Feasibility Study - Wind Energy

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Overview

The term Feasibility Study related to wind energy projects is used for assessments of very different extensiveness. Feasibility studies consider the results from wind measurements (cp. assessing wind potentials). If these results indicate that technical and economical operation of wind energy (projects) can be considered viable or at least expectable, a feasiblity study will be conducted[1].

Based on the wind resource appraisal and other relevant inputs, the feasibility study shall be conducted to:

  • Determine the optimum unit size of the wind turbines under the technical and transport infrastructure conditions of country
  • Optimize the technical lay-out of the wind park site
  • Assess the comparative economic and financial viability of the project and propose a decision for implementation[2]


The European Wind Energy Association defines the main contents of a feasibility study as follows[3]:

  • The technical aspects already regarded during the pilot study are assessed in a more detailed manner, including on-site wind monitoring to determine a draft design and layout for the installation.
  • an economic assessment is conducted to establish the commercial viability of the project;
  • an appraisal and scoping exercise to identify specific environmental constraints and opportunities is implemented
  • possible planning constraints are assessed


Especially the economic assessment of the wind park viability includes several large subtasks to determine all economic parameters and variables of a wind project[4][5][6][7]:

  • An energy production estimation to define expected financial returns
  • A complete estimation of costs (investment, operation and maintenance, costs of project development)
  • An economic assessment of the project benefits concerning economic development and welfare of the region or country. Influence on electricity prices and potential for poverty reduction are important aspects of these economic assessments.
  • An assessment of financing options with focus on potential participation with the Clean Development Mechanism (CDM)
  • A financial analysis based on the estimation of costs an including a cost-benefit analysis, which allows an exact statement concerning investment returns. Discussion and evaluation of different operation models have to be included.


The project appraisal related to environmental and social constraints should be based also on a dialogue with the local population and planning authorities[8].

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Detailed Assessment of Site Conditions

Assessment of site conditions starts with general description of the area proposed for the project: The altitude above sea level, the orographic conditions as well as the surface properties (e.g. plants, infrastructure) are important information included in site description. The availability of maps is checked[9].

Site limitations like domestic dwellings, important roads, nearby airports or telecommunications facilities for the wind park area are identified. And the possible area available for the wind park layout is determined[10].
A central aspect is the analysis of ground and soil conditions to choose the necessary basement types for the individual turbines and the related costs of foundation. The regional site geology is described in general and the seismic conditions at the site are investigated, if there is a potential risk of earthquakes in the area. Distance to city infrastructure and ports is considered, because in most cases turbine parts are transported to the project sites via roads. Road conditions especially the stability for heavy freight, inclination and curve radiants are important for the long an heavy parts of wind turbines, too. Often the feasibility of transport for turbines of capacities > 2 MW is assessed seperatly. Available crane capacities in the project country are checked.

At the point the feasibility study is conducted, an environmental impact assessment must have been carried out and the environmental constraints are used in the development of the project layout[11].

For information about possible legal constraints of the project development, a central task is to identify conflicting interests with other land users (e.g. mining activities, recreational use).

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Wind Resources

The description of the wind resources for a feasibility study includes a detailed description of the measurement campaign, which has been conducted for project development. Mast positions, used measuring technology like anemometers and data loggers as well as their application are described carefully to provide a reliable informationable basis for project appraisal. Besides wind resources further data like temperature or air density is presented in this section of a feasibility study.


The outcome is presented as a list of average wind speeds per wind direction (usually wind direction is divided in sectors of 30°) and their frequency distribution. A very important step for rating the available wind resources is the analysis of the wind data. Primarily quality of data is checked carefully concerning erroneous values, which have to be sorted out or have to be replaced by suitable ones. Data losses over longer periods of time distort the information[12].


Also measurement campaigns for wind park planning are conducted for minimum during one year, the results can be regarded as representative for an estimation of energy yields during common wind project lifetimes of 20 years, because wind conditions
are not stable over the years and oscillate around the long term average. For that reason a correlation analysis of the collected data with long-term data gathered from other regional sources has to be conducted. If long-term data is available, gathered wind data of the measurement campaign can be adjusted considering these values. According to international standards, this has to be done by comparing and adjusting the measured wind data by means of suitable mathematical methods with data obtained from long-term measurements - usually meteorological stations. A period of at least 10 years (15 to 20 years is preferred) can be considered as an adequate longtime experience[13].


Wind turbines are subjected to environmental conditions which may affect their loading, durability and operation. To ensure an appropriate level of safety and reliability, the environmental parameters shall be taken into account during the selection of appropriate wind turbines. The categories used to describe wind turbines suitable for certain site conditions are the so-called IEC-classes[14].

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Technical Layout of Wind Park

Based on the long-term corrected wind data a wind potential map is calculated for the feasibility study using analysis software (e.g. WindPro and WAsP. Considering this map and the outcome of measurement campaign and data analysis the appropriate wind turbine type is selected. Usually several scenarios using different sizes, numbers and types of turbines are considered and their cost and benefits are take into account during the financial viability assessment of the project.

The following criteria are used to determine appropriate wind turbine types[15]:

  • Transportation to the foreseen wind park site.
  • Available space on site.
  • Orographical conditions on site which may prevent the installation of larger turbines in the Megawatt - range.
  • Local experiences with regular operation and maintenance with wind turbines.
  • Distances between site and turbine manufacturer who will perform the maintenance within the warranty period.
  • Wind turbines types yet installed in the county.
  • Energy Yield.
  • Turbine types available on the national market.


Besides turbine type and capacity, the suitable tower heights are chosen considering the local wind profile (increase of wind speed with height). Higher towers can exploit higher wind speeds so that the annual energy production can be increased correspondingly. The counteracting effect is the respective additional investment cost for the tower and the foundation[16].


For the micro-siting certain minimum distances between the individual wind turbines have to be observed. A common rule of thumb specifies three to five rotor diameters in cross wind directions (less than three is possible under some circumstances) and six to eight rotor diameters in main wind direction as a minimum spacing between the individual turbines. Based on the analysis concerning turbine type, capacity, hub height and optimal distances between the towers, a number of wind park layouts is compared regarding their expected energy yield and investment costs. These layouts are additionaly influenced by noise assessents and shadow impact of the proposed wind farm: The target of the noise assessment is to investigate the potential noise impact of the wind turbine operation on sensitive areas in the vicinity of the wind farm[17].


When the sun is just above the horizon, the shadows of the wind turbine generators can be very long and can move across houses (windows) for short periods of time. If this happens for longer period, it causes stress to the inhabitants. Thus the shadow impact of a certain layout has to be reduced until no significant disturbance should be expected[18].
An important part of the wind park layout is grid-connection, consisting of the implementation of an internal cabling concept and the technical design of the grid connection point. Optimization of cabling and grid-connection can be an important influence for park layout[19].

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Energy Production Estimation

The calculation of the wind resources on-site and the corresponding energy production are based on the assessment of wind potentials by anemometric measurement. The wind data is processed by software packages to calculate the expected wind energy yield for the proposed site.

This calculation by software packages like WindPro and WAsP combines a great number of characteristics (site conditions and wind speed distribution)[20]:

  • Orographic description and roughness values as a quantitative description for the friction of the surface causing a slowdown of the near-surface air flow
  • valleys and similar terrain structures as an influence on wind speed differences within the proposed wind park area. For instance valleys can act as a blast pipe, concentrating the air flow.
  • Wind shear as determined by measurement of wind speed in different heights and mathematic extrapolation
  • Wind turbine parameters and the corresponding power curves of all proposed turbine types; scenario analysis for the different turbine types are worked-out
  • Air density


In a reverse process, the generalised regional wind climate is then applied to topography, surface description and obstacles at the vicinity of each individual wind turbine, providing the wind flow at this point even if the wind data has measured in some distance
which can be, depending on the terrain, up to several kilometres.

A very important aspect of estimation of energy production for use within a feasibility study is the determination of potential losses and uncertainties caused by uncertainties in variables and parameters of the used model. Meteorological phenomena can only be predicted to a certain limited degree. As a consequence it is not possible to make an exact forecast of the wind conditions even if long-term reference data is used.

Description of uncertainties includes[21]:

  • Turbine Availability - describes the percentage of a year (i.e. 8760 hours) where the turbine is able to generate electrical energy while being connected to the grid.
  • Electrical Losses - the electrical losses depend on the resistance of the conductors and on the current intensity.
  • Wind Speed related Uncertainties
  • Uncertainties of the Wind Data


The uncertainties are summarized to calculate a value for the complete uncertainties in energy yield estimation, which can be used for the calculation of financial returns of the project. The estimation of energy yield as well as the corresponding uncertainties are calculated for several scenarios to allow extensive comparison before a layout is implemented.

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Grid Connection

Considerations concerning opportunities of grid connection are an important part of the initial site selection. In the feasibility study, the detailed layout and component-choice is determined.

  • If the low voltage distribution grid (e.g. 15 kV grid) is the closest available solution, the expected increase of electrical losses, voltage drops and necessary reactive power compensation have to be taken into account for the calculation of electricity delivered to the grid by the project[22].
  • Another possibility is the construction of a new substation at the wind park area, where a high voltage single overhead transmission line brings the generated electricity into the existing high voltage grid. This option causes significantly higher investment cost, but reduces expected electrical losses on the other hand
  • If the connection should be realized via an existing substation, the remaining capacities of this substation have to be checked. There may be a need to extend the capacity of the existing substation.
  • As an alternative of using overhead lines, a grid connection via underground cables can be considered.
  • Feed-in characteristics of the selected wind turbines are described. Modern wind turbine (pitch-concept wind turbine) installations feature a grid feeding system that meets the latest grid connection requirements and can therefore easily integrated in any
    supply and distribution structure, especially when stipulated requirements, such as voltage frequency and reactive power for each individual turbine in a wind farm have to be considered
  • In order to provide reliable economical grid operation, power feed timing has to be regulated


Based on these considerations a principle wind park grid connection layout is developed and related costs can be used in the Financial analysis.

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Estimation of Costs

This part of feasibility studies gives a structured overview of all costs related to wind project development and implementation. The costs are usually calculated and listed seperately for[23]:

  • Investment costs
  • Costs of the construction period (costs of wind turbine erection and infrastructure installation at the site)
  • Operation and maintenance costs


An exact determination of project costs respectively the calculation of uncertainties in cost development form the necessary basis for conducting the central cost-benefit analysis for the appraisal of the financial project feasibility.

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Capacity Credit (CC)

Any kind of electrical power plant is required to answer the crucial question: To what extent is a specific energy production unit with an installed nameplate capacity available to meet system demand?


Typically the answer is derived from a statistical analysis of this period, when a unit or technology is not available, even if it is supposed to be working, generally termed as forced outage. For conventional generation units this is mainly a technical question, whereas for intermittent resources like wind, solar and hydro power, it is a question of fuel availability: is wind, water or solar radiation available when it is needed? And if yes, what amount is available and how does the intermittency influence the rest of the electrical supply system? The answer is given by the capacity credit, which should consider each of the posed questions.


There are various definitions of the term capacity credit (CC), and several synonyms are used in parallel, each bearing a similar variety of definitions. The two most common synonyms of CC are "firm capacity" and "capacity value".


The CC can be defined as the firm capacity, which can be replaced by a certain amount of installed wind power or any other energy source. It can be used either as a value in MW or as a percentage of the installed wind capacity. This is the terminology used in recent studies throughout industrialised countries, where wind energy is replacing other forms of energy[24]. In developing countries, which pursue high goals for improving the electrification rate, it is important to analyse how much capacity wind energy can add to the current system.

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Economic Analysis

Following the "World Bank Handbook for Economic Analysis of Investment Operations" [25], the main purpose of an economic analysis is to help to design and select projects that contribute to the welfare of a country. Whereas the financial analysis evaluates the project from the point of view of the operating company or Independent Power Producer (IPP), the economic analysis evaluates the project from the point of view of the whole economy of the country.


The purpose of the investigation is to compare from a macroeconomic standpoint the benefits of the project with the costs it incurs, as is customary in any cost-benefit analysis. The standard of evaluation for costs and benefits is a monetary quantification. To the greatest possible extent, the project impacts are evaluated in terms of economic market prices. Shadow prices are employed, i.e., internal accounting prices that free the day-to-day (market) prices from multifarious biases. In other words, shadow prices represent an attempt to illuminate the actual costs of a product or service for the economy as a whole. In comparison with micro- and macro-economic prices, shadow prices are devoid of taxes and charges, duties and subsidies.

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Clean Development Mechanism (CDM) Assessment

Developing countries and transition economies may host a project and benefit from CDM as an additional co-financing source. Project sponsor can be either the host country or usually a project sponsor of an Annex I country. In the case of a wind energy project, for instance, the owner of the wind park in a non-Annex I country generates revenues from electricity sales in the national market and also from the sale of Certified Emission Reduction (CER) credits[26].

CERs can be sold to carbon exchanges or to a CER acquisition program such as a carbon fund. Carbon funds offer the opportunity to project owners to close an Emission Reduction Purchase Agreement (ERPA) for the whole CER crediting period, usually 10 years, which avoids risks of oscillating CER market prices[27].
A potential buyer for the CERs generated by a wind park project could be found, for example, through the Community Development Carbon Fund of the World Bank, which links small scale projects seeking carbon finance with companies, governments, foundations, and through NGOs looking for improvement of livelihoods in local communities and obtain verified Emission Reductions[28].


To make CDM accessible as a source for project funding, the emission reductions generated by the implented project have to be calculated. For that purpose assumption for a baseline are made: the amount of anthropogenic emissions which would occur if the project did not take place - is of crucial significance for the amount of credits a CDM project can generate. The amount of CERs issued for a project equals the difference between the actual emissions and the baseline. For inclusion of this additional funding into the financial analysis potential revenues of selling generated CERs have to be estimated[29].

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Financial Analysis

This financial analysis is intended to clarify whether or not the wind farm project is financially feasible for the described parameters. And, as the case may be, whether or not and, if so, how the financial efficiency threshold can be reached and surpassed and, if so, how by which means of technical and non-technical modifications.


The main difference between a financial analysis and an economic analysis is that, in the financial analysis, the wind farm is viewed as an enterprise and in the economic analysis the windfarm is evaluated from the point of view of the national economy of the country. In the financial analysis, the windfarm operating company has to earn enough money, by feeding electricity into the existing grid, to cover its operating costs, interest payments, loan payments and distribution of dividends to equity investors. The object of consideration is the commercial or microeconomic[30].

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Framework Analysis for Wind Energy

The general relation between equity and debt for the project realization is set. Financing options for the project are explored. Potential sources for funding to cover investment costs are identified and the financing concept is described.

For the calculation of project returns and viability the regulatory and legal framework is analyzed: Country-specific conditions for the development of wind energy projects are based upon the policy framework conditions prepared by national or regional governments. The financial feasibility of any wind energy project proposed to sell electricity to the grid depends on the available framework conditions for support. Inadequate or non-existent framework conditions often form crucial barriers impeding the exploitation of available wind energy potential. Existence, operability and reliability of a feed-in tariff system is checked and integrated in the financial viability assessment[31].

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Further Information


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References

  1. ↑ Gasch R. and Twele J. (2010) Windkraftanlagen - Grundlagen, Entwurf, Planung und Betrieb, Vieweg+Teubner
  2. ↑ GTZ (2006) Feasibility Study for Wind Park Development in Ethiopia and Capacity BuildingfckLRMesobo-Harena Wind Park Site, retrieved 25.7.2011 [[1]]
  3. ↑ European Wind Energy Association (1999) European best practice guidelines for wind energy development, retrieved 19.7.2011 [[2]]
  4. ↑ GTZ (2006) Feasibility Study for Wind Park Development in Ethiopia and Capacity BuildingfckLRMesobo-Harena Wind Park Site, retrieved 25.7.2011 [[3]]
  5. ↑ GTZ (2002) Feasibility Study of a 19,2 MW Wind Park at Qiyueshan, Lichuan County, Hubei Province, PR China, retrieved 25.7.2011 [[4]]
  6. ↑ GTZ (2006) Feasibility Study for Windpark Development in Ethiopia and Capacity Building - Ashegoda Wind Park Site Final Report, retrieved 25.7.2011 [[5]]
  7. ↑ Burton T., Sharpe D., Jenkins N., Bessanyi E.(2001) Wind Energy Handbook, Wiley
  8. ↑ European Wind Energy Association (1999) European best practice guidelines for wind energy development, retrieved 19.7.2011 [[6]]
  9. ↑ GTZ (2004) Feasibility StudyfckLRfor a 900-kW Wind FarmfckLRin Gao, Mali - Wind Diesel System - Final report, retrieved 25.7.2011 [[7]]
  10. ↑ European Wind Energy Association (1999) European best practice guidelines for wind energy development, retrieved 19.7.2011 [[8]]
  11. ↑ GTZ (2006) Feasibility Study for Wind Park Development in Ethiopia and Capacity BuildingfckLRMesobo-Harena Wind Park Site, retrieved 25.7.2011 [[9]]
  12. ↑ GTZ (2006) Wind Energy Programme TERNA - Ethiopia Wind Data Evaluation after 12 Months, retrieved 26.7.2011 [[10]]
  13. ↑ GTZ (2006) Feasibility Study for Wind Park Development in Ethiopia and Capacity BuildingfckLRMesobo-Harena Wind Park Site, retrieved 25.7.2011 [[11]]
  14. ↑ GTZ (2006) Feasibility Study for Windpark Development in Ethiopia and Capacity Building - Ashegoda Wind Park Site Final Report, retrieved 25.7.2011 [[12]]
  15. ↑ GTZ (2006) Feasibility Study for Windpark Development in Ethiopia and Capacity Building - Ashegoda Wind Park Site Final Report, retrieved 25.7.2011 [[13]]
  16. ↑ Gasch R. and Twele J. (2010) Windkraftanlagen - Grundlagen, Entwurf, Planung und Betrieb, Vieweg+Teubner
  17. ↑ Burton T., Sharpe D., Jenkins N., Bessanyi E.(2001) Wind Energy Handbook, Wiley
  18. ↑ Burton T., Sharpe D., Jenkins N., Bessanyi E.(2001) Wind Energy Handbook, Wiley
  19. ↑ GTZ (2006) Feasibility Study for Windpark Development in Ethiopia and Capacity Building - Ashegoda Wind Park Site Final Report, retrieved 25.7.2011 [[14]]
  20. ↑ GTZ (2006) Feasibility Study for Wind Park Development in Ethiopia and Capacity Building Mesobo-Harena Wind Park Site, retrieved 25.7.2011 [[15]]
  21. ↑ GTZ (2002) Feasibility Study of a 19,2 MW Wind Park at Qiyueshan, Lichuan County, Hubei Province, PR China, retrieved 25.7.2011 [[16]]
  22. ↑ GTZ (2006) Feasibility Study for Windpark Development in Ethiopia and Capacity Building - Ashegoda Wind Park Site Final Report, retrieved 25.7.2011 [[17]]
  23. ↑ Gasch R. and Twele J. (2010) Windkraftanlagen - Grundlagen, Entwurf, Planung und Betrieb, Vieweg+Teubner
  24. ↑ Dena (2005) Konzept für eine stufenweise Entwicklung des Stromnetzes in DeutschlandfckLRzur Anbindung und Integration von Windkraftanlagen Onshore und Offshore unter Berücksichtigung der Erzeugungs- und Kraftwerksentwicklungen sowie der erforderlichen Regelleistung. In: Energiewirtschaftliche Planung für die Netzintegration von WindenergiefckLRin Deutschland an Land und Offshore bis zum Jahr 2020 - Netzstudie I, DeutschefckLREnergie Agentur (German Energy Agency)
  25. ↑ World Bank (1996) Handbook on Economic AnalysisfckLRof Investment Operations, retrieved 19.7.2011 [[18]]
  26. ↑ GTZ (2002) Preliminary CDM and Baseline-Study for the “TERNA Wind Energy Project, Jordan –fckLRWind Park Aqaba”, retrieved 26.7.2011 [[19]]
  27. ↑ Ellerman D, Joskow PL (2008) The European Unions Emissions Trading System in perspective.fckLRPew Center on Global Climate Change at Massachussets Institute for Technology
  28. ↑ The World Bank/Carbon Finance Unit: Carbon Finance at the World Bank: List of Funds, retrieved 26.7.2011 [[20]]
  29. ↑ GTZ (2002) Preliminary CDM and Baseline-Study for the “TERNA Wind Energy Project, Jordan –fckLRWind Park Aqaba”, retrieved 26.7.2011 [[21]]
  30. ↑ GTZ (2006) Feasibility Study for Windpark Development in Ethiopia and Capacity Building - Ashegoda Wind Park Site Final Report, retrieved 25.7.2011 [[22]]
  31. ↑ Western Cape Department of Environmental Affairs and Development Planning / German Technical Cooperation (GTZ) (2009) Regional Regulatory Action Plan for the Western Cape, retrieved 13.7.2011 [[23]]
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