The Performance of Wind Farms
in the United Kingdom and
Denmark
Gordon Hughes

The Performance of Wind Farms
in the United Kingdom and Denmark

Gordon Hughes

2012© Gordon Hughes 2012

Cover background image by Simon Gray (http://www.star-one.org.uk/) via stock.xchng
Published by the Renewable Energy Foundation
57–58 Russell Square
London WC1B 4HS
www.ref.org.uk
The Renewable Energy Foundation is a registered charity in England and Wales (1107360)

Contents
List of Figures and Tables

4

About the author

5

About the Renewable Energy Foundation

5

Author’s Note

6

Note on the Data

6

Executive Summary

7

The Performance of Wind Farms in the United Kingdom and Denmark

9

Introduction

9Age-performance curves

10

Differences between wind farms

12

Implications for future policy and performance

15

Conclusion

21

Appendix: Data and Methods

23

A.

Data for the United Kingdom

23

B.

Data for Denmark

25

C.

Specification and estimation methods

26

D.

Period fixed effects vs normalisation by wind speeds

28

E.

Estimation results for the UK

30

F.

Estimation results for Denmark

36

List of Figures and Tables
Figure 1: Performance degradation due to age using equal weights

11

Figure 2: Performance degradation due to age using capacity weights

12

Figure 3: Range of unit fixed effects by category

13

Figure 4: Initial load factors by year of commissioning for onshore wind

14

Figure 5: Impact of performance degradation on discounted cumulative output

16

Figure 6A: Projected load factors for UK onshore wind (total capacity of 10 GW in 2020)

18

Figure 6B: Projected load factors for UK onshore wind (total capacity of 15 GW in 2020)

18

Figure 7: Projected load factors for UK offshore wind in 2020

20

Figure 8: Box plots of load factors by age for UK onshore wind farms

24

Figure 9A: Additive age-performance curves for UK onshore wind farms

32

Figure 9B: Multiplicative age-performance curves for UK onshore wind farms

32

Figure 10: UK onshore age-performance curves using equal and capacity weights

33

Figure 11A: Residuals by age for performance curves using equal weights

34

Figure 11B: Residuals by age for performance curves using capacity weights

34

Figure 12: Unit fixed effects by year of commissioning for England and Scotland

35

Figure 13A: Age-performance curves for Danish onshore wind farms

37

Figure 13B: Age-performance curves for Danish offshore wind farms

37

Figure 14: Danish age-performance curves using equal and capacity weights

38

Table 1: Average load factors by year and country (%)

40

Table 2: Estimation results for UK onshore wind farms

41

Table 3: Equations for trends in unit fixed effects

43

Table 4: Estimation results for Danish wind farms

44

Table 5: Performance by year of commissioning for Danish wind farms

46

About the author
Dr Gordon Hughes is a Professor of Economics at the University of Edinburgh where he teaches courses inthe Economics of Natural Resources and Public Economics. He was a senior adviser on energy and environmental policy at the World Bank until 2001. He has advised governments on the design and implementationof environmental policies and was responsible for some of the World Bank’s most important environmental
guidelines.

About the Renewable Energy Foundation
The Renewable Energy Foundation is a registered charity promoting sustainable development for the benefitof the public by means of energy conservation and the use of renewable energy.
REF is supported by private donation and has no political affiliation or corporate membership. In pursuit of
its principal goals REF highlights the need for an overall energy policy that is balanced, ecologically sensitive, and effective.
We aim to raise public awareness of the issues and encourage informed debate regarding a structured energy
policy that is both ecologically sensitive and practical. The issues of climate change and security of energy
supply are complex and closely intertwined. REF contributes to the debate surrounding these issues bycommissioning reports to provide an independent and authoritative source of information.
For further information see: www.ref.org.uk.

Author’s Note
Note: The views expressed in this paper are strictly personal and do not reflect the position of any organisation with which I am associated. I am grateful to John Constable, Lee Moroney and a referee for theircomments on earlier drafts of the paper. The results of this study have been presented at seminars andlectures to various groups in Edinburgh and Glasgow. I have benefited from the questions and commentsfrom participants in those events.
Gordon Hughes
School of Economics
University of Edinburgh
g.a.hughes@ed.ac.uk

Note on the Data
For the convenience of interested researchers both the raw and cleaned data employed in this analysis will
published alongside the electronic version of the study on the REF website: www.ref.org.uk.

The Performance of Wind Farms in the United Kingdom and Denmark

7

Executive Summary1.

Onshore wind turbines represent a relatively mature technology, which ought to have achieved
a satisfactory level of reliability in operation as plants age. Unfortunately, detailed analysis of
the relationship between age and performance gives a rather different picture for both theUnited Kingdom and Denmark with a significant decline in the average load factor of onshore
wind farms adjusted for wind availability as they get older. An even more dramatic decline isobserved for offshore wind farms in Denmark, but this may be a reflection of the immaturityof the technology.

2.

The study has used data on the monthly output of wind farms in the UK and Denmark reported
under regulatory arrangements and schemes for subsidising renewable energy. Normalised
age-performance curves have been estimated using standard statistical techniques which allow
for differences between sites and over time in wind resources and other factors.

3.

The normalised load factor for UK onshore wind farms declines from a peak of about 24% at
age 1 to 15% at age 10 and 11% at age 15. The decline in the normalised load factor for Danish
onshore wind farms is slower but still significant with a fall from a peak of 22% to 18% at age 15.
On the other hand for offshore wind farms in Denmark the normalised load factor falls from
39% at age 0 to 15% at age 10. The reasons for the observed declines in normalised load factors
cannot be fully assessed using the data available but outages due to mechanical breakdowns
appear to be a contributory factor.

4.

Analysis of site-specific performance reveals that the average normalised load factor of new UK
onshore wind farms at age 1 (the peak year of operation) declined significantly from 2000 to
2011. In addition, larger wind farms have systematically worse performance than smaller windfarms. Adjusted for age and wind availability the overall performance of wind farms in the UK
has deteriorated markedly since the beginning of the century.

5.

These findings have important implications for policy towards wind generation in the UK. First,
they suggest that the subsidy regime is extremely generous if investment in new wind farms
is profitable despite the decline in performance due to age and over time. Second, meeting
the UK Government’s targets for wind generation will require a much higher level of windcapacity – and, thus, capital investment – than current projections imply. Third, the structureof contracts offered to wind generators under the proposed reform of the electricity market
should be modified since few wind farms will operate for more than 12–15 years.

The Performance of Wind Farms in the United Kingdom and Denmark

9

The Performance of Wind Farms in the United Kingdom
and Denmark
Introduction
1.

Any assessment of the costs of wind power must rely heavily upon assumptions about the
average load factor that will be achieved by new wind installations over their lifetime. It is
standard practice to calculate average load factors by year and country for onshore and offshore
installations as shown in Table 1 (page 40).1 However, such estimates do not provide areliable statistical basis for assessing the future performance of wind farms in aggregate. Partof the reason is that the amount of wind in any month or year is influenced by long term meteorological cycles that have periods of many years, notably the North Atlantic Oscillation. In
addition, average load factors do not allow for changes in the composition of wind installations
by location, age, size and other factors.

2.

As the number of wind farms operating in developed countries has grown, engineers have an
opportunity to analyse operating experience over extended periods of time. With any (relatively)
novel technology the incidence of temporary or permanent breakdowns may be expected to fall
over time, so it is difficult to disentangle the effects of age on operating performance from thetechnological immaturity of turbines installed 10 or 20 years ago. Nonetheless, the technology
for onshore wind turbines has been reasonably mature since the early 2000s. This is documented
by data produced by the US Department of Energy which shows that the decline in capital costs
that is characteristic of immature technologies slowed after 2000 and was reversed after 2004.2

3.

With at least 10 years of operating data since 2000 it should be possible to examine how thetypical operating performance of wind installations in the United Kingdom and Denmark
varies with the age of the turbines. The estimated age-performance curves should then beincorporated in estimates of levelised costs, which are often used to compare the costs of windand other forms of generation.

4.

The Appendix provides a detailed description of the data and methods employed for this study.
In both the UK and Denmark wind operators have a large incentive to produce electricity
whenever there is sufficient wind available since marginal operating costs are small while theoperator receives a much higher price. In the UK this price is the sum of the market price plus
the value of (a) the Renewable Obligation Certificates (ROCs) awarded for each MWh of electricity produced, and (b) the associated exemption from the Climate Change Levy. In practice,
the effective market value of ROCs and associated incentives means that an onshore wind
operator earns roughly double the average market price of electricity per MWh. In Denmark,most onshore wind capacity receives a price premium equivalent to about £28 per MWh on top

1

2

The load factor is calculated as the ratio of the amount of electricity actually produced by a turbine or wind farmover a period of a month or a year divided by the amount of output that would have been produced had it operated
at full nameplate capacity for the entire period. This is expressed as a percentage, so that reported load factors lie
between 0 and 100.
R. Wiser & M. Bolinger (2012) 2011 Wind Technologies Market Report, Lawrence Berkeley National Laboratory,
US Department of Energy. It should be noted that the installed cost of wind plants has fallen since 2010, but thesechanges reflect the cyclical forces of demand and supply that are well established across the electricity sector andwhich apply to fossil-fuel as well as renewable generators.

10

The Performance of Wind Farms in the United Kingdom and Denmarkof the market price for about 12.5 years of operation at a typical load factor.3 Offshore capacity
is eligible for a similar price premium but most of it is contracted via tenders that offer a guaranteed feed-in tariff. The tender tariffs have varied from £56 per MWh to twice that figure
extending over 16-18 years of operation at a typical load factor.

Age-performance curves
5.

A standard indicator of the operating performance of a wind turbine is its normalised loadfactor defined as the total output over some period divided by the maximum potential output
adjusted for wind availability. Normalisation for wind availability is not straightforward. If
detailed data on wind speeds at specific locations is available, then the potential output fromindividual turbines or wind farms can be calculated using standard power curves. Since windspeeds can vary substantially over small distances, such calculations are both difficult to implement and prone to errors when applied to large numbers of wind generators using public
sources of data.4

6.

Many analyses work in the opposite direction. For example, the Danish Wind Index – thelongest running series of data on wind availability in Europe – is constructed from the common
component of monthly variations in wind output from a large sample of wind turbines.5 This
study adopts a similar approach. Wind availability is treated as an unobserved factor whose
contribution to monthly variations in wind output is estimated by a series of fixed period(month/year) effects in a statistical model of monthly output for all wind farms. The reasonsfor adopting this approach are discussed in Section D of the Appendix. This explains why themethod must perform better than the feasible alternative of using a single index of averagewind speed for the UK or Denmark.

7.

The analysis relies upon standard techniques that are widely used in the biological and medical
sciences as well economics and engineering. Full details are given in the Appendix. The idea isto treat the actual load factor (i.e. without adjustment for wind conditions) for a specific wind
generator in any time period as being determined by a set of components which reflect specificsite conditions and the age-related performance of wind plants in general together with theperiod fixed effects and an uncorrelated random error. The onshore wind datasets for the UK
and Denmark used for the analysis are large with monthly observations on 282 installations in
the UK and 823 installations in Denmark with an age range from 0 to 19 years. The offshore
wind dataset for Denmark is rather smaller, covering only 30 installations, but it can be used toobtain reasonable estimates of performance up to age 10. The results discussed here are based
upon least squares estimation (see page 27) combined with standard errors that are robust to
various departures from classical assumptions about the nature of the data generation process.

8.

The results of the statistical analysis demonstrate an unambiguous and statistically significant
decline in the operating performance of wind farms as they grow older. Figure 1 shows the3
45

Conversions to GBP are based on an exchange rate of £1 = DKK 9.18 (as at 19 October 2012).
All wind generators collect their own information on wind speeds in order to manage their plants but they do not
publish such information and will not have access to information collected by other operators.
Details of the construction of the Danish Wind Index are given at www.vindstat.dk. A paper by Boccard – N. Boccard(2009) ‘Capacity factor of wind power: realized values vs estimates’, Energy Policy, Vol 37, pp. 2679-88 – includes a
discussion of the construction of similar indices of wind availability in Germany, the UK, Netherlands, and Sweden.

The Performance of Wind Farms in the United Kingdom and Denmark11

simplest variant of the normalised age-performance curve for onshore UK wind installations
together with the equivalent curves for onshore and offshore Danish installations. The curves
illustrated are calculated from the multiplicative error components model described in the
Appendix with log(load factor) as the dependent variable and a quadratic in plant age to represent the variation in plant performance with age.
9.

The rate of decline in performance is greatest for offshore installations in Denmark, with a fallfrom load factors of over 40% at ages 0 and 1 to less than 15% by at ages 9 and 10. Onshore
installations in the UK show a more rapid rate of decline – 0.9 percentage points per year overthe first 10 years of operation – than is the case for Denmark, though the normalised Danish
performance curve lies below the UK curve for the first four years. For the UK the normalised
load factor falls to just over 15% at age 10 and to 11% at age 15. With such low load factors it
seems likely that many wind farms will be re-powered – i.e. the turbines will be replaced – once
they reach the age of 10 or at most 15.
Figure 1: Performance degradation due to age using equal weights
50
45
40
Load factor (%)

35
30
25
20
15
10
5
0

0

1

2

3

4

5

6

7

8

9

10

11

12 13 1415 16 17 18

Age (years)
UK onshore

DK onshore

DK offshore

Note: Normalised load factors in %. Source: Author’s estimates.

10.

There are two plausible explanations for the observed decline in average load factors as windfarms age. The first is that the turbines become less efficient over time as a result of mechanicalwear and tear, erosion of the turbine blades and related factors. The second is that the turbines
experience more frequent breakdowns and their operators take more time to bring them backinto service because they are less concerned about the performance of older plants. Bothreasons may be relevant in different circumstances and it is not possible to identify a primary
explanation from the data. The frequency of extended shutdowns does seem to increase withage, but this could be a reflection of the timing of planned maintenance operations rather thanbreakdowns. Whatever the cause, the reduction in performance with age is much greater thanwould be expected for thermal generating plants.

12

The Performance of Wind Farms in the United Kingdom and Denmark11.

The age-performance curves in Figure 1 are derived from equations estimated by giving equal
weight to each wind farm irrespective of its generating capacity. Figure 2 illustrates similar
curves but in this case the estimates are constructed by weighting each wind farm by its generating capacity, referred to as capacity-weighted. This gives a better representation of performancedegradation per MW of generating capacity. The striking result is that the rate of decline in
the performance of UK onshore wind installations is significantly faster when capacity weights
are used, which implies that large wind farms in the UK experience a more rapid decline thansmaller ones. The differences are smaller in Denmark but the capacity-weighted decline inperformance is more rapid than the equal weights decline for Danish onshore installations.
Figure 2: Performance degradation due to age using capacity weights
45
40

Load factor (%)

35
30
25
20
15
10
5
0

0

1

2

3

4

5

6

7

8

9

10 11

12 13 14 15 16 17 18

Age (years)
UK onshore

DK onshore

DK offshore

Note: Normalised load factors in %. Source: Author’s estimates.

Differences between wind farms
12.

The specification of the statistical model means that the unit fixed effects identify the specificperformance characteristics of individual wind farms after adjusting for wind availability andage. These characteristics may reflect the site and/or design of the installation as well as theway in which it is operated. A positive value for the unit fixed effect is equivalent to shifting
the performance curve up by some percentage applied uniformly at each age, while a negativevalue shifts it down. It follows that the distribution of unit fixed effects across installations canbe used to compare the relative effectiveness of new installations by location, date of commissioning, etc. Care is required when making comparisons between, for example, UK and Danish
onshore wind installations because these have been normalised separately, so the unit fixed
effects refer to different underlying averages.6

6

Some care is required in interpreting the unit fixed effects. By default, the average value of the unit fixed effects foreach group is zero but these averages are taken over all observations for each installation in the basic sample. For the
purpose of the comparisons in Figure 3 the unit fixed effects have been adjusted so that the average values for eachgroup are zero when using one value for each installation.

The Performance of Wind Farms in the United Kingdom and Denmark
13.

13

To give a sense of the numbers, unit fixed effects of (a) 0.2 or (b) -0.2 mean that the base loadfactor given the age of the plant is multiplied by (a) exp(0.2) = 1.22 or (b) exp(-0.2) = 0.82. Since
the base load factor for a plant of age 0 is 23.1%, these fixed effects translate to load factors in
the first year of operation of (a) 28.2% and (b) 18.9%. For a wind farm with 50 MW of generating capacity the difference amounts to an additional 40,700 MWh of electricity output per
year. Using the standard figures cited by RenewableUK this would be sufficient to supply 12,300
homes for a year. This range (0.40) is slightly greater than the interquartile range of unit fixed
effects for UK onshore wind farms (0.35). Again for comparison, operators of thermal power
plants would regard any difference of even 10% up or down in efficiency relative to what is
expected as a striking and perhaps worrying indication of either good or bad performance.

.5
0
-.5
-1

Adj fixed effect – quadratic

1

Figure 3: Range of unit fixed effects by category

UK onshore

DK onshore

DK offshore

Source: Author’s estimates.

14.

A notable feature of the distributions of the unit fixed effects that are summarised in the box
plots shown in Figure 3 is the range of variation between the best and worst performers, especially for UK onshore and Danish offshore wind farms. Box plots are constructed so that the
top and bottom of the box correspond to the upper and lower quartiles, while the bars at top
and bottom correspond to the maximum and minimum values excluding outliers.7 A plant at
the upper quartile of the distribution of UK onshore wind farms will generate an annual output
that is about 40% higher than a plant at the lower quartile. The equivalent figure for Danish
onshore wind plants is an increase of 30%, while for Danish offshore wind farms the difference
between the upper and lower quartiles is equivalent to 2.5 times the output of a lower quartile
plant. By any standard such differences are important.

7

The upper quartile is the point in a distribution such that the 25% of values exceed it, while the lower quartile is thepoint in a distribution such that 75% of values exceed it. The line in the middle of the box marks the median, thepoint exceeded by 50% of values. Outliers are defined as values that lie outside the range of Tukey adjacent values
which are defined as the upper/lower quartiles +/- 1.5 x interquartile range.

14

The Performance of Wind Farms in the United Kingdom and Denmark
15.

Outside the range between the upper and lower quartiles, the top and bottom segments ofthe distributions extend further up and down for UK onshore wind farms than for those in
Denmark. The rather different pattern for Danish offshore wind installations is partly a consequence of the relatively small size of the sample, but the evidence points to considerably greater
variability in the performance of offshore wind installations than for onshore installations.

16.

It is somewhat surprising to observe the magnitude of the differences in the performance inonshore wind farms in the UK. Given the nature of the subsidy regimes and the high capital
cost of developing new installations, it might be expected that operators have a strong incentive to identify the best locations and then choose equipment that will deliver the maximum
amount of electricity output at a high level of reliability. For UK onshore operators it seems that
good or bad performance is somewhat of a lottery. However, if the subsidies provided by ROCs
are sufficient to underwrite investment in inefficient plants – as appears to be the case – thenthose subsidies are extremely generous for plants that operate close to the efficient frontier.
As location is likely to be the main factor that determines the performance of a specific plant
relative to all other plants, the inference must be that many wind plants have been developed onsites with poor wind characteristics.
Figure 4: Initial load factors by year of commissioning for onshore wind
35

Initial load factor (%)

30

25

20

15

10

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Year commissioned
UK onshore

DK onshore

Linear (UK onshore)

Linear (DK onshore)

Source: Author’s estimates.

17.

There is another disturbing characteristic of UK wind farms which is revealed by examinationof the unit fixed effects and illustrated in Figure 4. It might be expected that the average performance of recently installed units would be higher than that of older units. This should reflect
improvements in turbine design and reliability as well as in the identification of good sites forwind generation. However, that is not the pattern for onshore wind farms in the UK. The figure
shows the average values of the initial load factors calculated using equally weighted data by
year of commissioning for onshore wind farms in the UK and Denmark together with fitted

The Performance of Wind Farms in the United Kingdom and Denmark

15

trend lines.8 There has been a clear decline in the initial load factors in the UK which has notoccurred in Denmark. This pattern is confirmed by more detailed statistical results shown in
the Appendix which take account of location and size of installation.
18.

The decline in initial performance is particularly obvious after 2005 when the rate of commissioning new capacity increased sharply from less than 500 MW in the 5 years 2000–04 to morethan 500 MW per year from 2005 onwards. In contrast, the peak years for commissioning new
onshore wind farms in Denmark were 2000–02 when 920 MW was installed. The rate of newbuilding (or replacement) picked up again in 2008 but it is still much lower than at the turn ofcentury. Not only is the performance of the onshore wind plants in the UK commissioned inrecent years significantly worse than that for wind farms commissioned before 2005, but it ispossible that this is a direct consequence of an overly rapid expansion of capacity. In essence,the evidence suggests that the industry does not have the capability to identify, develop andoperate new onshore wind farms at the rate envisaged by UK government targets while maintaining a satisfactory average level of performance.

Implications for future policy and performance
19.

The pattern of performance degradation with age and over time identified in this analysis has
implications for the assessment of new investment in wind farms and for the design of the
proposed Electricity Market Reform (EMR). There are two related issues that are affected by
the results:a)What are the implications for the design of policies intended to promote the adoption
and expansion of wind generation in the UK? This includes the structure of current
subsidies as well as the specification of the contracts that are proposed under the EMR. A
related question concerns the expected life of new wind farms.

b)

How might the average performance of wind generation develop over the next decade?
This is absolutely critical to any assessment of the amount of wind capacity that will be
required to meet the UK government’s targets for the share of electricity – and, moregenerally, energy – from renewable sources. The government has assumed that the
average load factors for both onshore and offshore wind farms will either remain stable
or increase in future. The prospects will be very different if these assumptions are notborne out.

20.

The first question can be addressed by considering the discounted sum of cumulative net
output from a new wind farm on the assumption that its performance matches the averages
identified in the analysis. This takes account of both performance degradation over time plus
the annual cost of maintaining the plant which may be expressed as a deduction from grossproduction so as to calculate the contribution of expected output at age s to recovering theoriginal capital cost of building the plant. These figures have to be discounted back to the dateof commissioning in order to assess the net present value of the initial investment in the plant.
The curves for constant and observed performance using a discount rate of 9% (a typical cost ofcapital for wind generation) are shown in Figure 5. The black line is based on the full set of age

8

The initial load factors are calculated as the normalised load factor for UK/Danish wind farms at age 0 multiplied bywhere is the unit fixed effect for installation i.

16

The Performance of Wind Farms in the United Kingdom and Denmark
effects while the red dashed line is based on the smoothed quadratic performance curve andthe blue dashed line shows what the pattern would be if operating performance was not affectedby age. The calculation is extended out to age 25 since DECC’s standard comparisons assume
that wind turbines have a life of 25 years.
Figure 5: Impact of performance degradation on discounted cumulative output% of discounted cumulative output

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Age of plant (years)
Constant

Quadratic

Full age effects

Source: Author’s estimates.

21.

The key points in the figure are that 80% of the discounted cumulative output of a new windplant is likely to be produced in the first 10 years of its life and 90% in the first 14 years. Thisis consistent with the structure of Danish subsidies for onshore wind farms which extend overa typical period of 12.5 years. Since sites for wind farms are scarce and involve the payment ofsignificant rents that may be linked to output, it is very unlikely that any new installation ofwind turbines will have an expected life of more than 15 years. Instead, as has happened in thepast, wind operators will have a strong incentive to decommission plants after no more than 15
years and replace the turbines with newer equipment.

22.

As a consequence, any economic assessment of wind generation should not be based on an
expected life which is longer than 15 years. In recent work reported in evidence to the Houseof Commons Select Committee on Energy and Climate Change I assumed that wind plants
would have a residual value equal to 20% of their initial cost in real terms at the end of 15 years.
The analysis in this paper suggests that this is too favourable an assumption. Given the costs ofdecommissioning old turbines the residual value is likely to be well below 10% of their initialcost and the decision point may be at 10 rather than 15 years.

23.

The corollary of this observation is that it makes little sense to offer long term contracts for 20
years or more that guarantee prices or feed-in tariffs (FiTs) to wind operators. A contract lengthof 10 to 12 years would be sufficient to remove most of the market risk associated with investment in wind generation. In this respect the subsidy arrangements implemented in Denmark
are better designed.

The Performance of Wind Farms in the United Kingdom and Denmark
24.

17

At the same time, the offer of subsidies and/or guaranteed prices may have serious adverse
consequences for the efficiency of wind generation. Returning to the unit fixed effects measuring the performance of wind plants commissioned after 2005, only 28 out of 159 units have an
operating performance that exceeds the average for the period. Those 28 units account for 360
MW of capacity whereas the remaining 131 units account for 2,810 MW of capacity. Not only
are recent plants less efficient than the average for the whole period, but the plants which are
below-average in efficiency are typically larger than the more efficient ones and account for adisproportionate share of the recent additions to generating capacity.

25.

In mid-2012 there was approximately 4,500 MW of onshore wind capacity operating in the
UK. By 2020 it is expected that there will be at least 10,000 MW (based on proposed windfarms with planning consent) and perhaps as much 15,000 MW of wind capacity in operation.
The government is relying upon a substantial contribution from onshore wind farms towards
meeting its targets for renewable energy in 2020. To provide context, the government’s targets
for renewable energy in 2020 specify a total of 234 TWh of energy from all renewable sourcesof which 90–140 TWh is expected to come from wind and biomass electricity generation.9
The projections for biomass electricity are extremely vague and have to be reconciled withan assumed increase of 3–4 times in the amount of biomass used separately for heat. So, in
concrete terms, it is reasonable to assume that wind generation will account for at least 90 TWh
with 24–32 TWh from onshore generation and the remainder from offshore.

26.

The average load factor for onshore wind over the 10 year period from April 2002 to March2012 was 25.6%, which is influenced by the large amounts of new capacity added from 2005
onwards. If this load factor were achieved in 2020, the total amount of onshore wind capacity
required to meet the onshore generation target would be 10.7 to 14.3 GW. The average loadfactor for offshore wind installations (on an unchanged configuration basis) for the five year
period 2007–11 was 32.0%.10 If this load factor were achieved in 2020, the total amount ofoffshore wind capacity required to meet the remainder of the 90 TWh target would be 20.6
to 23.5 GW, though these estimates would fall to 18.0 to 20.5 GW if the average load factor
matched the historic average value of 36.7% for Danish offshore wind installations.

27.

The question that has to be addressed is whether these load factors are consistent with (a) theinvestment programmes that would be required to achieve the total amounts of generation
capacity implied by the government’s targets, and (b) the age profiles of the performance ofwind farms discussed in this paper. The short answer is that this is simply not possible if theinitial load factor for new wind farms continues to decline at the rate observed the past decade.
So, even as a starting point, it is necessary to assume that this underlying deterioration in windfarm performance ceases. This would be a major change in itself and it is not obvious what
factors might lead to such a result.

28.

The results illustrated below are based on a vintage model of performance that takes accountof the actual expansion of capacity up to the end of 2011 plus whatever investment in new or
replacement turbines is required to achieve the target levels of wind capacity in 2020. To highlight the full range of potential outcomes these targets are either 10 GW or 15 GW of onshore

910

Department of Energy and Climate Change – UK Renewable Energy Road Map, July 2011, Figure 2.
The equivalent average load factor for onshore wind farms was 26.4%.

18

The Performance of Wind Farms in the United Kingdom and Denmark
wind and either 18 or 24 GW of offshore wind. The levels of investment required to meet thesetargets depend upon the expected life of wind turbines. For onshore turbines, an expected lifeof 10 years is consistent with re-powering decisions over the last decade, while an expected lifeof 15 years seems to be the maximum consistent with the age-performance profile. For offshore
turbines, the analysis uses expected lives of 15 and 20 years.
Figure 6A: Projected load factors for UK onshore wind (total capacity of 10 GW in 2020)
28
26

Load factor (%)

24
22
20
18
16
14
12
10

UK – life 10 yrs

UK – life 15 yrs
2007–11

DK – life 10 yrs
2015

DK – life 15 yrs

2020

Source: Author’s estimates.

Figure 6B: Projected load factors for UK onshore wind (total capacity of 15 GW in 2020)
28
26

Load factor (%)

24
22
20
18
16
14
12
10

UK – life 10 yrs

UK – life 15 yrs
2007–11

DK – life 10 yrs
2015

DK – life 15 yrs

2020

Source: Author’s estimates.

29.

Figure 6A shows projected values of the average normalised load factors for UK onshore windfarms in 2015 and 2020 using a target capacity in 2020 equal to 10 GW plus the age-performance profiles for the UK and Denmark (DK). Since vintage effects are important in thisThe Performance of Wind Farms in the United Kingdom and Denmark

19

calculation, the profile of new or replacement investment affects the results. In this case thelevel of gross investment is assumed to be constant from 2013 onwards at either 930 or 1,220
MW per year – the range is defined by the assumed life of turbines. Achieving a target of 15
GW in 2020 (Figure 6B) would require a level of investment from 2013 onwards of either 1,540
or 1,930 MW per year. Such figures are 3–4 times the average level of investment over theperiod 2005–11, so the lower target may provide a better indication of what will happen.
30.

All of the estimates are calibrated to match the observed average load factor in 2007–11, so thatthey should be interpreted as relative rather than absolute values. Using the age-performance
profile for UK onshore wind installations the average normalised load factor is likely to fall by
about 19% from 2007–11 to 2015 and by 23–28% to 2020. If the age-performance curves for
Danish onshore installations were to apply, the reduction in the average normalised load factor
would be considerably less but there would still be a fall of up to 5% by 2020.

31.

In the medium term, the fall is greater if turbines operate for 15 years because the average ageof all turbines will be higher and thus the degradation in performance due to age will have alarger effect. By 2020 this effect reduces the average normalised load factor from 20.3% for a 10
year life to 19.5% for a 15 year life. There is a complex economic and commercial trade-off here.
To meet a target of 10 GW in 2020 it is necessary to increase the level of investment in onshore
capacity by 30% from 2013. Almost all of this will take the form of re-powering existing windfarms.11 The costs are fairly high because this will usually involve new development consents,
decommissioning the original turbines and replacing them with a smaller number of larger andmore powerful turbines.

32.

Estimates of re-powering costs are generally treated as being commercially sensitive but broad
project costs cited in specialist magazines suggest that the unit costs are likely to be at least£1,000 per kW or more than £300 million per year in aggregate. On the other hand, the increasein the amount of energy generated would be about 1.2 TWh for a 10 year turbine life rather
than a 15 year turbine life, though this does not allow for the loss of production during re-powering. Under the best circumstances the payback period may be quite short, but the best option
from a broader economic and social perspective is not obvious.

33.

Even under the best scenario 10 GW of onshore wind capacity will only generate 17.8 TWh ofelectricity in 2020, well below the lower end of the target range for onshore wind generation
specified in DECC’s road map. In fact, allowing for interactions between the age-performance
profile and investment the amount of onshore wind capacity required in 2020 to generate 24
TWh would be a minimum of 13.4 GW. At the top end of DECC’s target range, the capacity
required in 2020 to generate 32 TWh would be a minimum of 17.8 GW. Since these estimatesare based on a 10 year turbine life, the level of investment required from 2013 onwards would
be 1,650 MW per year for the bottom of the range and 2,350 MW for the top end of the range.
In the last 8 years total investment in onshore wind has only ever exceeded 600 MW in one

11

Re-powering is usually defined as the full replacement of existing turbines, whereas retrofitting covers the replacement of various mechanical or electrical components. In the data analysis, re-powering involves the creation of a
new unit, whereas retrofitting affects the performance of a continuing unit. Hence, the potential benefits of retrofitting are taken into account in constructing the age-performance curves.

20

The Performance of Wind Farms in the United Kingdom and Denmark
year (883 MW in 2008), so it seems rather unlikely that even the lower end of DECC’s range foronshore wind generation will actually be realised.
34.

Of course, this assessment would be different if UK onshore wind operators were able to matchthe Danish age-performance curve. There are many factors which differentiate the UK andDanish wind industries. The average scale of wind farms in the UK is larger, they are more
remote and there appears to be significantly greater variation between operating and potential
new sites in achieved performance. It would, therefore, require a very optimistic observer toconclude that the difference in age-performance curves between the two countries will disappear in the short or medium term.
Figure 7: Projected load factors for UK offshore wind in 2020
34
32

Load factor (%)

30
28
26
24
22
20

18 GW – life 15 yrs

18 GW – life 20 yrs
2007–1124 GW – life 15 yrs
2015

24 GW – life 20 yrs

2020

Note: Based on Danish age-performance curves. Source: Author’s estimates.

35.

Figure 7 shows the results from carrying out a similar exercise for offshore wind farms in the
UK. The only evidence on the age-performance curves for offshore installations is based upon
the Danish experience, so these have been used to construct the projections. Further, the profile
of investment assumes a progressive increase in additions to capacity from 2013 to 2016 andthen a stable level of investment from 2017 to 2020. The DECC road map involves a very largecommitment to offshore wind investment – in the range 2.5-3.5 GW of new capacity annuallyfrom 2016 onwards. As a consequence, the average age of offshore capacity in 2020 will be quite
low and the full effects of the age-performance curves will only be felt during the decade following 2020. Even so, the average normalised load factor in 2020 will be about 15% lower than for
2007–11, while by 2025 it will be about 30% below the base level.

36.

On these projections 23.2 GW of offshore capacity is the minimum necessary to generate 58
TWh of electricity from offshore wind in 2020. This requirement will increase to 29.8 GW by
2025 simply to offset the effect of the ageing of offshore generation capacity on total output.

37.

Combining the estimates for onshore and offshore wind generation the total amount of windcapacity required in 2020 to produce 90 TWh of electricity from wind will be in the range 39

The Performance of Wind Farms in the United Kingdom and Denmark21

to 41 GW once allowance is made for the observed age-performance curves for both onshore
and offshore installations. These estimates are roughly a third higher than official predictions of
28–31 GW of wind capacity in 2020.
38.

Turning the figures round gives a slightly different picture of the reality of the government’s
strategy on renewable electricity generation. A total of 30 GW of wind capacity in 2020 (12GW onshore, 18 GW offshore) will generate about 64 TWh of electricity in a normal year.
Since electricity generation from wind and biomass are expected to account for 50% of renewable energy in 2020, the consequence is that biomass is expected to account for 53 TWh. In
2011 landfill gas and sewage sludge digestion accounted for 44% of electricity from bioenergy(DUKES Tables 6.4). There are limited opportunities to expand production from these sources,
so a continuation of historic rates of growth would mean that renewable generation from othersources of bioenergy would have to increase from 7.2 TWh in 2011 to 46 TWh in 2020. There
are severe constraints on increasing the amounts of electricity generated from animal biomass,biodegradable municipal solid waste and anaerobic digestion, so it would be optimistic toassume that these will contribute more than 6-8 TWh in 2020 (up from 2.6 TWh in 2011).

39.

In practice, if the projections for renewable energy are to be believed, they rest upon an assumption that there will be a large increase in the amount of electricity that is generated from plantbiomass – either on its own or through co-firing with coal. This increase will involve increasing the amount of electricity generated in these ways from 4.6 TWh in 2011 to 38-40 TWh in
2020. Since the amounts of straw and UK-grown timber available for this purpose are strictly
limited, this will come down to the amount of wood chips that can be imported and the cost of
doing this.

40.

The historic average load factor for biomass plants is just over 60%, so about 7,500 MW of
biomass capacity will be required to supply 40 TWh of electricity. The weight of wood chips per
MWh of electricity depends upon moisture content, storage, boiler design and other factors but
an indicative range is 0.85 to 1.15 tonnes per MWh of wood chips with a moisture content of
30%. According to DECC and Forestry Commission estimates, the UK imported 26.5 million
tonnes of steam coal and 2.6 million tonnes of other wood products (including wood chips)
in 2011. It seems that the net effect of the government’s strategy will be to replace 15 million
tonnes of coal imported in 2011 by 32 to 44 million tonnes of imported wood chips. This is asomewhat strange way of increasing energy security.

Conclusion
41.

Wind power is a highly capital-intensive technology for generating electricity. Its merits rely
entirely upon a substitution of capital for fuel inputs. The same is true for hydro or tidal or wave
power. In comparison with hydro power, wind is a low quality resource because of its variability
and because it cannot be stored. So, the economic case for wind power must rest on obtaining
the most out of the wind that is available.

42.

While the decline in the achieved performance of onshore wind turbines in Denmark ismuch less than that for the UK or offshore, nonetheless the decline in expected output understandardised wind conditions over 10 years is 10% unweighted and 13% capacity weighted.
These declines accelerate after age 10 so that the reductions in performance are 17% and 20%

22

The Performance of Wind Farms in the United Kingdom and Denmark
respectively after 15 years. For UK onshore wind farms the reduction in performance due toage is much worse at 27% unweighted and 69% capacity weighted by age 10.
43.

Evidence on the performance of Danish offshore installations is both restricted and so poorthat there may be concern that the results are affected by a small number of outliers. Still, thesample contains a reasonable number of sites with at least 5 years of operating experience andthe decline in performance by age 5 is 38% unweighted and 26% capacity weighted.

44.

In addition to these results there is strong evidence that the average normalised load factor for
new onshore wind installations in the UK has fallen significantly over the period from 2000 to
2011. This is consistent with a pattern in which the most favourable sites are developed first.
Equally, it could mean that wind developers have been unable to keep up with the rate of new
investment while maintaining the quality of development and operations. For example, the site
design or selection of turbine characteristics may make less effective use of the available windresources for the sites available than was the case in the past.

45.

Whatever the reasons, the deterioration in initial performance means that the expected returns
from the expansion in wind capacity, both for investors and in terms of the reduction in CO2emissions, have been falling without a concomitant decrease in the private and social costs
that are borne by customers and the general public. Clearly this is unsatisfactory at best and it
suggests that the benefits claimed for current policies cannot be taken at face value.

The Performance of Wind Farms in the United Kingdom and Denmark

23

Appendix: Data and Methods
A.

Data for the United Kingdom
The raw data used for this study was extracted by the Renewable Energy Foundation from theRenewables and CHP Register database compiled by Ofgem.12 This information is used in theadministration of the market in Renewable Obligation Certificates (ROCs). The Renewables
Obligation is the primary mechanism by which large scale generators of renewable electricity receive subsidies, so the operators of wind farms have a very strong incentive to submit
complete and up-to-date information to the database. The data extracted covered all onshore
wind generators with at least 0.5 MW of generating capacity which are eligible for ROCs for the
10 year period April 2002 to March 2012. The key variables are the monthly output of electricity (used for the purpose of allocating ROCs) and nominal generating capacity. There are 282
reporting units in the final dataset. A reporting unit may correspond to an entire wind farm or
to separate phases of development. Complications arise when an existing wind farm is re-powered, i.e. when old wind turbines are replaced by newer and usually more powerful turbines.
The database reports this as a change in the generating capacity of the recording unit, but inthis analysis repowering is treated as the termination of the old recording unit and the creationof a new recording unit.
A considerable amount of data checking and cleaning was required before the data could
be analysed. The first step was to add the age of each reporting unit. This was calculated byreference to the month in which the turbines were commissioned. For wind farms in operationin or before June 2002 the commissioning date was obtained from various online sources –notably the thewindpower.net database of UK wind farms13 which was cross-checked against
the information provided on the websites of wind operators and other sources. For recording
units whose first data relates to dates after June 2002, the commissioning date was initiallyassumed to be the month for which data is first reported. Cross-checks were carried out for
all recording units which commenced reporting in the period July 2002 to December 2003. In
more than 80% of cases the externally-reported commissioning date is within one month of thefirst month for which data is reported. The exceptions – Bu Farm and Mablethorpe – appear tobe due to delays by small operators in reporting data to Ofgem.
In a number of cases it is clear from the data that plants were not in full operation at thetime when data was first reported to the database. There are two indicators of partial or delayedcommissioning:• For an initial series of months the calculated load factor is very low – usually below 5% –and then increases abruptly. In such cases, the data for the early months is dropped and thecommissioning date is treated as the month immediately preceding the first month with a‘normal’ load factor.14

12
13
14

https://www.renewablesandchp.ofgem.gov.uk/
See: http://www.thewindpower.net/windfarms_list_en.php .
The month in which a plant is reported as having been commissioned is not included in the analysis.

24

The Performance of Wind Farms in the United Kingdom and Denmark• The reported generating capacity for the recording unit increases after a period of months
or even years after the commencement of data reporting. All such cases were checkedagainst external sources. In some cases the increase in generating capacity represented
either a repowering or a major extension of the plant, in which case a new recording unit
was created. In other cases, primarily when the increase in generating capacity was less than
25% of the original generating capacity, the data appears to reflect delays in commissioning
individual turbines, so that the commissioning date was not amended and load factors were
calculated by reference to the reported capacity in each period. Finally, in a few cases thechanges were patently due to changes in reporting practices such as rounding total generating capacity from 9.95 MW to 10 MW. These records were corrected to record generating
capacity consistently over time.15
For a small number of recording units the reported generating capacity is reduced after commissioning, either permanently or for a number of months or years. This can lead to anomalies inwhich the calculated load factor exceeds 100%. In all cases, reductions in generating capacity
have been overridden unless there is external evidence that some of the turbines at the reporting unit have been decommissioned. In other circumstances, a reduction in rated capacity is a
symptom of performance degradation and has to be treated as such.

40
0

20

Annual load factor (%)

60

80

Figure 8: Box plots of load factors by age for UK onshore wind farms

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

Wind farm age (years)

Source: Author’s estimates.

The general principle that was applied in making adjustments to the raw data – other than thecorrection of obvious reporting discrepancies – was that any changes should have the effect ofeither (a) reducing the estimated age of the plants concerned, or (b) reducing any estimates of
15

In statistical terms, it does not matter which value for generating capacity is used, because this is captured by theunit fixed effects in the model that were estimated. In practice, the generating capacity reported for the majority ofrecords was used for all records in such cases.

The Performance of Wind Farms in the United Kingdom and Denmark

25

the decline in the plant’s load factor as it ages. As an example, consider a plant whose reported
capacity was increased from 9.9 MW to 10 MW at age 3. If this was simply a change in reporting practice, this would reduce the estimated load factor from age 3 onwards. By increasing
the initial capacity from 9.9 MW to 10 MW – or by reducing the capacity from 10 MW to 9.9
MW from age 3 onwards – this bias is removed. It is not important which adjustment is madebecause the difference between the alternative assumptions is captured by the unit fixed effect.
The numbers of separate sites and of observations per site mean that it is not possible toprovide a simple visual representation of the data. Figure 8 provides a summary by illustrating
the distributions of load factors by the age of the wind farm pooled across all years. The rangesof the load factors for each age are wide while the medians show no clear trend by age. Thus, anaïve analysis might conclude that there is nothing to investigate. However, as will be explained
below, the distributions mask crucial differences between the performance of wind farms as
they age because they do not control for the differences in location and wind availability over
time.

B.

Data for Denmark
The data for Danish wind farms used in this study comes from a database compiled by theDanish Energy Agency covering the characteristics and performance of all wind turbines from2002 up to the end of August 2012.16 The basic recording unit for the register is the individual
wind turbine, but where a number of turbines are connected to a single meter an identical
average output per turbine is recorded for all turbines in the group. The presence of what are, in
effect, repeated observations increases the noise in the data. In addition, the model that is used
for the analysis assumes that site, operator and turbine characteristics are common for all of theunits that make up a single wind farm. To address this point, separate wind farms have been
identified by grouping all turbines which have identical values for: turbine manufacturer andtype, local authority, date of commissioning and date of decommissioning (where applicable).
The register contains information on 7,569 turbines commissioned from 1977 onwards. This
includes a large number of small turbines which would not fall within the scope of the ROC
scheme in the UK. Hence, for comparability with the UK data all turbines commissioned
prior to 1992 were dropped as well as all wind farms with a generating capacity of less than 1
MW. The resulting sample covered 823 onshore wind farms and 30 offshore wind farms withmonthly load factors for various periods from January 2002 to August 2012. Given the cut-off
for wind farms commissioned prior to 1992 the maximum age for an onshore wind farm was 20
years and the maximum age for an offshore wind farm was 17 years.
The total capacity of the onshore wind farms recorded in the Danish database was 2757 MW.
The average size of an onshore wind farm in Denmark is small – only 3.3 MW as comparedwith 16.1 MW for the UK – because 84% of the sample consists of installations with between
1 and 4 turbines. The largest onshore installation has 39 turbines with a capacity of 23.4 MW
while the onshore installation with the greatest capacity has 19 turbines with a capacity of 58.4
MW. Overall, the sample of Danish onshore wind farms is older and smaller than the sampleof UK onshore wind farms, reflecting the much longer history of wind generation in Denmark.
16

http://www.ens.dk/EN-US/INFO/FACTSANDFIGURES/ENERGY_STATISTICS_AND_INDICATORS/OVERVIEWOFTHEENERGYSECTOR/REGISTEROFWINDTURBINES/Sider/Forside.aspx

26

The Performance of Wind Farms in the United Kingdom and Denmark
The larger scale of UK wind farms may account for some of the differences in performance
curves for the two countries.
The sample of offshore wind farms in Denmark is quite small with 30 installations in
total. Still, it is useful to analyse the performance of these installations since there is very littlecomparable data for the UK. The sample covers 394 turbines with an average of just over 13
turbines per installation and an average capacity of 28.8 MW. The largest installation, which
was commissioned in 2003, has 72 turbines with a total capacity of 165.6 MW. Again, offshore
installations are smaller and older in Denmark than is the current pattern in the UK. The firsttwo wind farms in the sample were commissioned in the years 1995 and 2000 but the sample
increases significantly from 2002 onwards. To avoid reliance upon a sample of 1 or 2 windfarms to determine specific coefficients for ages > 10 years, all observations with an age greaterthan 10 were omitted from the analysis.17
A somewhat different problem with the offshore wind farm data arose because the coefficients estimated using capacity weights (see below) were heavily influenced by the largest wind
farm. This has had an extremely erratic profile of performance over time with a very low averageload factor. The treatment of this wind farm is discussed in more detail in Section F below.

C.

Specification and estimation methods
As Figure 8 illustrates, it is necessary to go beyond simple summary statistics in order to assess
whether there is any systematic relationship between age and the average performance of windfarms. The performance of wind farms varies over both time and space: some months and years
have more or less wind than the long term average, while specific characteristics of wind farms– including location, type of turbine and operating regime – will influence the performance ofeach plant under identical wind conditions.
The combination of (a) site-specific characteristics which are constant over time, and (b)period-specific characteristics which are constant across wind farms can be represented bywhat statisticians call an error components model with fixed effects for each wind farm andeach time period. The dependent variable in the model consists of a sequence of load factors –denoted byfor unit i in month t – for each wind farm (the panel unit) over time. The loadfactors are calculated by dividing the total output in MWh by (24 x number of days in month x
reported generating capacity in MW) and are multiplied by 100 to convert to percentages.
The additive version of the error components model may be written as:(1)
in whichdenotes the age of plant i in period t andis some function that is either arepresentation of or an approximation to the normalised age-performance relationship. The
multiplicative version is similar except thatnatural logarithm. The

is replaced by, where ln() denotes theterms are wind farm or unit fixed effects which capture factors suchas location, type of turbine, operating regimes, etc. The

terms are period fixed effects which

capture the influence of wind conditions over the UK or Denmark as a whole as well as seasonal
maintenance and demand. Without loss of generality it may be assumed that the fixed effects are17

For the avoidance of doubt, this means that no attempt was made to estimate the effect of age on the performance ofoffshore wind farms beyond age 10, while the data for the oldest wind farms was included in the analysis up to andincluding age 10.

The Performance of Wind Farms in the United Kingdom and Denmark

normalised so that27

, i.e. all of the error components have a zero mean, while themean of the random error is zero by definition. The

terms are random errors which capture

random variations in wind conditions that are not specific to the site, turbine breakdowns, andother factors that are uncorrelated with either the site or the time period. It is assumed that themean of the random error is zero, while additional assumptions depend upon the method of
estimation that is adopted.
The model specified in equation (1) can be estimated in a variety of ways.18 A crucial issue iswhether the are or may be significantly correlated with the age terms or any other independent
regressors. If it is assumed that there is no such correlation, the model is usually referred to asa random effects model. In that case, the equation can be estimated by a variant of least squares(LS), generalised least squares (GLS), generalised methods of moments (GMM) or maximum
likelihood (ML) – all of which should be yield parameter estimates that will converge in probability to the true parameter values as the sample size increases. An alternative, but less restrictive, specification is known as the fixed effects model in which no assumption is made about
the correlation between the unit fixed effects and other regressors. The limitation of the fixed
effects model is that it cannot be used to estimate parameters for regressors that vary acrosspanel units but are constant over time for a panel unit (time-invariant regressors) – e.g. theyear in which a wind farm was commissioned, its location or its rated generating capacity. The
influence of such variables is captured by the unit fixed effects.
In order to avoid the risk of obtaining biased estimates of the age effects, the results reported
in this note are based upon estimates using the fixed effects model. The influence of time-invariant regressors is examined in a second stage by regressing the estimates of the unit fixed effects
on these variables. The simplest method of estimating the fixed effects model is known as the‘within’ estimator in which the mean value for each unit is subtracted from all observations forthat unit. For example, if

is a general polynomial of order M in A, equation (1) becomes:(2)

so that the model can be estimated by least square with the inclusion of dummy variables foreach period t. The variance-covariance matrix of the coefficients have been estimated by using(a) a robust sandwich estimator adjusted for clustering by panel unit, and (b) a bootstrap estimator with 400 repetitions. The estimates of the standard errors will be consistent even if therandom error component is serially correlated within panel units and/or has different variancesacross panel units.19 Since the number of panel units and the average number of time periods
per panel units are both large (other than for Danish offshore wind farms), the least square estimates of the parameters will be unbiased under these assumptions.
The bootstrap method is expensive to carry out but it provides a useful cross-check on
the standard errors generated by other methods. Unfortunately, the bootstrap method of18
19

See Chapter 21 of A.C. Cameron & P.K. Trivedi – Microeconometrics: Methods and Applications (Cambridge:
Cambridge University Press, 2005) for a standard textbook treatment of estimation methods for panel data models.
The estimation was carried out using the xtreg procedure in Stata Version 12. The methods of constructing the
sandwich and bootstrap estimates of the variance-covariance matrix are described in Chapters 8 & 13 of A.C.
Cameron & P.K. Trivedi – Microeconometrics using Stata (Revised Edition, College Station, Texas: Stata Press, 2010)

28

The Performance of Wind Farms in the United Kingdom and Denmark
resampling panel units with replacement can lead to degeneracy in the estimation for some of
the bootstrap samples. When the proportion of degenerate samples is significant, the statistical properties of the bootstrap standard errors are not clear. This was a particular problem forthe sample of Danish offshore installations and the robust standard errors are reported in thiscase. In practice, the robust and bootstrap standard errors are very similar, so that the methodof estimating the standard errors does not alter any general conclusions about changes in theperformance of wind farms as they age.
If standard methods of estimation are applied to the data for the UK and Denmark, theresults will generate performance curves that reflect the performance of the typical wind farm.
Since the distribution of wind farms by capacity is heavily skewed, the typical wind farm hasa much smaller capacity than the average of all wind farms. If there is any kind of relationshipbetween scale and performance, the performance curves may not provide a good guide to theaggregate performance of all wind farms. Hence, as an alternative the models have also been
estimated using weights for each wind farm that are proportional to the capacity of the windfarm normalised so that the sum of the weights is equal to the to number of observations. These
are referred to as capacity-weighted estimates and the performance curves derived from theestimates reflect the performance of the typical MW of wind capacity.

D.

Period fixed effects vs normalisation by wind speeds
In its quarterly publication Energy Trends the UK Department of Energy and Climate Change
publishes a monthly index of average wind speeds based upon data collected at 14 sites spreadover the UK. The descriptive material that accompanies the table (including an article publishedin the September 2008 issue of Energy Trends) does not provide details of how the data for the
separate sites is combined but it seems reasonable to infer that the index is simply an average of
the wind speeds for each site.
An obvious question is whether this wind index offers a satisfactory or, perhaps, better way
of normalising for wind availability than the inclusion of period fixed effects

as specified

in equation (1) above. Though it may be surprising to some, there are strong mathematicalreasons for preferring the period fixed effects. The reason is based on the fact that the relationship between wind speed and electricity output for a wind turbines is highly non-linear. The
direct relationship between wind speed and energy follows a cube power law. In addition, windturbines have cut-in speeds and are designed so that they will not produce more than theirrated capacity even if wind speed increases above the level at which capacity output is achieved.
Finally, for safety reasons turbines have a cut-out wind speed so that output is zero above thatlevel, though this does not have much effect on the analysis that follows.
Hence, the amount of electricity

generated per MW of capacity in monitoring location jin period t of month m with a steady wind speed of

may be written as:
(3)

where

is a non-linear (roughly S-shaped) function. Wind speeds vary almost continuously

but it is fairly standard to use an averaging period of 5 minutes so that t refers to time measured
in 5 minute intervals. The total output for month m will be:(4)The Performance of Wind Farms in the United Kingdom and Denmark
where

29

is the average wind speed at location j for month m. The inequality states that wecannot rely on being able to calculate total electricity output during the month as a function
φ() of average wind speed. Clearly the inequality remains if

is replaced by the wind index.
Now, consider the unobserved profile of wind speeds
month m. The monthly equivalent wind speed

over periods t = 1…T at unit i foris defined by:(5)This is the wind speed which, if maintained steadily at unit i throughout month m, would havegenerated the same level of output as generated by the actual profile of wind speeds. Averaging
the equivalent wind speeds over all units gives

andin which theare deviations from average equivalent wind speed for unit i and month m. By construction
the monthly averages of these deviations are all zero. Using a standard first order expansion, theelectricity output per MW for unit i in month m may be expressed as:
(6)
where

is the first derivative of the output function with respect to wind speed at the average

equivalent wind speed.
The point of this derivation is that the first term in equation (6) is a period fixed effect whichis common to all units in month m, while the second term is a random error that is specificto the unit and month. It follows that the specification in equation (1) may be interpreted as a
generalisation of (6). A corollary is that a statistical model in which the period fixed effects are
replaced by a function of the wind index – denoted byif– will only perform as well as (1)for all m, which requires that the wind index is a perfect measure of equiva-

lent wind speed for all wind farms in the UK. In practice, this is impossible with a fixed index
because the population of wind farms changes over time.
The relevance of this exercise is that it establishes as a matter of principle, not just empirical observation, that the specification in terms of period fixed effects is a more efficient way
of normalising performance for variations in wind availability over time than using any windindex of the kind constructed from (weighted) averages of wind speeds at a fixed set of locations. If the output function was linear in W, then it might be possible to construct a windindex that would provide a close approximation to the average equivalent wind speed, but thatis certainly not the case with the data analysed for this study. However, in the general case it issimple to show that estimating a model with some function of the wind index may yield biased
estimates of the coefficients if the period fixed effects are not included as well.20

20Wind operators tend to treat detailed data on output and local wind conditions as being commercially confidential.
It would be instructive to extend the analysis in this study by using examining daily output as a function of age, local
wind speeds and other variables if such data were available.

30

E.

The Performance of Wind Farms in the United Kingdom and Denmark

Estimation results for the UK
Alternative specifications for the period effects

have been examined. The most general spec-

ification is to estimate 120 separate coefficients, one for each month in the 10 year period. A
more restrictive specification is to assume that if period t corresponds to year s and month m,thenso that the period effect is a composite of a year effect and a month effect.

Since weather patterns are clearly seasonal, the assumption of a monthly fixed effect seems
reasonable. The addition of an annual fixed effect is less obvious but there are clear differences
over a run of years in average wind speeds and the inclusion of an annual fixed effect eliminates
potential correlations between age and year. The results are very similar for the two specifications, so the tables report the more general variant with a full set of period effects.
For each of the main models which have been estimated a comparison has been carried out
between three alternative specifications of wind availability: (a) a full set of period fixed effects,(b) the log of average wind speed, and (c) the combination of period fixed effects and the log of
average wind speed. The results are quite consistent and correspond to the implications of theanalysis in the previous section. They are:
• The between-units values of R-square, which is the key measure of goodness of fit for themodel, are substantially higher for the specification with period fixed effects than for the
one with the wind variable.
• The between-units values of R-square and estimates of the coefficients on age and otherindependent regressors are identical for the specifications with full period effects with orwithout the wind variable. In effect, the only consequence of adding the wind variable is toredistribute the explanatory power of the equation between the period fixed effects and thewind variable.
It follows that the wind variable is redundant when the period fixed effects are included in
the model, but it performs much less well than the period fixed effects when a comparison ismade between the alternative specifications with each variable or set of variables included on
their own. Since this outcome conforms with what would have been expected, the results are
not reported in detail and the wind variable is not examined in the discussion of the estimation
results.
Detailed results are reported for two versions of the age-performance relationshipfirst is a quadratic approximation –of age effects –. The– while the second includes a full set

where Ds = 1 if A=s and Ds = 0 otherwise. The quadratic specifica-tion was chosen as a smooth approximation to the ‘true’ age-performance relationship because
statistical tests showed that higher order polynomials added little to the explanatory power ofthe estimated equations while the coefficient on the quadratic term was significantly different
from zero with p < 0.01 in almost all of the models examined. The constant in the quadratic
approximation gives the normalised load factor for age = 0.
The reason for estimating the specification with a full set of age effects is that this does notforce year-to-year changes in performance to follow some smooth pattern. For example, there
are strong a priori reasons to expect that the average load factor in the first year of operation(age = 0) will be compromised by the time required to establish a satisfactory operating regime
and to sort out any initial mechanical problems. Hence, it should be expected that the second

The Performance of Wind Farms in the United Kingdom and Denmark

31

year of operation will be the year in which the design performance of a wind farm is achieved.
As a consequence age = 1 is used as the baseline category in presenting the results estimatedwith a full set of age effects as this means that the coefficients capture either out-performance(positive values) or the shortfall in performance (negative values) relative to expected design
performance.
The additive model can yield extreme or infeasible projections such as negative load factors
if it is extrapolated too far, whereas the projections from the multiplicative model must be
greater than zero. Hence, unless stated otherwise the results of estimating the multiplicative(log-linear) model provide the basis for the analysis in the remainder of the paper. There is no
straightforward way of testing statistically whether a linear or log-linear specification fits thedata better as they do not provide nested hypotheses and the different transformations mean
2that the variances of the errors cannot be compared so that their R and other summary statistics do not measure the same thing.
The results of estimating the alternative specifications with a full set of period effects areshown in Table 2 (page 41). The period effects have been normalised by adopting August
2007 as the default period, i.e. withthat

= 0. This normalisation was selected in order to ensure. As a consequence the constant terms in the equations are equal to the means of

the load factors after normalising for unit characteristics and age. These means are 24.0% for
the multiplicative specification with quadratic age effects and 24.3% for the full set of age effects.
With a very large number of degrees of freedom any coefficient with a t-ratio whose absolutevalue is greater than 2.58 is significantly different from zero at the 1% level or better. Both of thecoefficients in the quadratic specification and all of the age effects for age > 1 meet this criterion, so that there can be no doubt that there is a statistically significant deterioration in plant
performance as wind farms get older. Both variants of the relationship between load factor andage perform relatively well in capturing within-unit variance in load factors, but the variance
between units (measured by the standard deviation of ) due to site and other characteristics is
as large as the variance of the pure error term (measured by the standard deviation of ).
Figures 9A and 9B illustrates the results of using the estimated coefficients for the additiveand multiplicative models to generate the age-performance curves standardised for windconditions and site characteristics. The error bars illustrate the 95% confidence intervals forthe models with a full set of age effects. The quadratic representation of the age-performance
curves yields a close approximation to the more detailed specification with individual age
effects. Comparing the additive and multiplicative (log-linear) versions of the age-performance
curves, the latter has narrower confidence intervals for ages of 10 years or greater which is afurther reason for preferring this specification.
The normalised age-performance curves in Figures 9A and 9B were estimated by giving
an equal weight in the estimation to each wind farm irrespective of the amount of installedcapacity. These results are representative of the typical wind farm. However, to obtain resultsthat are representative of the average MW of wind generating capacity it is necessary to estimate
the model using a weight for each wind farm that is proportional to the installed generating
capacity of the plant – referred to here as capacity weights. Figure 10 compares the normalised
age-performance curves (including the 95% confidence intervals) for the multiplicative specification with full age effects estimated using equal and capacity weights.

32

The Performance of Wind Farms in the United Kingdom and Denmark
Figure 9A: Additive age-performance curves for UK onshore wind farms
30

Load factor (%)

25
20
15
10
5
0

0

1

2

3

4

5

6

-5

7

8

9

10

11

12

13

14

15

16

15

16

Wind farm age (years)
QuadraticAge effects

Source: Author’s estimates.

Figure 9B: Multiplicative age-performance curves for UK onshore wind farms
30

Load factor (%)

25
20
15
10
5
0

0

1

2

3

4

5

6

7
8
9
10
Wind farm age (years)

Quadratic

Source: Author’s estimates.

Age effects

11

12

13

14

The Performance of Wind Farms in the United Kingdom and Denmark

33

Figure 10: UK onshore age-performance curves using equal and capacity weights
30

Load factor (%)

25
20
15
10
5
0

0

1

2

3

4

5

6

7
8
9
10
Wind farm age (years)

Equal weights

11

12

13

14

15

16

Capacity weights

Source: Author’s estimates.

The decline in performance with age is considerably greater when capacity weights are used.
This implies that the performance of large wind farms declines more rapidly than that of smaller
ones. From age 3 onwards the confidence intervals for the two age-performance curves do not
overlap, so that it is unlikely that the difference between the two curves arises merely by chance.
The normalised load factor per MW of capacity falls to about 7% at age 10 and 3.5% at age 15.
With such low levels of performance it seems very unlikely that large wind farms will continue
in operation beyond 10 years of age, with a strong likelihood of re-powering at that point. The
consequence is that large scale reliance upon wind power seems likely to involve a regular – andcostly – commitment to upgrading major components of the wind turbines.
As a cross-check on the estimated models, Figures 11A and 11B show box plots of the distributions of residuals plotted against plant age for the specifications with full age effects using
equal and capacity weights respectively. The inter-quartile and Tukey adjacent values show
little variation across plant age. The numbers of observations are much greater for plant ages
at the bottom of the range (N > 2000 for ages = 0, 1 or 2 but N < 400 for ages > 13). The larger
numbers of outliers for the lowest age groups reflect differences in sample size. The standard
deviations of the residuals by age group in Figure 11A fall in a range from 0.22 to 0.42 withthe highest values for ages 0, 2, 10, 11, and 15. While the residuals are heteroskedastic, there isno systematic relationship between plant age and the residuals. The use of robust or bootstrap
standard errors means that there should be no reason to be concerned about statistical inference based on the results in Table 2 (page 41).

34

The Performance of Wind Farms in the United Kingdom and Denmark

0
-2
-4

Random component with full age effects

2

Figure 11A: Residuals by age for performance curves using equal weights

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

14

15

Wind farm age (years)

Source: Author’s estimates.

0
-2
-4

Random component with full age effects

2

Figure 11B: Residuals by age for performance curves using capacity weights

0

1

2

3

4

5

6

7

8

9

10

11

12

13

Wind farm age (years)

Source: Author’s estimates.

The unit fixed effects

for each unit i can be used as an indicator of the relative effectiveness ofdifferent wind plants. Since wind turbines use no fuel, the crucial determinant of their effectiveness is the number of hours per month or year that they operate, assuming that their output is
not constrained by demand or transmission considerations. Periods of constrained production
were minimal over the period covered by the data, so this is not a significant consideration.
Hence, a unit with a value ofat the top end of the distribution will operate for more hours

The Performance of Wind Farms in the United Kingdom and Denmark

35

in any year than the average, after adjusting for wind conditions, while a unit with a valueofat the bottom end of the distribution will operate for fewer hours per years. The factors

which influence average efficiency for particular units will include site location, the type ofwind turbines installed, and operating practices. Site location is likely to be the most importantfactor since this will determine how far the turbines can take advantage of exogenous windconditions.
Figure 12 plots the unit fixed effects – i.e. the efficiencies – of wind plants in England andScotland commissioned in or after 2000 together with trend lines over time.21 A small numberof extreme outliers, all with very low load factors, have been excluded. There is a very clear
downward trend over time in the unit fixed effects for Scotland – marked with red triangles anda red dashed trend line. The variance of performance of wind plants in Scotland commissioned
in any one year is also large. The performance of wind plants in England has also fallen overtime but more gradually.

Figure 12: Unit fixed effects by year of commissioning for England and Scotland
1.0
0.8
0.6

Unit fixed effect

0.4
0.2
0.0
-0.2
-0.4
-0.6
-0.8
-1.0
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Year of commissioning
England

ScotlandLinear (England)

Linear (Scotland)Note: The unit fixed effects are based on the log-linear specification with full age effects.
Source: Author’s estimates.

A more comprehensive analysis can be constructed by treating the 282 values of the unit fixed
effects as data observations and estimating a regression equation in which the performance ofa plant is affected by the year in which it was commissioned and its generating capacity. Table 3(page 43) shows the results of estimating regression equations to identify how the unit fixed
effects vary with the date of commissioning and capacity of wind farms. The results indicate
an annual reduction of 3.8% in the normalised load factor by date of commissioning for theequally weighted fixed effects and of 11.3% for the capacity-weighted fixed effects. These trends
21

A fall in the unit fixed effect from 0.2 to 0.1 translates to multiplying the normalised load factor by exp(0.1)/exp(0.2)= 0.905.

36

The Performance of Wind Farms in the United Kingdom and Denmark
have been reinforced by diseconomies of scale so that recently commissioned and larger windfarms have much lower normalised load factors than older and smaller wind farms. In addition,wind farms in Northern Ireland and Scotland perform better than those in England and Wales.
The average load factor for a plant with a generating capacity of 50 MW is estimated to beabout 8% lower than that for a plant with a generating capacity of 10 MW commissioned in
the same year. The combination of less favourable sites and larger units as the number of windfarms has grown has had a major impact on average load factors.
One hypothesis which merits investigation is that any performance degradation is determined by usage rather than the passage of time. This would imply that wind plants withrelatively low load factors experience less rapid degradation in performance than those withrelatively high load factors. This may be tested by including cumulative actual output normalised by generating capacity as an explanatory variable along with age effects. Since output is
not recorded for periods prior to April 2002 for wind plants that were commissioned before
that date, the analysis is restricted to the subset of plants commissioned after April 2002. The
analysis (available on request from the author) indicates that cumulative output does not haveany statistically significant influence on performance degradation, which depends upon age
alone.
The most plausible explanation is that performance degradation is linked to the cumulative
number of starts and stops for the wind turbines. This is certainly the case for thermal generating plants for which maintenance requirements and performance are strongly influenced by
the thermal stresses of start and stop cycles. As a consequence, thermal plants operate mostefficiently on base load when the number of starts and stops is minimised. The inescapablevariability of wind speeds means that the stresses on mechanical and other components due tostart and stop cycles cannot be minimised by similar strategies.

F.

Estimation results for Denmark
The results of estimating the model for Danish onshore and offshore wind farms are shownin Tables 4 (page 44) and 5 (page 46). Because the sample of offshore wind farms is fairly
small the process of bootstrapping the standard errors generates a relatively high proportionof degenerate results, especially for the specification with a full set of age effects, so clusterrobust standard errors are reported for all of the models estimated for offshore wind farms. For
both onshore and offshore wind farms the specification with full age effects yields no statisticalimprovement on the quadratic specification.
In Section B it was noted that the largest offshore wind farm appears to be an outlier and has
a very large influence on offshore age-performance curve estimated using capacity weights.22
To highlight the impact of including this observation, the normalised load factor at age = 0 is
76.8% but it falls to 0.6% at age = 10 if this observation is included. In contrast, the equivalentestimates are 32.8% at age = 0 falling to 9.9% at age = 10 when the observation is excluded.
The time profile of normalised load factors when this observation is retained in the sample isso extreme and implausible on technical grounds that the wind farm was excluded from thesample used to estimate the capacity-weighted model for offshore wind farms. An alternative
22

This wind farm suffered from some kind of major equipment failure in 2007 with the consequence that the total
output from 72 turbines was almost zero for more than 4 months.

The Performance of Wind Farms in the United Kingdom and Denmark

37

that was considered and which yields very similar results is to drop only the observations forthe year 2007, the year in which there was some kind of major failure for this wind farm. Noneof the conclusions drawn from the analysis of the capacity-weighted age-performance relationship are affected by which of these alternative adjustments is adopted.
Figure 13A: Age-performance curves for Danish onshore wind farms
25
24
Load factor (%)

23
22
21
20
19
18
17
16
15

0

1

2

3

4

5

6

7
8
9
10
Wind farm age (years)

Quadratic

11

12

13

14

15

16

Age effects

Source: Author’s estimates.

Figure 13B: Age-performance curves for Danish offshore wind farms
70

Load factor (%)

60
50
40
30
20
10
0

0

1

2

3

4
5
6
Wind farm age (years)
Quadratic

7

8

9

10

Age effects

Source: Author’s estimates.

The within R-square values are about 0.76 for all of the onshore equations and 0.74 for thecapacity-weighted offshore equations. This indicates that the equations provide a better fit forvariations in performance over time than would normally be expected for a large sample ofseparate panel units. The unit fixed effects account for about 50% of the residual variation foronshore wind farms and more than 75% of the residual variation for offshore installations. The
correlations between the unit fixed effects and other regressors are very small for onshore windfarms, which would permit the use of a random effects model in this case, but the correlations

38

The Performance of Wind Farms in the United Kingdom and Denmark
reject the random effects assumption for offshore installations. In practice, using the random
effects model for onshore wind farms generates results that are broadly similar to those reported
based on the fixed effects model.
The normalised age-performance curves for Danish wind farms using equal weights areshown in Figures 13A and 13B while the comparison between the age-performance curves
estimated using equal and capacity weights is shown in Figure 14. The confidence intervals
for the age-performance curves for offshore wind farms are large because of the limited sampleof sites but the hypothesis that the load factor remains constant as plants age – i.e. that theco­efficients on age in columns (5) to (8) of Table 4 (page 44) are all zero – is rejected for eachspecification (p ≤ 0.02). The comparison of the age-performance curves derived using equaland capacity weights in Figure 13 is based upon the quadratic specifications as these provide
simpler approximations which are not statistically different from the estimates based on themodels with the full set of age effects.
Figure 14: Danish age-performance curves using equal and capacity weights
50
45
40
Load factor (%)

35
30
25
20
15
10
5
0

0

2

4

6

8

10

12

14

16

18

20

Age (years)
OnshoreOffshore

Onshore – capacity

Offshore – capacity

Source: Author’s estimates.

The decline in the performance of onshore wind farms in Denmark is less marked than for
the UK but there is a significant decline at an average of 1% of the previous year’s load factor
for each year. The decline is much more rapid for offshore wind farms with highly significant
negative coefficient on the quadratic term. In both cases the rates of decline are larger whenwind farms are weighted by capacity in the analysis. The estimates using a full set of age effects
show that the normalised load factor in the first year of operation (age = 0) is lower than in thebaseline year with age = 1. From age = 3 to age = 16 the coefficients are increasingly negative.
The results for ages > 16 are erratic but it is likely that this reflects sample selection bias, i.e.
older wind farms with poor performance are more likely to be decommissioned early and thus
not appear in the sample.
The age-related decline in the performance of offshore wind farms is very rapid. The
normalised performance of an offshore wind farm falls from a load factor of 45% at age = 0 to

The Performance of Wind Farms in the United Kingdom and Denmark

39

12% at age = 10. The decline in the capacity-weighted load factors has a slightly different profile
with a stronger quadratic term that reflects a slower initial rate of decline in performance which
accelerates after age = 8. Overall, the average load factors for ages up to and including age =10 are very similar – about 28% – for the estimates derived using equal and capacity weights.
This average is well below the load factor immediately after commissioning. Since typical loadfactors after age = 10 are likely to be well below this average, the steady state load factor for alarge sample of offshore wind farms will be well below the figure of 35% that is often used as thebasis for policy assessments in the UK. This will have important consequences for the cost ofoffshore wind generation and its potential contribution to meeting the demand for electricity.
Analysis of the unit fixed effects for the performance equations reveals another systematic
pattern that must raise concerns about the future of the offshore wind industry. Table 5 (page46) gives the median values of capacity and the unit fixed effects for onshore and offshore
wind farms by year of commissioning. The unit fixed effects used in constructing the table arebased upon the quadratic performance equations, but similar results are obtained if the unit
fixed effects for the performance equations with a full set of age effects had been used instead.
In the case of onshore wind farms both the size of new installations and the associated unit
fixed effects have tended to increase with time. Hence, the typical onshore wind farm commissioned in 2010 was larger and had a better performance than the typical installation commissioned in 2000, though onshore wind farms remain very small by UK standards. The year 2007
appears to be an anomaly with respect to this general trend but it should be noted that themedian capacity of new plants commissioned in 2007 was only 1.5 MW, well below the mediansfor other years in the period 2005-10 The trend in the typical load factor trend over time isconfirmed by estimating regressions for the unit fixed effects with capacity and year of commissioning as regressors. In Denmark larger wind farms tend to have higher load factors than small
wind farms. Even after allowing for that trend, the normalised load factor for new wind farms
has been increasing at about 1% per year over time. This is consistent with the normal patternof technical progress and learning which one would expect to observe for a (relatively) matureindustry.
The pattern is very different for offshore wind farms. In this case the results of the regressions show no significant relationship between capacity and the unit fixed effects combinedwith a very substantial deterioration (at rates of 8–10% per year) in the unit fixed effects. Even
allowing for the small sample of offshore wind farms the trends are so strong that the probabilities of obtaining the results by chance are well below 0.1%. Thus, the median values of theunit fixed effects for offshore wind farms shown in Table 5 (page 46) illustrate a sharp andsystematic decline in the performance of new offshore wind farms in Denmark. If this were tocontinue and/or to be reproduced in other countries where offshore wind is being developed,
then there can be no prospect that offshore wind farms will ever be financially viable at reasonable prices for electricity.

40

The Performance of Wind Farms in the United Kingdom and Denmark
Table 1: Average load factors by year and country (%)
OnshoreEnglandOffshore
Northern
Ireland

Scotland

Wales

Denmark

Denmark

2002

22.2

26.4

21.5

21.8

26.1

2003

24.1

28.6

24.9

20.1

30.1

2004

25.0

27.7

25.8

22.8

33.3

2005

25.0

30.8

27.1

24.8

22.1

39.4

2006

23.9

29.4

24.5

26.5

20.2

37.1

2007

24.2

26.3

26.9

25.8

24.7

37.1

2008

24.4

29.4

23.9

29.9

23.1

41.2

2009

24.1

30.0

27.2

25.5

21.3

38.0

2010

20.8

23.5

21.6

18.9

21.0

39.8

2011

26.6

30.7

27.9

27.0

25.3

44.9

Source: Author’s estimates. See text for source of data.
Note: The average load factors are the sums of total electricity output by country and year divided by
the average total nameplate capacity in the country multiplied by number of hours in the year. For new
installations, the first full month after the date of commissioning is excluded. Total nameplate capacity is
calculated monthly and averaged to give a monthly average of total nameplate capacity.

The Performance of Wind Farms in the United Kingdom and Denmark

41

Table 2: Estimation results for UK onshore wind farms
Unweighted

Weighted by capacity

Linear(1)
Age
Age ^ 2

Log-Linear
(2)

(3)

Linear(4)(5)

Log-Linear
(6)

(7)

-0.74***-0.036***-1.31***-0.092***(0.21)(0.010)(0.31)(0.020)-0.017***-0.0010***-0.043***-0.0026***(0.005)(0.0003)(0.011)(0.0007)(8)

Age effects
0
2
3
4
5
6
7
8
9
10
11
12
13
14
15

-0.89**-0.050***-1.85*-0.103(0.34)(0.015)(0.90)(0.055)-1.04**-0.066***-1.87***-0.127***(0.32)(0.018)(0.36)(0.025)-1.89***-0.093***-4.01***-0.269***(0.51)(0.024)(0.74)(0.062)-2.86***-0.140***-6.52***-0.446***(0.75)(0.036)(1.21)(0.102)-4.23***-0.200***-9.00***-0.582***(0.96)(0.047)(1.68)(0.135)-4.52***-0.231***-9.98***-0.676***(1.19)(0.057)(2.03)(0.158)-6.45***-0.308***-13.02***-0.850***(1.41)(0.069)(2.39)(0.186)-7.61***-0.394***-15.50***-1.033***(1.60)(0.082)(2.72)(0.218)-8.89***-0.465***-17.58***-1.161***(1.88)(0.097)(3.11)(0.244)-10.45***-0.574***-19.75***-1.310***(2.12)(0.117)(3.39)(0.265)-11.14***-0.591***-21.67***-1.422***(2.40)(0.120)(3.69)(0.289)-12.54***-0.632***-24.55***-1.598***(2.66)(0.131)(4.16)(0.330)-12.84***-0.666***-25.42***-1.701***(2.83)(0.140)(4.57)(0.356)-13.37***-0.708***-27.87***-1.855***(3.04)(0.148)(4.78)(0.373)-14.45***-0.752***-28.78***-1.910***(3.26)(0.159)(5.14)(0.395)

42

The Performance of Wind Farms in the United Kingdom and Denmark

16
17
18
19
Constant-16.27***-0.825***-32.87***-2.155***(3.42)(0.171)(5.63)(0.447)-16.95***-0.911***-35.37***-2.372***(3.71)(0.191)(5.98)(0.473)-18.99***-0.982***-38.00***-2.482***(3.96)(0.195)(6.30)(0.493)-22.40***-1.156***-46.05***-3.011***(4.63)(0.276)(7.40)(0.582)24.90***

24.93***

3.180***

3.190***

23.94***

23.88***

3.206***

3.192***(0.99)(0.88)(0.045)(0.038)(0.74)(0.696)(0.052)(0.052)

Observations

18224

18224

18224

18224

18224

18224

18224

18224

No of units

282

282

282

282

282

282

282

282

R-squareWithin

0.653

0.657

0.549

0.555

0.687

0.700

0.585

0.607

Source: Author’s estimates. See text for source of data.
Notes: (a) Standard errors in parentheses. Probabilities are measured in stars:* p < 0.05, ** p < 0.01, *** p < 0.001.
(b) Bootstrap standard errors for models (1)–(4); cluster- robust standard errors for models (5)-(8).
(c) The equations are estimated with a full set of period effects in addition to the variables reported. The
default (missing categories) are age = 1 and period = August 2007. The constant term corresponds to theestimate of the load factor or ln(load factor) for a unit of age=1 in August 2007.

The Performance of Wind Farms in the United Kingdom and Denmark

43

Table 3: Equations for trends in unit fixed effects

Year of commissioning – 2000
Capacity (MW)Northern Ireland
Scotland
Wales
Constant

Observations
R-squareQuadraticAge effects

Quadratic –capacityAge effects –capacity

(1)

(2)

(3)

(4)

-0.038***-0.039***-0.117***-0.121***(0.003)(0.003)(0.003)(0.003)-0.0021***-0.0021***-0.0020***-0.0020***(0.0005)(0.0005)(0.0005)(0.0005)

0.198***

0.192***

0.207***

0.199***(0.040)(0.041)(0.041)(0.042)0.207***

0.206***

0.202***

0.202***(0.036)(0.035)(0.036)(0.040)0.081

0.0824*0.0844*0.0882*(0.042)(0.042)(0.040)(0.042)0.022

0.02730.475***

0.504***(0.029)(0.032)(0.030)(0.032)

282

282

282

282

0.413

0.423

0.848

Source: Author’s estimates.
Notes: (a) Standard errors in parentheses. Probabilities are measured in stars:* p < 0.05, ** p < 0.01, *** p < 0.001.
(b) England is the baseline country in the model.
(c) Bootstrap standard errors.

0.857

44

The Performance of Wind Farms in the United Kingdom and Denmark
Table 4: Estimation results for Danish wind farms

Regressors

Dependent variable: ln(load factor)
Onshore wind farms
Unweighted(1)

Age
Age ^ 2

(2)

Offshore wind farms
Weighted by capacity

Unweighted

(3)

(5)

(4)

Weighted by capacity
(6)

(7)

-0.010*-0.013**-0.062-0.022(0.004)(0.005)(0.077)(0.020)-0.0002-0.0002-0.0067**-0.0075**(0.0001)(0.0002)(0.0019)(0.0022)(8)

Age in years
0
2
3
4
5
6
7
8
9
10
11
12
13
14

-0.041***-0.036**0.036

0.0155(0.011)(0.012)(0.090)(0.025)-0.014-0.020*-0.197*-0.0600(0.009)(0.010)(0.091)(0.032)-0.031**-0.043***-0.1270.0784(0.012)(0.013)(0.200)(0.061)-0.040**-0.053**-0.312-0.224(0.015)(0.016)(0.307)(0.112)-0.052**-0.068**-0.374-0.359**(0.019)(0.021)(0.308)(0.118)-0.069**-0.088***-0.432-0.432*(0.022)(0.026)(0.380)(0.182)-0.076**-0.097**-0.700-0.681**(0.027)(0.031)(0.451)(0.192)-0.087**-0.115**-0.838-0.734**(0.031)(0.035)(0.511)(0.208)-0.100**-0.131**-0.983-0.828**(0.035)(0.041)(0.590)(0.254)-0.115**-0.151**-1.313-1.183***(0.040)(0.046)(0.676)(0.270)-0.131**-0.170***(0.044)(0.051)-0.144**-0.184**(0.048)(0.057)-0.154**-0.201**(0.053)(0.062)-0.160**-0.210**(0.057)(0.066)

The Performance of Wind Farms in the United Kingdom and Denmark

Regressors

Dependent variable: ln(load factor)
Onshore wind farms
Unweighted
(1)

15
16
17
18
19
20
Constant

45(2)

Offshore wind farms
Weighted by capacity

Unweighted

(3)

(5)

(4)

-0.184**-0.228**(0.064)(0.073)-0.217**-0.231*(0.083)(0.090)-0.157*-0.179(0.073)(0.097)-0.188*-0.256**(0.083)(0.095)-0.083-0.143(0.082)(0.095)-0.161-0.246*(0.084)(0.101)

Weighted by capacity
(6)

(7)

(8)

3.073***

3.074***

3.154***

3.160***

3.798***

3.701***

3.668***

3.475***(0.048)(0.045)(0.053)(0.050)(0.179)(0.158)-0.032-0.056

Observations 93929

93929

93929

93929

2201

2201

2091

2091

No of units

823

823

823

30

30

29

29

0.345

0.350

0.738

0.751

R-squareWithin

823
0.766

0.766

0.762

0.762

Source: Author’s estimates. See text for source of data.
Notes: (a) Standard errors in parentheses. Probabilities are measured in stars:* p < 0.05, ** p < 0.01, *** p < 0.001.
(b) Bootstrap standard errors for models (1)-(2); cluster- robust standard errors for models (3)–(8).

46

The Performance of Wind Farms in the United Kingdom and Denmark
Table 5: Performance by year of commissioning for Danish wind farms
YearOnshoreCapacity(MW)

Offshore
Unit fixed effects
Unweighted

Capacity
weighted

2000

2.3

-0.055-0.0762001

2.6-0.151-0.177

2002

2.7

0.036

2003

2.3

2004

Capacity(MW)

Unit fixed effects
Unweighted

Capacity
weighted

40.0

0.001

-0.035

0.008

22.0

0.196

0.215

0.185

0.153

4.0

-0.059

0.082

3.0

0.047

0.012

2005

3.6

0.278

0.241

2006

5.6

0.256

0.216

2007

1.5

-0.451-0.494

2008

4.0

0.263

0.216

2009

4.6

0.326

0.274

23.2

-0.546-0.305

2010

7.2

0.406

0.351

39.1

-0.727-0.466

2011

6.5

0.050

-0.0083.6-0.979-0.673

Note: Median values of capacity and unit fixed effects. Source: Author’s estimates. See text for source of data.

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