Calculating the Cost Per kWh

The information gathered to find the payback period easily enables us to compute the cost per kWh of wind-generated electricity. The calculation for cost per kWh is a two-step process.

Step 1

Annual Cost = (Initial Cost/Expected Life) + Annual Operating Costs

This formula defines the annual cost over the wind system’s lifetime. Wind turbine manufacturers estimate a useful life of between 20 and 30 years for their product. In this example, let’s assume a 25 year estimate of useful life. The annual cost is equal to the total initial cost (defined previously) divided by the expected life of 25 years, plus the annual operating costs for maintenance (defined previously).

Step 2

Cost Per kWh = Annual Cost/Annual Energy Output

This formula takes the annual cost calculated in Step 1 and divides it by the projected annual energy output (defined previously). Using our previous examples of residential and commercial machines, the cost per kWh calculation is:

Residential:
($15,000/25 years) + $100/year = $600 + $100 = $700/year

Commercial:
Annual cost = ($100,000/25 years) + $1,000/year = $4,000 + $1,000 = $5,000/year

Cost per kWh = ($5,000/year)/100,000 kWh/year = $0.05 per kWD

These costs can be compared with your utility company rates. These examples indicate that both wind system applications should produce energy over their life at a lower cost per kWh than purchases from the utility.