Understanding Wind Power Costs: The Value of a Comprehensive Approach (Presentation): NREL (National Renewable Energy Laboratory)

The evolution and maturity of the wind industry have often been assessed by considering changes in key metrics including capital costs, capacity factor, turbine pricing, and in some cases electricity sales data. However, wind turbines and plants represent a complex system optimization problem and each of these metrics, in isolation, fails to tell the complete story of technological progress andindustry advancement. By contrast, the levelized cost of energy (LCOE) provides a more comprehensive and nuanced perspective on industry trends. LCOE can be used to analyze the effect of individual changes (by holding other variables constant) or to understand the complex interactions that might occur for example between turbine costs and productivity. Moreover, LCOE offers a reflection of thetotal production costs and required revenue for wind plants. This presentation provides examples of how a narrow focus on individual industry metrics can provide inaccurate representations of industry trends while also demonstrating how LCOE captures the array of critical industry variables to provide a greater level of insight.