Small Wind Turbine: What Is the Payback Period?

Claire Moloney's picture
Claire Moloney
Consultant
June 26, 2014

Small wind turbines are typically used to power smaller properties but do they have a short payback period as well?

Small wind turbines are growing in popularity thanks to tax incentives and improving technology.
Small wind turbines are growing in popularity thanks to tax incentives and improving technology.
Credit: TechnoSpin via Flickr

With renewable energy on the rise and many small homes and businesses searching for cheap alternative energy sources, wind power and small wind turbines might just be what you are looking for to go green.  

Small wind turbines generate electricity, and typically have capacities of 100 kilowatts (kW) and larger, though many wind turbines manufactured today have capacities ranging from 250 watts to 1.65 megawatts (MW).

Types of Wind Turbines

According to the Wind Energy Foundation, there are many different turbine designs and sizes with varying uses.  Large wind turbines are the design most commonly known. With capacities of 100 kilowatts to multi-megawatts, these turbines sit on towers that are over 100 meters tall, have blades 30 to 60 meters long, and are utilized by wind farms because of their ability to power entire towns. The most common design is the horizontal-axis turbine, named so because the axis of the blades is horizontal to the ground.  Larger wind turbines, however, are the design most people think of when they imagine wind turbines.  With capacities of 100 kilowatts to multi-megawatts, these turbines sit on towers that are over 100 meters tall and have blades 30 to 60 meters long.  Most small wind turbines have a horizontal-axis, usually only reach about 80 feet and are mainly used to power small farms, businesses, remote villages and houses.  and are typically not found in clusters like large wind turbines, which are utilized by wind farms because of their ability to power entire towns.

How Much Do Small Wind Turbines Cost?

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Small wind turbines are not especially popular because of their high upfront cost and their space requirement. However, tax incentives in the U.S. can help alleviate the cost of small wind systems.  For example, the federal government offers a tax credit of 30% off the cost of the system. Despite the tax credit, wind turbines are still very expensive because they have very large economies of scale due tohigh labor and materials costs.  In fact, larger turbines usually cost much less per kilowatt of capacity than smaller wind turbines because of the diminishing economies of scale.

Windustry.org estimates that small wind turbines cost about $3,000 to $8,000 per kilowatt.  The American Wind Energy Association (AWEA) reports that a wind turbine large enough to power a home costs an average of $30,000, but can range from $10,000 to $100,000.

It is hard to pinpoint the exact size and corresponding price of a wind turbine for an “average” home, because it will depend on a range of factors, including:

  • Tax incentives
  • Wind speeds in regions
  • electricity use

This calculator from Solar Estimate is a great tool to help you estimate the price of a wind turbine for your home. It considers a variety of factors such as location, electricity usage and utility.

Installation costs can be up to 30 percent of the price of the total wind turbine project.  It is possible to construct a wind turbine yourself if you have a background in electrical systems, but typically turbines with over 1 kW or more of generating capacity should be installed by an experienced professional.

Estimating Wind Turbine Power Output

The watt or kilowatt rating on a small wind turbine refers to the power that it can generate, also known as its capacity. (i.e. its capacity).  To estimate its power output, you can multiply the capacity by the amount of time.  For example, if a 1.5 MW wind turbine generates energy for 25 percent % of the year, it will generate 0.25 x (1.5 MW x 365 days x 24 hours), or 3,285 megawatt hours of electricity per year.  The capacity of the wind turbine will depend on the building’s energy needs. The greater the energy needs, the larger the capacity needed.

Lastly, space is also an important factor to consider when deciding whether your home or business is suitable for a small wind turbine. Since they tend to be tall and not ideal for roof-mounting, they are most likely best for a home with a lot of property or a small business or farm with a good amount of open space.  It’s also important to check local codes as some zoning laws may not allow a tall wind turbine.

What Is the Payback Period?

While the upfront cost of a wind turbine will vary, the general payback period for a wind turbine in an average home can be estimated with a couple of calculations.

According to the U.S. Energy Information Administration, the average annual electricity consumption for a U.S. residence was 10,812 kilowatt hours (kWh), or an average of 901 kWh per month in 2015.  In July of 2016, the average price per kWh in the U.S. residential sector was 12.68 cents per kWh.  Therefore, according to this data, the average U.S. home pays about $1,368 per year in electricity.

Small Wind Payback

The size of the wind turbine for a home with this electricity demand would range from 5 to 15 kW.  Again, the actual size would depend on a few factors, and the wind speeds in the area would have a large impact on the system. 

Let’s estimate the cost and payback period for a 5, 10 and 15 kW system and use 2012 data for the average yearly home payment of $1,340 to get an idea of the return on investment for a small wind system.

Using Windustry.org’s estimate of $3,000 to $5,000 per kilowatt, we’ll assume an average of $4,000 per kilowatt for the cost of a small wind turbine.

A 5 kW small wind turbine would cost about $20,000 (5 kW x $4,000).  With electricity costs of $1,340 per year, it would pay for itself in 14.9 years.

A 10 kW turbine would cost about $40,000.  With electricity costs of $1,340 per year, it would pay for itself in 29.9 years.

A 15 kW turbine would cost about $60,000.  With electricity costs of $1,340 per year, it would pay for itself in 44.8 years.

It’s important to note that small wind turbines have a lifetime of about 20 years, which means that some of these payback periods are longer than the product’s actual lifetime.  That means that the wind turbine would have to be replaced before it paid for itself in energy generation.

Solar PV vs Small Wind

Based on the calculations, the payback period for a small wind turbine is pretty lengthy, even for a small system.  Therefore, other renewable energy technologies may be more cost effective than wind.  However, while more popular in the residential market, solar PV systems are often more expensive, at $6.10 per watt in 2011, according to the Department of Energy’s Lawrence Berkeley National Laboratory

In this case, a kilowatt of solar PV capacity is $6,100, making it $1,900 greater than each kilowatt of capacity for small wind (per Windustry’s average estimate of $4,000 per kW). This means that a 5 kW PV system would cost $30,500, a 10 kW system would cost $61,000, and a 15 kW system would cost $91,500.  However, there are more incentives geared at solar that make it more popular and more cost effective than wind.

commons..wikipedia.orgWhile federal incentives apply to both solar and wind, there are many more local and utility-based tax or financial incentives for installing solar.  here are also programs such as solar feed-in tariffs or solar leasing that make solar essentially free for homeowners in some areas.  Plus, wind turbines require more space on the building owner’s property than solar panels, which are most often roof-mounted.

If small wind gains the same popularity of solar PV, these programs could be extended to small wind, allowing wind to become,more financially viable.  In the meantime, small wind turbines may just be limited to households with large budgets and passion for renewable energy.

But wind is still a blossoming industry.  More and more manufacturers are investing in improving the efficiency and performance of wind turbines.  Many within the industry itself are expecting increased investments for wind power, a surge in renewable energy use and more global encouragement to rely on wind for power. 

While prices are high to begin with and the payback period is longer than expected, harnessing wind power for electricity might just be the green investment you were looking for as, globally, we make the switch to green energy. In fact, Scotland is taking advantage of the benefits of the wind energy sector. Read about Scotland’s advancements in renewable energy. 

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