| Comment/Question |
|---|
Summary
|
|---|
| Net Annual Savings |
Assumptions
The economic analysis for both past and future is presented in terms of the actual dollars in the stated year. For future years, estimates of inflation are included, as applicable.The two largest cost drivers are the amount of energy produced (as determined by the wind) and the National Grid electricity rate. To understand the sensitivity of the economics to these variables, two representative values of each are chosen. For energy produced, the average value (50% probability) and 3% probability value have been chosen. For electricty rates, currrent rate inflated at 3% and at 6% have been chosen.
The following table lists the basic assumptions:
| Wind Energy - 50% probability | 1,405,000 | kWh |
|---|---|---|
| Wind Energy - 3% probability | 1,002,000 | kWh |
| Capital Expense | $2,211,000 | |
| Pay Back Period | 13 | Years |
| Bond Interest Rate | 0.0 | % |
| Operating Expense | $17,500 | |
| Operating Expense Inflation | 3.0 | % |
| Renewable Energy Credit | 4.0 | ¢ per kWh |
National Grid Rate Structure
According to the US DOE Energy Information Administration, in May 2008, the average electricity rate in Rhode Island (all sectors) was the second highest in the nation at 20.31¢ per kWh. This compares to a national average of 9.49¢ and rates as low as 5.28¢ in the energy producing states. Since there are fixed distribution and administrative costs, a WTG can only offset the portion of the overall cost associated with the magnitude of the energy. Based on data from National Grid, the graph shows the history of the RI energy related cost and where it is headed under the two inflation scenarios. Note that the cost is currently 15¢ per kWh.For comparison, the graph also shows the corresponding cost of energy from the proposed wind turbine at Legion Way. The first year cost (bond principal, maintenance and insurance) is $188,100. At the predicted average annual wind speed of 6.0 meters per second (13.4 mph), the proposed wind turbine will generate 1,405,000 kWh or 13.39¢ per kWh ($188,100 divided by 1,405,000). Using a conservative estimate of 4¢ per kWh Renewable Energy Credit, the net first year cost of WTG energy is 9.39¢ per kW (13.39¢ minus 4.00¢). This would result in a savings of 5.61¢ (15¢ minus 9.39¢) per kWh or about $79,000 (5.61¢ savings times 1,405,000). In order for the project to just break even the first year, the WTG energy would have to cost 19¢ (15¢ plus 4¢), and only produce 990,000 kWh ($188,100 divided by 19¢). As outlined in the Wind Resources section, the average annual wind speed would need to be less than 5.2 mps (11.6 mph) – a less than 3% annual probability at Legion Way.
The Town would realize a savings equal to the difference between the National Grid energy related rate and the WTG rate. In subsequent years, the National Grid energy cost will rise (at the very least - the rate of inflation). However, the cost of the WTG energy will only increase slightly, since the primary cost driver is the fixed bond payment. Once the bond is paid off in the 13th year, the cost will drop to less than 2¢ per kWh.
Wind Turbine Savings from National Grid
The WTG will measure the total kilowatt hours that are supplied to the National Grid. The National Grid will give a credit to the Town equal to the total kilowatt hours times the current rate that is being charged to the Town. The energy will be measured monthly, the coresponding credit will appear on one or more of the Town accounts on the next month. The current National Grid rate is about 15 cents per kWh. This rate is the total of all charges that are based upon kWh delivered.
National Grid Rate History
Renewable Energy Credit
Rhode Island allows tax credits for total amount of clean energy produced. Municipalities don't pay state taxes but they may sell credits to the private sector for the clean energy that they produce. The current rate for selling these credits is 4 cents per kWh. The cost model assumes that the current rate will remain for the period of the bond payment, then go away.
Operating Expense
The annual operating expense for a wind turbine consists of insurance payments and regular maintenance. The insurance will be included as a rider on the present Town policy estimated to cost $5,000. The Contractor has provided a quote of $12,500 for the first year maintenance. Thus the total operating expense costs are currently projected to be $17,500 for the first year and to increase at a 3% rate for the following years.
Clean Renewable Energy Bonds (CREBs)
The US Treasury authorizes zero interest Clean Rewnewable Energy Bonds to qualified municipal projects. The municipality issues the bonds to large corporations and pays back the principal only (no interest) typically over 13 years. IRS provides tax credits to bond holders in lieu of interest that they would otherwise receive.Barrington Wind Energy Project has been awarded a $2.1M CREB. These bonds must be issued by the end of 2009 and paid back (principal only) in 13 years.
Financials - First Year of Operation
| 50% Probability | 3% Probabillity | |
|---|---|---|
| Energy Produced (kWh) | 1,405,000 | 1,002,000 |
| National Grid Rate (¢ per kWh) | 15.91 | 15.91 |
| National Grid Credit | $223,500 | $159,400 |
| Renewable Energy Credit | $56,200 | $40,100 |
| Clean Renewable Energy Bond Payment | -$170,100 | -$170,100 |
| Operating Expense | -$18,000 | -$18,000 |
| Net Savings | $91,600 | $11,400 |
Financials - 14th Year of Operation
| 50% Probability | 3% Probabillity | |
|---|---|---|
| Energy Produced (kWh) | 1,405,000 | 1,002,000 |
| National Grid Rate (¢ per kWh) | 33.94 | 33.94 |
| National Grid Credit | $476,900 | $340,100 |
| Renewable Energy Credit | $0 | $0 |
| Clean Renewable Energy Bond Payment | $0 | $0 |
| Operating Expense | -$26,500 | -$26,500 |
| Net Savings | $450,400 | $313,600 |