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INVESTMENT ANALYSIS OF SMALL SCALE WIND TURBINE

INSTALLATIONS IN URBAN AREAS IN EDINBURGH, SCOTLAND

Submitted to Bahri Uzunoglu as part of the Wind Turbine Concepts and Applications

Uppsala University

Dept. of Earth Sciences, Campus Gotland

OKOYE ELOCHUKWU OBINNA

Source: Energy Saving Trust

7th November, 2014

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Project summary

This report will disscuss the investment analysis of small scale wind turbine

installations in urban areas in Edinburgh,Scotland. It will feature the potential of

micro/small scale wind turbine installations at a specific sites in chapter 3. An

overview of the capital costs, savings and earnings will be discussed in chapter 4.

However, the Cash back Calculator Summary from (Energy Savings Trust) will also

used in chapter 4 to provide an estimate of what could potentially be earned and saved

through the Clean Energy Cash back (Feed-In Tariff) scheme of the UK‟s

government.

In chapter 5, the economic and cost-benefit analysis will be discussed to present a

detailed economic and cost-benefit analysis of micro/small wind turbine installations

in urban areas. The presented economic analysis include: capital costs, power and

energy outputs, feed-in tariffs, loan interest, and operation and maintenance (O&M)

costs.

Currently, small wind turbines of up to 1 kW installed capacity cost upwards of

£1,500, while larger units from 2.5 to 6.0 kW tend to cost between £10,000 and

£21,000 fully installed. Some lower priced models have much shorter design lifetimes

than their higher priced competitors; figures quoted by manufacturers vary between

10 and 20 years. Some manufacturers specify that annual services are required for

their turbines. The costs of services vary, but are generally likely to be between a few

tens and a few hundred pounds per year .

The periodic costs highlighted in this report in chapter 4 include maintenance, parts

replacements, and transport costs related to the on-site work, the possible insurance

costs (including the third party damage liability), the costs of any equipment

replacements and the cost of a complete check of the system after 10 years of

operation. Again, these costs have been estimated on the basis of information from

suppliers and manufacturers for the purpose of this report and should be treated as

indicative costs only.

However, it should be noted that all costs are estimates for the purpose of this report

and subject to change. Also, all calculations are only indicative, as the separately

charged costs cannot be estimated.

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Therefore, this report has proven that investment in the small scale wind turbines in

Edinburgh, Scotland is really something worth doing because you will be saving on

your energy bill costs and will benefit financially in that way too through the UK FIT

for any surplus electricity you export to the grid.

Key words: Feed-in Tarrif(FIT),United Kingdom(UK) ,NOABL Numerical Objective

Analysis of Boundary Layer (NOABL) database,Microgeneration Certification Scheme

(MCS),Value Added Tax(VAT ), Renewable Obligation Order (ROO-FIT).

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TABLE OF CONTENTS

CHAPTER 1. INTRODUCTION…………………………………………………… 6

CHAPTER 2: DECSRIPTION OF ENDINBURGH…………………………………7

CHAPTER 3: THE POTENTIAL OF SMALL WIND TURBINES AT SPECIFIC

SITES………………………………………………………………………………….8

CHAPTER 4: COSTS, SAVINGS AND EARNINGS………………………………9

4.1 Costs……………………………………………………………………………….9

4.2 The periodic costs………………………………………………………………….9

4.3 Savings and income………………………………………………………………..9

CHAPTER 5: ECONOMIC AND COST-BENEFIT ANALYSIS………………….11

5.1 Micro wind turbine scenario…………………………………………..………….11

5.2 Small wind turbine scenario………………………………………………..…….12

CHAPTER 6: FINANCIAL INCENTIVES FOR SMALL SCALE WIND TURBINE

INSTALLATIONS…………………………………………………………………...13

6.1 Feed-in Tariffs……………………………………………………………………13

CHAPTER 7: CALCULATED BENEFITS AND ANNUAL ENERGY

PRODUCTION OF DIFFERENT SMALL SCALE WIND TURBINE…………….15

CHAPTER 8: RECOMMENDATION AND CONCLUSION ……………………...18

REFERENCES……………………………………………………………………….21

APPENDICES……………………………………………………………………22-24

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LIST OF TABLES

Table 1: Current rates for Wind Energy Feed-in Tariff in the UK

LIST OF FIGURES

Figure 1.1: Cash back Calculator Summary

Figure 2.1: Power curve of Tozzi Nord TN535 10kW small scale wind turbine

Figure 3.1: The main items making up capital costs

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CHAPTER 1. INTRODUCTION

Apparently, UK has 40% of Europe's total wind energy but just 0.5% of the UK‟s

electricity requirements are currently generated by wind power. Over the next few decades

we can expect to see significant investments into Wind energy with the continuation of

domestic and commercial Feed in Tariffs as well as large investment into wind farms.

The BWEA estimates that if barriers to market growth are reduced, by 2020 the UK Small

Wind Sector will be generating 1,700 Gwh of renewable electricity annually. This is the

equivalent of over 600,000 micro and small wind turbines (BWEA,2014).

It pays to do your homework before you make any investments. If you have a house or

other property that either can't be connected to the grid, or would be very expensive to

connect, then small scale, or micro generation is usually the cheapest, or only option.

However if you are already connected to the grid then the upfront cost of setting up a small

scale generation system means you are unlikely to get any reduction in energy cost over

the life of the system.

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CHAPTER 2: WHY EDINBURGH?

Source: Google Map

Edinburgh is one of the fastest growing and most productive cities in the UK. It is the UK's

most prosperous city outside London with highly competitive labour and property costs

and an unrivalled quality of life.

Edinburgh is the UK's second largest financial centre, a major European centre for asset

management and asset servicing and home to the Headquarters of the UK Green

Investment Bank.

The financial services sector of Edinburgh is extremely diverse, and the city has critical

mass in banking, life insurance and pensions, asset servicing and investment management.

(More than 90% of all Scottish fund managers are based in the city region). It also has

vibrant corporate finance, brokerage and professional services sectors.[1]

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CHAPTER 3: THE POTENTIAL OF SMALL WIND TURBINES AT SPECIFIC

SITES.

Due to the variability of winds across the UK, plus local effects such as sheltering and

turbulence, only certain sites are suitable for small wind turbines. An initial evaluation of a

site‟s suitability – sufficient for a „move forward/no go‟ decision – can be made following

simple rules of thumb. The principal factor affecting the amounts of electricity generated

and carbon saved by a small wind turbine is wind speed.

This can be assessed in several ways, including by reference to the NOABL Numerical

Objective Analysis of Boundary Layer (NOABL) database and applying a methodology

developed for the Microgeneration Certification Scheme (MCS), (Carbon Trust 2014).

The Carbon Trust is developing a new yield estimation tool which is based on a wind

speed dataset preferable to NOABL database. The tool also improves on the MCS

methodology (Carbon Trust 2014).

Organisations considering installing small wind turbines in urban areas in Edinburgh are

recommended to:

Use the Carbon Trust yield estimation tool to obtain initial quantitative estimates of

a site‟s potential; And if the site appears attractive,

Install anemometry equipment and take measurements to give the greatest degree

of certainty about potential energy yields and carbon savings.

The yield and carbon savings of a turbine can be estimated using a measured or

assumed wind speed distribution and the turbine power curve, obtained from the

turbine manufacturer or installer(Carbon Trust 2014).

Combining a yield estimate with cost data, it is possible to make an economic assessment.

In doing so, it is important to take account of the amount of electricity likely to be exported

(potentially 50%), since otherwise, the value of the yield must be reduced by the exported

amount.

Other considerations include planning, the structural integrity of the supporting building if

the turbine is to be roof-mounted, and grid connect

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CHAPTER 4: COSTS, SAVINGS AND EARNINGS

4.1 Costs

In Edinburgh, the cost of a system will depend on the size and the mounting method:

building-mounted small scale wind turbines cost less to install than pole-mounted ones.

The average size is 6kW, which can cost between £21,000 and £30,000 for equipment and

installation, with VAT at 5% (Energy Savings Trust,2014).

4.2 The periodic costs

Maintenance checks are necessary every few years, and will generally cost around £100 to

£200 per year depending on turbine size. A well-maintained small scale wind turbine

should last more than 20 years, but you may need to replace the inverter at some stage

during this time, at a cost of £1,000 to £2,000 for a large system.

For off-grid systems, batteries will also need replacing, typically every six to ten years.

The cost of replacing batteries varies depending on the design and scale of the system. Any

back-up generator will also have its own fuel and maintenance costs.

4.3 Savings and income

Building-mounted small scale wind turbines tend to produce less electricity per kW than

pole-mounted ones. A well-sited 6kW turbine can generate around 10,000kWh and the

equivalent of around 4.8 tonnes of carbondioxide a year.

The calculator shown below in Figure 1.1 is intended to provide an estimate of what could

potentially be earned and saved through the Clean Energy Cashback (Feed-In Tarrif)

scheme. Actual savings and earnings will vary, depending on system efficiencies, location

and other factors. The figures in the calculator are subject to change. The results are

dependent on the information provided for the purpose of this report only and the

maintenance costs were not included in the calculation.

The Investment section is intended only to be an indicative loan calculator and used only to

help calculate payback times (Energy saving Trust 2014).

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Figure 1.1: Cash back Calculator Summary

Source: Energy Saving Trust

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CHAPTER 5: ECONOMIC AND COST-BENEFIT ANALYSIS

This chapter will be used to expand chapter 4 by presenting a detailed economic and cost-

benefit analysis of micro/small wind turbine installations in urban areas in Edinburgh. The

presented economic analysis include: capital costs, power and energy outputs, feed-in

tariffs, loan interest, and operation and maintenance (O&M) costs.

Small/micro wind turbine systems range in cost from a few hundred pounds for a small

battery charging system, to several thousand pounds for a larger system capable of meeting

electricity needs for an entire household or business. A turbine rated at 600W-1.5kW might

cost between £1,500- 3,000, whilst turbines rated at 2.5 kW to 20 kW can cost between

£6,500 and £30,000.

The amount of money a wind turbine will save you depends on the amount of initial capital

outlay, electricity prices and how much electricity your turbine produces. Once a

small/micro wind turbine has produced enough electricity to pay for its cost, it will then

start to save you money. A turbine on a good windy site will pay for itself more quickly

and start to generate free electricity sooner than on a poor site.

If domestic electricity prices were to remain stable at the current cost of around 12 pence

per kWh, a hypothetical micro wind turbine that costs £2,500 and has a rated capacity of 1

kW and a diameter of 2.3 m would take a varying amount of years to pay-off according to

wind speed.

The estimated initial capital cost of the micro and small wind turbine installation scenarios

are set out below:

5.1 Micro wind turbine scenario: 1 kW turbine, initial capital cost £2,500

At 4 m/s average annual wind speed, 827 kWh is estimated to be produced per year with a

value of £99, so a “simple payback” calculation suggests it would pay for itself in 2,500/99

or 25 years.

For a good 5 m/s average wind speed, 1,557 kWh is produced with a saving of £187

therefore the turbine pays back in 13 years. On an exceptionally good site of 6 m/s, 2,386

kWh is estimated to be produced with an annual saving of £286 and a payback of 9 years.

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5.2 Small wind turbine scenario: 6.0 kW turbines, initial capital cost £21,000

At 4 m/s average annual wind speed, 11,800 kWh is estimated to be produced per year

with a value of £1416, so a payback calculation suggests it would pay for itself in

21,000/1,416 or 14.8 years. For a good 5 m/s average wind speed, 23,000 kWh is produced

with a saving of £2760 therefore the turbine pays back in 7.2 years.

On an exceptionally good site of 6 m/s, 35,700 kWh is estimated to be produced with an

annual saving of £4,284 and a payback of 4.6 years.

However, for small scale wind systems, 6 m/s average annual wind speed is considered to

be exceptionally good due to the height of the mast and effect of local siting conditions.

Within this annual average, wind speeds will vary through a range of 0–20 m/s or more.

The examples above demonstrate that the economics of a small/micro wind system very

much depend on wind speed, but sizes, prices and outputs vary considerably.

Electricity prices are unlikely to remain stable, and any increase in prices will shorten the

payback period of a small wind turbine. Grant funding may also contribute to the cost of

capital outlay and shorten payback periods. A turbine with a longer payback period may be

less economic; however there are many good reasons for installing a small/micro system in

addition to potential savings.

The interest rates on loans available for wind turbine developers currently offered by a

number of investment companies and banks for different sizes of micro/small scale wind

turbine projects are in this report assumed to be: 18% for loans up to £4999, 12% for loans

£5000 to £7499, 11% for loans £7500 to £14 999, and 10% for loans greater than £15 000.

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CHAPTER 6: FINANCIAL INCENTIVES FOR SMALL SCALE WIND TURBINE

INSTALLATIONS

This section discusses about the UK Government's Feed-In Tariffs scheme (FITs) which

could mean that you get money from your energy supplier. One can be paid for the

electricity you generate, even if you use it yourself, and for any surplus electricity you

export to the grid. Nevertheless, a grant can be obtained from the Low Carbon Building

Programme (LCBP) in the UK, to cover up to 50% of the installation cost (Cace .J, 2007).

However, some provinces and municipalities in UK provide additional subsidies as a part

of their own renewable energy development programmes. Most commonly these subsidies

are a part of local measures against climate change and are usually reconsidered yearly

(Cace .J, 2007).

6.1 Feed-in Tariffs

The FiTs are a government incentive, aimed at encouraging the deployment of small scale

renewable electricity generation by communities, individuals and organisations.

Since its introduction in April 2010, the Feed-in Tarrif scheme has provided significant

stimulus for small and medium wind developments in the UK.

When installing an eligible wind turbine, the scheme guarantees payment for the electricity

you generate and use, and an additional payment for any surplus electricity you export to

the National Grid.

To qualify for the Feed-in Tariff, you need to use a Microgeneration Certification Scheme

(MCS) approved product and installer. MCS applies to installations up to 50kW.

Installations greater than 50kW need to apply for accreditation through Ofgem‟s ROO-FIT

process(Ofgem,2014).

The scheme provides 20 years guaranteed revenue, with a return on investment within 3 to

8 years. Generally the better sited the turbine, the faster it will pay back the initial

investment.

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If you are eligible for the Feed-in Tarrif you‟ll get paid in two ways:

1. The generation tariff

You will be paid a set rate by your energy supplier for every unit (kWh) of

electricity you generate. The tariff levels are guaranteed for 25 years, are index

linked, and VAT exempt.

2. The export tariff

Any electricity you generate that you don‟t use is automatically exported back to

the national grid and you will receive an additional flat rate of 5p per kWh from

your electricity supplier for this. At the moment there is no conclusive way to

measure how much you export so an assumption is made that 50% of the electricity

you generate is exported back to the grid, and you‟ll be paid on that basis.

The appropriate bodies in the UK have announced that rates will remain as seen below in

Table 1, for Wind Energy until 31st March 2015.

Table 1: Current rates for Wind Energy Feed-in Tariff in the UK

Source: Energy Saving Trust (2014).

Wind Energy Feed-in Tarrif Until 31st March 2015

Capacity Rate (p/kWh)

≤1.5kW 17.78

>1.5-15kW 17.78

>15-100kW 17.78

>100-500kW 13.34

>500kW-1.5MW 7.24

>1.5MW 3.07

Export tariff 4.77

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CHAPTER 7: CALCULATED BENEFITS AND ANNUAL ENERGY

PRODUCTION OF DIFFERENT SMALL SCALE WIND TURBINES.

This section presents a compared calculated benefits and annual production of 8 different

small scale wind turbine installations in Edinburgh at the same average wind speed of 5m/s

using Life Long Energy‟s Wind Turbine Calculator.

SMALL 10KW

Wind Speed = 5m/s

1. Tozzi Nord TN535 10kW

Source: Google Image

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With an average wind speed of 5 m/s the Tozzi Nord TN535 10kW small scale wind

turbine will produce 37,360 kWh per year and generate a benefit of £10,231.04 per year

Figure 2.1: Power curve of Tozzi Nord TN535 10kW small scale wind turbine

Source: Life Long Energy (2014).

2. Gaia 133-11kW

Annual Energy Production: 27,502 kWh/year

Annual Benefit: £7,531.42

3. Evoco 10kW

Annual Energy Production: 21,706 kWh/year

Annual Benefit: £5,944.19

4. C&F 11kW

Annual Energy Production: 21,530 kWh/year

Annual Benefit: £5,895.99

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5. Xzeres 442SR

Annual Energy Production: 17,418 kWh/year

Annual Benefit: £4,769.92

6. Aircon 10S

Annual Energy Production: 17,488 kWh/year

Annual Benefit: £4,789.09

7. Westwind 10

Annual Energy Production: 13,971 kWh/year

Annual Benefit: £3,825.96

8. Bergey Excel 10

Annual Energy Production: 13,842 kWh/year

Annual Benefit: £3,790.63

The annual benefits assumes current Feed-in tariff rates per kWh plus 50% of Energy

produced being exported at current export rate

In addition, energy savings have to be considered to determine the Annual Benefits,

therefore assumes 75% energy used on-site at £0.12 per kWh

The annual Energy Production figures are based on 100% availability, air density of

1.225kg/m3 and a Rayleigh wind speed distribution (k=2) They have been obtained from

MCS Accreditation certificate summaries and advertised data for each turbine,(Life Long

Energy (2014).

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CHAPTER 8: RECOMMENDATION AND CONCLUSION

In conclusion, it has been discussed in this report the investment analysis of a small scale

wind turbine installations in urban areas in terms of costs and paybacks. I will like to

conclude with some suggestions for cost reduction on the price of small scale wind turbine

installations to increase the benefits.

The total UK small-scale wind energy resource reflects a combination of wind conditions

and the performance of wind turbines. While the former is not controllable, some

improvements to the latter are possible and could lead to marginal increases in energy

generation ( Entec Global Group, 2014).

However, such increases are unlikely to reduce costs of energy to a significant extent. To

do this, one needs to reduce the costs of turbine installations. Since the costs of

maintaining turbines tend to be low, upfront capital costs are the primary drivers of costs of

energy, and capital cost reductions are most likely to lead to cost of energy reductions.

The main items making up capital costs are shown in Figure 3.1.

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Figure 3.1: The main items making up capital costs

The Analysis by Entec suggests that the main ways in which costs could be reduced are:

Improvements in the engineering design of turbines;

Greater efficiency and increased economies of scale in turbine manufacturing; and

Using lower cost inverters and efficient installation techniques.

.

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REFERNCES

1. Invest Edinburgh, http://www.investinedinburgh.com/industry-strengths/financial-

services, accessed October, 2014.

2. Cace J., 2007.Urban Wind Turbines guidelines for small wind turbines in the built

environment, February, 2007.

3. Renewable UK, http://www.renewableuk.com/en/renewable-energy/wind-energy/small-

and-medium-scale-wind/financial-incentives.cfm#sthash.afsE3NQ1.dpuf, 2014.

4. Energy Saving Trust, http://www.energysavingtrust.org.uk/Generating-

energy/Choosing-a-renewable-technology/Wind-turbines, accessed on September,2014.

5. Energy Saving Trust.

http://www.energysavingtrust.org.uk/extension/estfrontend/design/est/flash/generate-your-

own-energy/windPower.html accessed on October, 2014.

6. Energy Saving Trust,http://www.energysavingtrust.org.uk/Generating-energy/Getting-

money-back/Cashback-Calculator accessed on September,2014.

7. Life Long Energy, http://www.lifelongenergy.co.uk/our-products/wind-energy/tozzi-

nord-calculator.html accessed on November,2014.

8. Life Long Energy, http://www.lifelongenergy.co.uk/our-products/wind-

energy/incentives-wind.html. Accessed on November, 2014.

9.Acosta J.L, Combe.K, Djoki´c S.Z, and Hernando-Gil.I.(2012).Performance Assessment

of Micro and Small-Scale Wind Turbines in Urban Areas, IEEE Systems Journal, vol. 6,

no. 1, March 2012.

10. BWEA, Small Wind Turbine Performance and Safety Standard, BWEA Standard,

2008.

11. The Carbon Trust, Small-scale Wind Report: Policy insights and practical guidance,

2008.

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APPENDIX A: CASH BACK CALCULATOR SUMMARY

Source: Energy Saving Trust

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APPENDIX B: TABLE 1- CURRENT RATES FOR WIND ENERGY FEED-IN

TARIFF IN THE UK

Table 1: Current rates for Wind Energy Feed-in Tariff in the UK

APPENDIX C: THE MAIN ITEMS MAKING UP CAPITAL COSTS

Figure 2.1: The main items making up capital costs

Wind Energy Feed-in Tarrif Until 31st March 2015

Capacity Rate (p/kWh)

≤1.5kW 17.78

>1.5-15kW 17.78

>15-100kW 17.78

>100-500kW 13.34

>500kW-1.5MW 7.24

>1.5MW 3.07

Export tariff 4.77

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APPENDIX D: POWER CURVE OF TOZZI NORD TN535 10KW SMALL SCALE

WIND TURBINE

Figure 1: Power curve of Tozzi Nord TN535 10kW small scale wind turbine