Quote Originally Posted by Financially dependant View Post
I have done some back of envelope calculations...

Each WTL 0.5MW turbine (and connection to grid) costs about a million dollars to install not including any carbon credits.

With 45% wind factor & then 97% power factor the turbines should operate for over 3800 hours per year so

3800hr x 0.5MW = 1900 MWh

at 10c/kwh = $190,000 per year for each turbine, a gross profit of 19% pa. (average spot price 9.7c/kwh)

End of stage 3, 65 turbines = $12.35 mill income pa

Because of NZ energy situation (gas prices and peak oil etc) this could increase very quickly. The running time is very conservative because in the last statement the turbines had been running 86% of the time!

With money in the bank equaling the share price how can this not be a good investment? I am holding a few but want to build up more before they pay a dividend and the stampede starts!
You might need to use a larger envelope Financially Dependent.

First of all those turbines may be rated at 0.5MW. But that doesn't mean they develop 0.5MW or nothing. The actual energy being delivered will be proportional to the wind speed (not linearly proportional), and that is a function of the wind profile of the site. Of course you would have to include the time of the wind speed being too high causing the wind turbines to shut down. Any particular wind farm is designed around a site's wind profile principally in accordance with the direction of the prevailing wind. However, when the wind swings round to a different direction, then this will likely affect the performance of the windfarm in a negative way. As you might imagine there is quite a bit of science in all of this. I believe that NWF were advertising not long ago for a full time specialist on this subject. I can guarantee that person will not be doing their calculations on the back of an envelope.

Also the 'average spot price' may be indicative when there is, overall, little variation in the spot price, and spot prices cluster around some kind of mean. However, I don't think that is true of the NZ power market. That means that 'when' you sell your power is actually very important. As the owner of a solely wind powered power generating power unit, NWF has no choice *when* they sell their power to the grid. A small operator will have to take whatever the spot price is. And that price might be consistently below the total cost of generation (which includes of course a charge against the capital costs of the structures) for months. Larger competitors, by bringing existing plant out of mothballs or choosing to close down a plant for maintenance, have the power to manipulate spot prices to do maximum damage to small competitors, like NWF.

Then you have the 'single site risk'. The power grid could be damaged locally precluding NWF selling any power at all, through no fault of their own. Alternatively a rogue hurricane might wipe out a large percentage of NWF's turbines. Sure these events are unlikely. But they are nevertheless part of the overall 'business case', and have to be priced in to any profitability probability model.

In summary, I like what you have tried to do in estimating a generation cost Financially Dependent. I recognise as do you I think that the costs and prices you have estimated are simplifications. I understand that you can build a business case around simplifying assumptions, if ou build a suitable 'safety factor' into your analysis. The safety factor you have built in Financially Dependent, does not convince me of the business case for NWF.

SNOOPY

discl: hold CEN