out such technological changes. As discussed in section 4, a number of coun-
tries have a large potential for wind based energy production. Hence, techno-
logical improvements also accelerate the switch points abroad. Consequently,
from the point of view of the country that makes the first move, this will make
the investment in new technology more likely to be profitable.5
2.3 Energy price estimates
As demonstrated in Figure 2 above, we based our analysis on a static picture of
the technological levels. Figure 3 illustrates the estimated average windmill
price per kW over time.6 Although prices of energy produced by windmills
have been falling due to the ”learning by doing” effect, as discussed in Hansen
et al. (2002),7 the simple projection of trend presented in figure 3 shows that the
potential for further cost reductions are likely to be small. A picture that is con-
sistent with the more rigorous analysis in Hansen et al. (2002). Hence, the most
likely reason why wind-energy will be competitive will be its environmental
advantage.
5 Note, however, that first mover advantages are not likely to be everlasting, since other tech-
nologies might also become competitive, see, e.g., figure 5.
6 The technological development has been stimulated both by the process and product innova-
tions as the capacity of the individual mill has increased; see Madsen et al. (2002).
7 The technological development following learning-by-doing within the wind turbine industry is
impressive: ‘Wind turbines have grown dramatically in size and performance during the past 15
years. The early machines of 25 kW with 10.6-metre rotor diameter can still be found in Den-
mark, but today the most widely sold turbines have a rated power output of 750-1000 kW and a
rotor diameter of 48-54 metres. The largest machines commercially available are 2,500 kW
machines with 80-metre rotor diameter placed on 70-80 metre towers. Each 2,500 kW machine
produces more energy than 200 old 1980 vintage machines. Productivity thus has increased
rapidly.’ (Krohn, 2001). The crucial parameter is the diameter of the turbine - the longer the
blades, the larger the areas swept by the turbine and the greater the energy output. Therefore,
the trend is towards larger machines.
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