//INTEGRAS/KCG/PAGINATION/WILEY/WPS/FINALS_14-12-04/0470855088_03_CHA02.3D – 19 – [5–24/20] 20.12.2004
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resources, diff erent tax structures and other reasons. In particular, the impact of wind
speed on the economics of wind power must be stressed: a 10 % increase in wind speed,
achieved at a better location for example, will in principal result in 30 % higher energy
production at a wind farm (see also Chapter 3).
The competitive bidding processes for renewable power generation in England
and Wales [The Non-Fossil Fuel Obligation (NFFO)] in the 1990s, however, provide a
good comparison of power production prices for wind power and other generation
technologies. The NFFO was based on a bidding process that invited potential project
developers of renewable energy projects to bid for buildi ng new projects. The developers
bid under different technology brands (e.g. wind or solar) for a feed-in tariff or for an
amount of financial incentives to be paid for each kilowatt-hour fed into the grid by
renewable energy systems. The best bidder(s) were awarded their bid feed-in tariff for
a predefined period.
Owing to changes in regulations, only the price development of the last three bidding
processes can be compared. They are summarised in Table 2.12. It shows that wind
energy bidding prices decreased significantly; for example, between 1997 (NFFO4) and
1998 (NFFO5), the average de crease was 22 %. Surprisingly, the average price of all
renewables for NFF05 is 2.71 British pence per kWh, with some projects as low as 2.34
pence per kWh, with the average power purchase price (PPP) on the England and Wales
spot market, based on coal, gas and nuclear power generation, was 2.455 pence per kWh
between April 1998 and April 1999.
The question arises, why would a project developer accept a lower-priced contract
from NFFO if he or she could also sell the energy for a higher price via the spot
market? The reason probably is that NFFO offered a 15-year fixed contract, which
means a reduced financial risk, and additional costs for trading via the spot market
make the trade of a small amount of energy unfeasible. Furthermore, as project
developers have a period of five years to commission their plants, some developers
have used cost predictions for their future projects based on large cost reductions
during the following five years. In summary, wind power can be competitive in some
countries, depending on the available wind speed, the prices of competing energy
resources and the tax system.
Table 2.12 Successful bidding prices in British pence per kilowatt-hour
NFFO3 (1994) NFFO4 (1997) NFFO5 (1998)
Large wind 3.98–5.99 3.11–4.95 2.43–3.14
Small wind — — 3.40–4.60
Hydro 4.25–4.85 3.80–4.40 3.85–4.35
Landfill gas 3.29–4.00 2.80–3.20 2.59–2.85
Waste system 3.48–4.00 2.66–2.80 2.34–2.42
Biomass 4.90–5.62 5.49–5.79 —
Source: Office of Electricity Regulation, 1998 — There was no bidding within
NFFO3 and NFFO4 for small wind projects.
Note: 1 ecu ¼1 euro ¼1.15 US dollar ¼0.7 pounds sterling, as at January
1999; NFFO ¼ Non-Fossil Fuel Obligation.
Wind Power in Power Systems 19