Abstract
Wind power is becoming an increasingly attractive method of electric power generation due to concerns with global climate change, increasing uncertainty of future oil supplies, and energy security. While most large-scale wind turbines are part of wind farms, which help states meet state renewable energy standards, several colleges and universities in the United States have purchased wind turbines for financial and educational purposes. This paper gives details of a cost-benefit analysis completed for a small liberal arts college in Illinois, Principia College, which is considering buying a single large-scale turbine. The process set forth here can easily be adapted to any college, university, or school. It is found that the project has a positive net present value for both a 20-year scenario and a 30-year scenario. Assuming the project did not receive any grants, Principia College would need to have an annual real return rate of about 6% on its initial investment to gain the same economic benefits.
Highlights
Principia College, a small liberal arts college located in Elsah, Illinois, is considering installing a Vestas V82 (1.65 MW) or another turbine of similar size
Principia College is a small, private, liberal arts college located on the bluffs of Elsah, Illinois, just north of St
Because the majority of the costs would be incurred before the first year, and the benefits are spaced out evenly over time, the expected lifespan of the wind turbine is an important factor in determining the net present value (NPV)
Summary
Principia College, a small liberal arts college located in Elsah, Illinois, is considering installing a Vestas V82 (1.65 MW) or another turbine of similar size. This paper calculates the costs and benefits of the proposed turbine and determines the discounted net present value (NPV). The discount rate, the initial costs, the value of renewable energy credits (RECs), and the quantity and value of electricity generated are tested to determine their impact on the project’s NPV. The results presented do not consider social, environmental, and educational costs and benefits. While these topics are important, they are externalities (i.e., they are not included in the market price of electricity). More information about these costs and benefits can be obtained from the authors
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