What is the cost of electricity produced from wind energy?

The cost of wind energy is evaluated in several different ways. The US Department of Energy (DOE) tracks both wind Power Purchase Agreement (PPA) prices, which represent the fixed price per kilowatthour that utilities and other third parties commit to pay for electricity over a long period of time, and Levelized Cost of Energy (LCOE), which represents the per-kilowatthour cost of building and operating a generating plant. (See OWOE: What are LCOE and LACE?)

The latest DOE Land-Based Wind Market Report: 2022 Edition shows a clear decline in PPA prices since 2009-2010, both overall and by region. (See Figure 1) Currently ERCOT (Electric Reliability Council of Texas) and SPP (Southwest Power Pool) tend to be the lowest-priced regions with costs generally under $20/MWh, and CAISO (California Independent System Operator) and the West tend to be the highest and close to $40/MWh. (See Figure 2 for a map of the major US power regions.) Figure 3 shows somewhat similar results for LCOE, with average and individual project costs declining since 2009 down to a US average of $32/MWh. These DOE values include any federal and state tax incentives for which the individual projects qualified as well as any Renewable Energy Credits (RECs) that were bundled with the electrical power costs.

Figure 4 summarizes unsubsidized LOCE for both alternative and conventional power sources as presented by Lazard 2022 (Version 15). It shows unsubsidized new onshore wind costs ranging from $26-$50 per MWh. This compares to $45-74 per MWh for the least expensive new plant using conventional sources, which is a new gas-fired combined cycle plant. At the low end of the cost range, i.e., in those locations and conditions that are best suited for wind power, wind LCOE beats all other sources of electricity. In all cases, new onshore wind is cheaper than a new nuclear plant or conventional coal plant. In fact, in many locations in the US the cost of new wind resources when including government subsidies will be less than running an existing combined cycle plant (average $24 per MWh) as illustrated in Figure 5 from Lazard.

The triangle in the bar for wind in Figure 4 at $83/kWh is an estimated midpoint for offshore wind. This compares to a value of $118/kWh from Lazard in 2016. Although offshore wind cost is still significantly higher than onshore wind, the cost has decreased at a faster rate due to technological advances. See OWOE: What are offshore wind farms? and OWOE: What are the main challenges facing offshore wind power?

Much of the decline in cost for both onshore and offshore wind can be attributed to advances in technology, in particular, associated with turbine design. However, technological advancements in the areas of component efficiency, smart controls, material selection, and construction and manufacturing process have also contributed to the reduction in cost over the years. (See OWOE: What are the key technology advances impacting wind energy production?) Current government investments in technology development, tax credits, and other subsidies should continue to drive down the cost of wind generated electrical power.

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