The market for small wind systems in the United States, often defined as systems less than or equal to 100 kW that produce power on the customer side of the meter, is small but growing steadily. The installed capacity of domestic small wind systems in 2002 was reportedly 15-18 MW, though the market is estimated to be growing by as much as 40 percent annually (AWEA, 2002). This growth is driven in part by recent technology advancements and cost improvements and, perhaps more importantly, by favorable policy incentives targeted at small wind systems that are offered in several states. Currently, over half of all states have incentive policies for which residential small wind installations are eligible. These incentives range from low-interest loan programs and various forms of tax advantages to cash rebates that cover as much as 60 percent of the total system cost for turbines 10 kW or smaller installed in residential applications. Most of these incentives were developed to support a range of emerging renewable technologies (most notably photovoltaic systems), and were therefore not specifically designed with small wind systems in mind. As such, the question remains as to which incentive types provide the greatest benefit to small wind systems, and how states might appropriately set the level and type of incentives in the future. Furthermore, given differences in incentive types and levels across states, as well as variations in retail electricity rates and other relevant factors, it is not immediately obvious which states offer the most promising markets for small wind turbine manufacturers and installers, as well as potential residential system owners. This paper presents results from a Berkeley Lab analysis of the impact of existing and proposed state and federal incentives on the economics of grid-connected, residential small wind systems. Berkeley Lab has designed the Small Wind Analysis Tool (SWAT) to compare system economics under current incentive structures across all 50 states. SWAT reports three metrics to characterize residential wind economics in each state and wind resource class: - Break-Even Turnkey Cost (BTC): The BTC is defined as the aggregate installed system cost that would balance total customer payments and revenue over the life of the system, allowing the customer to "break-even" while earning a specified rate of return on the small wind "investment." - Simple Payback (SP): The SP is the number of years it takes a customer to recoup a cash payment for a wind system and all associated costs, assuming zero discount on future revenue and payments (i.e., ignoring the time value of money). - Levelized Cost of Energy (LCOE): The LCOE is the levelized cost of generating a kWh of electricity over the lifetime of the system, and is calculated assuming a cash purchase for the small wind system and a 5.5 percent real discount rate. This paper presents SWAT results for a 10 kW wind turbine and turbine power production is based on a Bergey Excel system. These results are not directly applicable to turbines with different power curves and rated outputs, especially given the fact that many state incentives are set as a fixed dollar amount, and the dollar per Watt amount will vary based on the total rated turbine capacity.

Although small wind turbine technology and economics have improved in recent years, the small wind market in the United States continues to be driven in large part by state incentives, such as cash rebates, favorable loan programs, and tax credits. This paper examines the state-by-state economic attractiveness of small residential wind systems. Economic attractiveness is evaluated primarily using the break-even turnkey cost (BTC) of a residential wind system as the figure of merit. The BTC is defined here as the aggregate installed cost of a small wind system that could be supported such that the system owner would break even (and receive a specified return on investment) over the life of the turbine, taking into account current available incentives, the wind resource, and the retail electricity rate offset by on-site generation. Based on the analysis presented in this paper, we conclude that: (1) the economics of residential, grid-connected small wind systems is highly variable by state and wind resource class, (2) significant cost reductions will be necessary to stimulate widespread market acceptance absent significant changes in the level of policy support, and (3) a number of policies could help stimulate the market, but state cash incentives currently have the most significant impact, and will be a critical element of continued growth in this market.