Analyzing the Techno-Economic Determinants for the Repowering of Wind Farms

Abstract

The aim of this article is to identify the relative importance of technical and economic variables in the financial feasibility of repowering wind farm projects. A financial valuation model is developed. We carry out a sensitivity analysis with several variables considered to be key in the repowering decision. The most relevant technical variable is the increase in production efficiency and the most relevant economic variable is the capital expenditures in new equipment. Furthermore, the decision to repower critically depends upon the level of support being provided. The repowering project would not be feasible in the absence of support.

Acknowledgments

We thank Joseph C. Hartman, Thomas O. Boucher, and the anonymous reviewers for their helpful comments.

Notes

There is disagreement on the magnitude of these benefits, although not regarding their existence. The most relevant benefits are lower environmental impacts, better grid integration, dynamic efficiency, and local socioeconomic benefits (Filgueira et al. 2009; Goyal 2010; Karp and Bowen 2006; KEMA 2008; Klein et al. 2008; Pacific Gas and Electric Company 2007; Rader 2007; Wiser 2007).

Notwithstanding, it is likely that the new turbines would require grid reinforcements or replacements, depending on the capacity increase of the wind farm.

According to Filgueira et al. (2009), the maintenance costs for wind turbines with over 10 years of service increase by 25%.

Cherrington et al. (2012) discussed these options, focusing on the economic aspects of recycling.

Rader (2007) and KEMA (2008) have shown that these permits were significant barriers for repowering in California.

In a study of repowering in Spain, Alonso (2008) showed that it makes sense to repower farms older than 15 years as soon as possible. Farms older than 10 years but younger than 15 years got different results depending on the technology installed. For those with the older technology and therefore the smaller unitary power, it is recommended to repower as soon as possible. However, those others farms with 500 to 700 kW wind turbines are advised to wait from 2 to 4 years before repowering. Those farms younger than 10 years or with wind turbines bigger than 750 kW are advised to wait for around 5 years until a greater technology development or a decrease in costs is achieved.

Quotas with TGCs (called renewable portfolio standards in the United States) are certificates issued for every megawatt-hour of Electricity from Renewable Energy Sources (RES-E), allowing generatorsto obtain additional revenue to the sale of electricity (i.e., two streams of revenue). Demand for TGCs originates from an obligation on electricity distributors to surrender a number of TGCs as a share of their annual consumption (quota). Otherwise, they would pay a penalty. The TGC price strongly depends on the interaction of supply and demand and other factors. In PTCs, a tax credit to wind electricity generators per kilowatt-hour of RES-E generated and fed into the grid is provided (Del Río et al 2011).

The number of equivalent hours per year is an indicator of production efficiency. It is defined as the hours that the wind farm should be working at its nameplate capacity in order to generate the same amount of electricity in a year. The capacity factor is the percentage of equivalent hours that a wind farm is in operation with respect to the total number of hours in a year (8,760).

The conclusions can be generalized to other repowering support schemes.

Note that, in this article, we compare the repowering decision with keeping the old wind farm in operation. We do not compare the repowering option with investments in an attractive greenfield project.

These costs are proxied by the deposit made by the wind farm investor in the wind farm authorization process.

Table 2 Key features of the benchmark old wind farm

This support level for the FIT corresponds to the level of the FIT for repowering in Spain (0.7¢/kWh) plus the complement for those wind farms that are able to bear voltage dips (0.41020¢/kWh). See Order ITC/3519/2009 and Royal Decree 661/2007.