Development of construction costs of onshore wind parks and solar parks

Onshore wind parks

In general, onshore wind turbines have

advanced significantly within the last few
years because of technology
improvements.1 Prices for wind turbines
generally slightly increased in 2021 due
to several reasons such as supply chain
constraints (mainly because of Covid),
increasing commodity prices, higher labor
costs and general higher profit margins of
manufacturers due to strong overall
Figure 1: Reported wind turbine transaction prices over time
demand growth in the last years. Though
prices have seen a general steady decline since the peak in 2008. 2
The U.S. Energy Information Administration reported a weighted average price for wind park
constructions at $1,391/kW as of 2019.

The IRENA renewable cost database

reports an average price of $1,388/kW for
onshore wind projects in North America as
of 2021.3 As a comparison, the weighted
average cost for installed onshore wind
energy worldwide is at $1,325/kW.4

Recent large transactions in the US

include a 1,2 GW wind park portfolio for
$1,5bn ($1,25m/MW or $1,250/kW)
spread out across the US5 as well as a
Figure 2: Costs for wind turbines across different regions single 199 MW wind farm in Oklahoma for
$250m ($1,256m/MW or $1,256/kW).6
Both transactions being slightly below the reported average of the recent years, this could be due to
economies of scale as larger wind farms (judging by MW) generally achieve lower costs compared to
smaller farms.7

In conclusion, around $1,200 – $1,400 costs per kW can be seen as a realistic price indication in the
current time judging by market data and recent transactions.

Solar farms

1
Renewable power generation costs in 2021 (irena.org), S. 60f
2
Wind Market Reports: 2022 Edition | Department of Energy, S. 56f
3
Renewable power generation costs in 2021 (irena.org), S. 65
4
Renewable power generation costs in 2021 (irena.org), S. 59
5
Major Utility Selling 1.2 GW of Wind Power - North American Windpower (nawindpower.com)
6
Evergy Signs Purchase Deal with Scout, Elawan for Persimmon Creek Wind Farm - North American
Windpower (nawindpower.com)
7
Land-Based Wind Market Report: 2022 Edition (energy.gov), S. 60
For solar parks a similar pattern can be observed regarding the cost development over the recent
years. The market has seen a steady decrease
in construction costs as materials have become
more accessible over the last years as demand
has grown, with 2021 being a slight exception
due to supply chain disruptions caused by the
pandemic and overall restricted availability of
materials. As can be seen in figure 3, prices
have substantially dropped over the last years
and amounting to roughly $1,796 per kW in
2019. Figure 3: Cost development for solar, wind turbines and natural gas

The reported costs in the IRENA renewable

cost database, as seen in figure 4, amount
to $1,085 per kW in 2021 for the United
States for utility-scale projects.8 Recent large
transactions for solar parks in the US include
a $300m and 200MW ($1,5/MW or
$1,500/kW) solar park in Indiana9 and a
$293m and 220 MW ($1,33m/MW or
$1,331/kW) deal for solar assets across
multiple states in the US.10 Both of those
transactions took place in the fourth quarter
of 2022 and may reflect the aforementioned
increase in material prices due to supply
chain disruptions as an aftermath of the
pandemic.

Figure 4: Cost breakdown of utility-scale solar PV projects across different

countries

8
Renewable power generation costs in 2021 (irena.org), S. 89
9
EDP Renováveis sells US solar park for $300 million - Portugal Resident
10
Altus Power Acquires 220 MW of Solar Assets from True Green Capital Management - Solar
Industry (solarindustrymag.com)
Technical development and problems

Current technical development for wind turbines is mainly about applying new technological
improvements to existing energy projects. In the case of wind turbines, this is known as repowering
(e.g., increase of rotor diameters and replacement of major nacelle components). In the US, 1,6 GW
of existing wind plants were partially repowered in 2021 (around 3 GW each in 2020 and 2019). 11 One
reason for the repowering of wind turbines in the recent years is the possibility to access the federal
production tax credit after repowering, therefore adding a governmental incentive to renew existing
projects and make them more efficient by applying recent technological advances. 12

Regarding solar, prices for crystalline solar PV modules have dropped significantly by around 91% in
Europe.

The influence of production tax credit (PTC) on construction costs

The production tax credit is a federal tax credit for electricity generated by renewable energy
resources. For energy generated by wind, the tax credit amounts to 2.6 cents per kWh and lasts for
10 years after the facility is being placed in service. 13 The growth of new wind energy projects in the
last years was mainly driven by the tax incentive of the PTC. But this may also lead to
investors/operators neglecting maintenance after the 10-year PTC eligibility 14 and maybe even
incentivize building new plants, therefore adding more demand on the market which could in the long-
term also influence construction costs.

Other relevant topics

11
Wind Market Reports: 2022 Edition | Department of Energy, S. 19
12
Land-Based Wind Market Report: 2022 Edition (energy.gov), S. 4
13
Renewable Electricity Production Tax Credit Information | US EPA
14
New Research Evaluates How US Wind Plant Performance Changes with Age | Electricity Markets
and Policy Group (lbl.gov)