The cheapest way to produce electricity: onshore wind energy

• Nationally, energy must be viewed as a whole.
• Estonia must choose an energy portfolio that suits itself.
• Electricity must also be competitively priced.

 

Onshore wind energy is the most affordable way to generate electricity. Offshore wind farms are more expensive to build, which also makes the price of electricity higher, writes TMV Green’s development manager Jaanus Kivirand.

 

The big challenge of the energy economy is to find a balance between security of supply, affordable price and environmental sustainability. At the same time, contrasting renewable energy with traditional energy based on the burning of oil shale, coal or gas is artificial. All these production methods have their place and time in the electricity generation portfolio.

Onshore wind energy is the most affordable option for electricity production, and that without the support of renewable energy. Since the lower price of electricity is one of the competitive advantages of the economic environment, Estonia should first take advantage of the opportunities to build onshore wind farms. Building offshore wind farms is more expensive, which also means higher electricity prices for the end user.

During windy periods, the use of wind energy makes economic sense in every way – at this time, the load on the boilers and the use of fuel can be reduced in controlled power plants. Onshore wind farms meet the criterion of both affordable price and environmental sustainability. The energy used to produce the wind turbine is returned by the wind turbine in three to five months. But by the time the wind doesn’t blow and the sun doesn’t shine, there must be recorders and controllable capacities. The reliability of our electricity supply must not depend on the weather.

Onshore wind turbines are very productive – if the electrical energy of one wind turbine is converted into heat, for example, the thermal energy needs of up to four settlements the size of Kehtna could be covered (Kehtna’s heat consumption is 6500 megawatt-hours (MWh)). A modern onshore wind turbine has a capacity of six to seven megawatts, produces energy with high efficiency (35 to 45 percent) and produces 20 to 23 gigawatt-hours per year (GWh/a) (or 3,000 to 3,500 MWh per megawatt unit).

 

Lower construction cost, cheaper electricity price
The efficiency of wind energy and the minimum average cost of electricity above which the project is profitable depend on the location for both onshore and offshore wind farms. As a rule, the average price of electricity in an offshore wind farm is almost twice as high as on land. According to an analysis by Lazard, an international financial consulting firm, the average cost of onshore wind farms ranges from $24 to $75 per megawatt hour and offshore wind farms from $72 to $140 per megawatt hour. The lower construction cost speaks in favor of onshore wind farms – the cheaper the construction cost and the higher the production, the lower-priced production the wind farm can supply to the grid.

In Estonia, but also in the Baltics more broadly, the cost of building an onshore wind farm is 1.2–1.5 million euros per megawatt. This means that the construction cost is eight to ten million euros per onshore wind turbine.

 

Investment in an offshore wind farm – twice as much
In Estonia, offshore wind farms have not yet been built or their investment decisions have been made. Therefore, it is difficult to say exactly how big the final price of building an offshore wind farm will be in the conditions here. As the closest reference, we can take as a basis the offshore wind farm Baltic Power (size 1140 MW), which is being built in Poland in cooperation between Orlen Group and Canada’s Northland Power. The annual output of this wind farm is estimated at 4,000 GWh (4 TWh/a).

In October last year, the project investment decision was reached: the total budget is 4.73 billion euros, of which construction costs are more than four billion euros. So, the construction cost of this offshore wind farm is 3.5 million euros per MW – more than 2.5 times more than the onshore wind farms being built in the Baltics. We have no reason to believe that the construction of an offshore wind farm in Estonia would be cheaper. Rather more expensive, because we have to take into account the effect of pack ice and a more expensive foundation due to the geology of the seabed.

It is true that the output of the offshore wind farm is higher. In the Baltic Sea region, we can expect electricity production at sea to be 4,000 MWh per megawatt, which is 15-25 percent more than on land. At the same time, the investment in the offshore wind farm is as much as 2.5 times higher. Therefore, it is obvious that the amount of investment per unit of energy produced at sea is almost twice as high as on land, and the additional production compared to onshore wind turbines comes at a high investment cost.

In order to pay off the offshore wind farms economically, it is therefore necessary to have electricity prices at least twice as high as, for example, in the case of an onshore wind farm. This price must be ensured either by state subsidies or long-term electricity sales contracts. In both cases, this means that energy consumers pay the difference. The only question is how and under what name it ends up on the accounts of people and companies. If it is planned to plan state subsidies, I think that we all deserve to be clear about how much of a financial obligation and for how long the state will take on the taxpayer.

 

A lower electricity price stimulates the economy
Since the lower price of electricity is one of the competitive advantages of the economic environment, Estonia should first take advantage of the opportunities to build onshore wind farms. Who wouldn’t want lower electricity bills?

Not to mention that the favorable electricity price would also act as a positive argument for potential manufacturers and industries looking for a suitable location for their businesses. Why can’t this country be Estonia?

Especially if the wind and solar parks being built across Estonia could offer the possibility of a direct line – thanks to this, the consuming company can pay less network fees. The direct line is a practical and worthwhile solution that does not bring additional costs to the taxpayer, but supports the arrival of large industrial investments across Estonia, reviving the economy and making it possible to bring industrial investments to rural areas. The area of the direct line could be expanded, because currently the direct line can be established up to six kilometers away from the power producer’s connection point.

 

Offshore wind farms are preferred in densely populated countries, onshore wind farms in sparsely populated countries
Offshore wind farms have been favored by countries with large populations but little free land. In Europe, there is a high population density and high electricity consumption, for example in the Netherlands, which is the second largest operator of offshore wind farms in the European Union after Germany. The annual electricity consumption of the Netherlands is 110 TWh and the population density is 517 people per square kilometer. Indeed, they would be hard-pressed to find an area on land to develop wind farms on a large scale.

In Estonia, electricity consumption is more than 13 times lower than in the Netherlands (8 TWh per year) and the population density is more than 16 times lower (31 people per square kilometer). It would be wise for us to follow the example of Sweden and Finland and build wind farms on land and increase the share of wind energy in the entire energy production portfolio. There are a total of 16,400 MW of wind farms in Sweden, of which only 192 MW are offshore wind farms.

 

The country’s energy portfolio should be competitive
Electricity is too important to all of us to depend on just one electricity producer or one type of energy. Nationally, energy must be viewed as a whole and a suitable production portfolio for the country must be found, which ensures both security of supply and competitive energy prices in the most environmentally friendly way possible.

In Estonia’s view, wind energy has its place in the energy production portfolio. The price guarantee needed to build onshore wind farms is low and they can be built dispersedly in small units. We should be guided by the experience of Sweden and Finland in the field of energy and contribute to the implementation of the most economically advantageous solution.

In order to bring energy-intensive industry to Estonia, electricity must not only be produced in an environmentally friendly way, but also the final cost for the consumer must be at a competitive price in our region. In order to avoid market distortions, exhaustion of Estonian consumers with additional fees and, in summary, a decrease in economic competitiveness compared to its neighbors, the amount of national subsidies planned for the production of renewable energy must be clearly defined.

Both onshore and offshore wind energy have their advantages. In favor of both, however, is the fact that wind energy has a smaller impact on nature and the environment than other forms of electricity production – it does not produce greenhouse gases or release pollutants into the air. At the same time, it should be kept in mind that neither production method guarantees us security of energy supply, and national energy policy planning should be based on the combined effect and cost of the entire electricity production portfolio.