
expressed in terms of dollars (or Euros or any other currency) per
2
kilowatt. According to LBL report TIC in the United States were:
$1,570/kW in 2006 and $1,915/kW in 2008 (see Fig. 13-2). The 2008
data is based on 61 onshore wind projects totaling 6,125 MW or 72%
of wind power capacity installed.
WindPower Monthly reported the following average cost of a fully
5
installed onshore wind farm across the world were: €1,502/kW in
2008 averaged over 3,600 MW with a range of €1,300 to €1,700/kW,
and €1,500/kWin2009averagedover4,000MWwitharangeof €1,200
to €1,800/kW. The price of turbine decreased from €1,100 in 2008 to
€1,050/kW in 2009. (See Fig. 13-3 for a plot of costs in 2004 to 2009
from WindPower Monthly.)
The capital costs fall into two broad categories as listed in Table
13-1: Turbine costs and balance of plant (BOP) costs. The costs are
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from the NREL’s jobs and economic development (JEDI) model. This
model contains state-specific default costs in the United States market.
Although valuable for preliminary financial analysis, the default costs
are approximate. It must be emphasized that capital costs are site- and
size-specific, and that generic costs should be used with caution. In