Will the Heartland College Windmill Save Money?

by Diane Benjamin  CPA reg.

Many factors are not available for analysis of this project.  This process must continually be updated when REAL data becomes available.  Some of the factors are:

  • Cost per KWH for purchased electricity over the next 20 years – it most likely will not remain constant
  • Amount of electricity generated by the turbine – will vary depending on wind & down time
  • The exact life span of the turbine – it’s estimated at 20 years
  • Disposal or refurbishing costs after 20 years
  • Amount of electricity needed to run the college each year – will very depending on the temperature, weather conditions, and future expansion

The actual electricity use from April 2011 to March of 2012 was obtained.  They used 9,460,928 KWH at a cost of $644,543. The cost per KWH ranged from a high of .074958286 to a low of .59876448.  Average cost: .068126875

Remember, the winter of 2011-2012 was VERY mild and is probably not representative of future needs.

The turbine is expected to generate at least 3795 MW or 3,795,000 KWH.  I rounded that figure up to 3,800,000 for my calculations.  This benefits the college.  Obviously, they still have to buy a lot of electricity.

How much did the turbine cost?

This is the cost using their 15 yr projections                20 yr projections 3% inc

Total Construction costs:           $5,168,408                               5,168,408

Interest Paid on 15 yr loan              671,380                                    671,380

Ongoing Measurement                    273,428                                   394,433

Insur/Warr/Maintenance            1,510,073                                 2,207,175

Reserve                                                185,989                                    268,704

Total Cost                                       $7,809,278                           $  8,710,100

Subsidies Received                         1,462,500

Since the subsidies still came from taxpayers, I am including them in all calculations.  Numbers issued by the college do not include them.

What does all this mean so far?  For this project to BREAK-EVEN, it needs to save $435,505 a year for 20 years  (8,710,100/20)

They might generate 3,800,000 KWH or more, only time will tell.

  • If this amount is valued at the AVERAGE COST paid in the last year,  total savings would be $258,882 (3,800,000 x .068126875)
  • If this amount is valued at the LOWEST COST paid in the last year, total savings would be $227,531 (3,800,000 x .59876448)
  • If this amount is valued at the HIGHEST COST paid in the last year, total savings would be $284,841  (3,800,000 x .074958286)

No matter what number is used, it doesn’t come close to saving the $435,505 figure needed to break even.

The ONLY way this project breaks even is if two things happen:

1) The turbine generates a lot more KWHs.

2) Electricity rates skyrocket

Since the EPA is shutting down coal fired power plants, electricity rates could skyrocket.

The energy savings predicted by the school are considerably higher.  They start at $380,551 in the first year and ending 15 years later at $550,822.  I don’t know how they arrived at their numbers.   They are also expecting revenue of $11,434 over 15 years for REC Revenue.  Since this amount is relatively insignificant, I assume their figure is correct.  These figures do not include any disposable or refurbishing costs when the turbine needs replaced or scrapped.   There is currently no used turbine market, so estimates range from getting paid for scrap or up to $500,000 to refurbish.

Click on any of the images below to enlarge.

This is the electricity used worksheet prepared by the college:

The projections worksheet prepared by Heartland College:

My Worksheet:

10 thoughts on “Will the Heartland College Windmill Save Money?

  1. Great analysis on the wind turbine at Heartland. Anyone reading the Pantagraph’s article on it, using calculations on the back of an envelope, could have determined this was a waste of money. Your in-depth analysis drives home the point.

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  2. Was just curious if you were able to actually see the Ameren Bills for HCC? The costs per kwh in your calculations seem pretty low to me.

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  3. I appreciate seeing some real numbers on this project and HCC’s power usage. That said, I think it will end up being close to break-even. Your calculations do not include any educational value (I don’t know how HCC plans to incorporate this in the classroom setting, but it seems like it could offer some pretty unique and valuable opportunities). It also appears you assume the structure will be useless/worthless after 20 years. As long as it is maintained, the tower could certainly be re-used/re-fitted with a new turbine, and that is one of the more expensive components. The entire setup lasting more or less than 20 years also plays a huge role in the financial outcome – my experience is that most things last longer than projected, but I guess well see. Another guess – and mine is as useless and anyone’s -I see no reason electricity rates won’t rise 50%+ in 20 years. Energy is getting more expensive quickly and a 3% CAGR seems optimistic. I’d love to see some real results in coming years, please update!

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  4. Diane, I spoke with someone that works for a major wind company yesterday. He said that the construction cost should not have been over $3 million.

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