May 20, 2008
Wind Turbine Costs Up
If you are waiting for alternative energy sources to become much cheaper, well, keep on waiting. Wind turbine costs are up for both offshore and onshore sites.
Shell's decision to sell its stake in London Array shows how difficult it will be to meet those goals. After the announcement on May 1, Skaerbaek, Denmark-based Dong Energy and Dusseldorf- based E.ON, Germany's biggest utility, said they may reduce the size of the project.
``Rising costs of materials,'' including steel and turbines ``are the reasons for reassessment of our position,'' said Shell spokeswoman Eurwen Thomas.
The price of offshore turbines rose 48 percent to 2.23 million euros ($3.45 million) per megawatt in the past three years, according to BTM Consult APS, a Danish wind power consultant. By comparison, land-based rotors cost 1.38 million euros per megawatt after rising 74 percent in the same period.
Some of that price rise might be due to strong demand for wind power. But materials cost increases played a role too. Higher commodities prices have pushed up prices for steel, aluminum, copper, and other materials used in wind tower construction.
So far the only energy source which looks like it might be getting ready for big price drops is solar. But it is also one of the more expensive ways to generate electricity. So it has plenty of room for improvement. The future costs of energy look pretty inflationary to me.
Materials costs rising will drive up the cost of all forms of power plants, not just wind power. Gas turbines are also made from metals.
Coal is only 90$ a TON, and there is no peak coal problem. It blows my mind that a semi-cleaner variation of coal is not the way to go for future electrical production which can offset considerable amount of oil use.
This is the kind of thing that can make pricing in terms of something like land far more attractive.
Check out the surge in weekly spot coal prices in one of the graphs on that US DOE EIA web page.
Metallurgical coal on the international market has skyrocketed. The trend now is for a larger amount of coal to get exported from the US. As export capacity of trains, shipyards, and the like increases I expect US coal prices to rise closer to international prices. I could be wrong. I hope so.
As this press release from Appalachian coal mining company Alpha Natural Resources, Inc. shows, Prices of metallurgical coking coal are way up on Chinese demand and Australian mine flooding:
Quillen said that after the close of the first quarter, the company secured commitments for 2008 delivery on three-quarters of a million tons of planned metallurgical production, at price levels consistent with recently announced settlements with Japanese steelmakers. "Those prices ranged from $295 to $305 per metric tonne at the port, which correlates to a realized price for Alpha of approximately $240-250 per short ton at the mine," Quillen said.
Hopefully the high cost of steel will let other wind alternatives come to market. Kite based wind offers both a low material way to harvest wind and a platform for solar panels.
You can't have clean coal no matter how you burn it.
The modern coal mining process is one of the most abhorring acts on earth. It also increases the likelihood of new or expanding coal seam fires which are one of the largest CO2 sources.
In order to dent oil consumption we need alternative fuel for vehicles and electricity seems the most likely (ethanol and hydrogen both seem ludicrous to me)
By my calculations, 15kwH of power is equal to about 1 gallon of gas in terms of how far it will get an automobile. The current price comparison for that is $1.50 or so on average for electricity and 4$ for the gasoline. That's about $1,000 a year in savings over 15,000 miles which I doubt sadly makes up for the higher depreciation costs of electrical vehicles.
However if we consider this externality into the economics: Which is more polluting, the 15kwH of coal or the 1 gallon of gas?
Haven't I pointed this out in our discussions of wind vs. nuclear. And, of course nobody ever talks about the cost of energy storage technology, which must be added to the cost of wind and solar.
"I expect US coal prices to rise closer to international prices. "
Coal costs on the spot market have risen. Most coal is sold on long-term contracts, so the overall average cost hasn't risen nearly as much.
At this point expansion of coal capacity (mining and delivering) can't keep up with demand, so we're seeing a rationing premium (like oil). Eventually, it will catch up, as there's plenty of coal for the next several decades. Ultimately what matters is the cost of coal once capital expansion has taken place - there's no reason to think that costs will be higher at that point.
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Thanks & Regards,