The cost of wind power is falling and Ontario should be buying even more at these bargain prices.
Ontario has been buying renewable energy from rural landowners and their wind developers for the last six years or so. The price per kWh has varied from the 8-9 ¢/kWh range six years ago to 13.5 ¢/kWh for current contracts. That price range is definitely below that of new nuclear plants and most - if not all - new hydro-electric facilities. It's competitive with new natural gas plants and beats them when gas is required to guarantee prices over the next 20 years.
Wind opponents like to compare wind with old plants that are going to be shut in a few years from now. These plants have written off their capital costs but are facing major re-investment when they have to replace or refurbish their obsolete equipment.
The price of wind energy is essentially driven by two factors:
1. The strength of the wind resource, and
2. The capital cost of the turbine
Many of the windier parts of Ontario have already been developed but there is still a huge potential for more development. Most of the development so far has occurred where transmission capacity already exists but there is a least ten times as much capacity available north of existing locations or offshore.
So, Ontario has no shortage of wind power and it's relatively cheap. Ontario should be adding wind capacity whenever turbine capital costs are in it's favour. Fortunately, the capital cost for turbines is trending down in response to under-utilized manufacturing capacity and also to technological advances in the industry.
About eight years ago, when negotiations were underway between Ontario developers and turbine manufacturers, the wind industry was less active and turbine prices were relatively low (see figure below), although so was the Canadian dollar.
Click on the image for larger view
Then, as demand picked up around the world, the global supply chain had to operate at capacity and prices for turbines rose accordingly. Predictably, the prices bid in Ontario rose as well. When Ontario moved to a Feed-in Tariff program, the prices for turbines were at a peak and Ontario was required to offer 13.5 ¢/kWh. Those prices have been reviewed and are expected to be revised downward this month.
And so they should be. It appears that the wind turbine global supply chain has now expanded sufficiently that prices are coming down. The trend has continued for the last two or three years and is approaching levels not seen since 2007. In addition, the US market is in limbo as wind pricing policy has been stalled awaiting the 2012 election, and the Canadian dollar is stronger. All in all, the perfect confluence of factors for Ontario.
What other source of electrical energy is so affordable and getting cheaper every year? None. Time to buy and keep on buying.
