U.S. Wind Power Looking for a Development Climate Regulated for a Variable Resource

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). The wind power generating industry is at something of a crossroads. Because of the variable nature of the power source and the need to have price and grid conventions tailored to windpower's special needs the environment for project planning is not as dynamic as it could be. In addition, federal production tax credits (PTCs) expire at the end of the year. These are critical to the industry. As the credits can either be called support/incentives or subsidies, positions will be taken on the renewal of tax credits in the larger energy market. The federal decision will also directly affect the climate in which ongoing local and state tax credits and incentives are voted.

During the recent Windpower 2003 conference in Austin, Texas, the executive director of the American Wind Energy Association, Randall Swisher said that billions of dollars were waiting to pour into the wind power industry until there are clear, long term signals about federal policy. Swisher said that Vestas, the world's largest wind turbine manufacturer, had stalled a decision to establish a new factory in the Pacific Northwest because of uncertainties concerning the extension of the wind power production tax credit (PTC, a 1.5 cent per kWh tax credit (adjusted annually for inflation) for wind turbine generated electricity).

FERC commissioners at the conference identified with Swisher's comments and noted that FERC's pending standard market design (SMD) proposal, if implemented, could help the industry. Commissioner William Massey said that wind energy had been championing an independent grid management platform for years. He said that renewable sources in general, and wind resources in particular, are on FERC's 'radar screen'.

Commissioner Nora Brownell said that the stability that the introduction of 'consistent and fair rules' and the transparency in independent oversight would enhance access to capital which, she said, has been an enormous problem for anybody in that energy sector, but particularly for those who are introducing new concepts and new technologies.

Swisher noted that transmission tariffs implemented under FERC Order 888 that are in effect in many parts of the country on many systems do not have sufficient flexibility in them to accommodate a variable resource like wind. He said that FERC's SMD would fix the problem.

Despite wind industry development problems highlighted at the conference new projects are being contracted. FPL Energy (NYSE:FPL) (Juno Beach, Florida) has projects going ahead that will add around 600MW of new wind generation capacity to the US national total by the end of 2003. The company, that has announced the purchase of 315 x 1.5MW wind turbines from GE (NYSE:GE) (Fairfield, Connecticut) added 324MW wind generation output in the U.S. in 2003.

The new projects include a 21MW plant in North Dakota for the Otter Tail Power Company that should be in commercial operation by the end of the year. A 51MW plant for the Oklahoma Municipal Power Authority that will also be in operation by the end of the year. A 63MW facility in Clinton, Pennsylvania, from which the power will be supplied to Exelon Generating Company (NYSE:EXC) (Chicago, Illinois), by the end of the year.

At the larger end of windpower facilities, FPL is constructing the world's third largest windfarm at the New Mexico Wind Energy Center. The 204MW of power generated by the 136 turbines will be purchased from the center by PNM (given the AWEA Utility Leadership Award for the project), the principal subsidiary of PNM Resources (NYSE:PNM) (Albuquerque, New Mexico) an energy holding company based in Albuquerque. PNM estimates the economic benefit for the area will be more than $40 million over 25 years. FPL is installing another large facility with 81 x 1.8 Vestas (COPENHAGEN:VWS) (Copenhagen, Denmark) turbines in Solano County, California for the High Winds project. PPM Energy has contracted to purchase the entire output of the 146MW project.

The AWAEA has been encouraged by the GE purchase of the Enron wind turbine business. GE has done more than $2 billion of wind energy business in the past year. John Rice of GE Power Systems said that expectations from the division have been met or exceeded. He said that the decision to purchase the Enron entity was an opportunity which arose after GE had been studying windpower for three years. The purchase motivations were; the cost of electricity generated from windpower dropped to the point where it was competitive with other sources; the business could benefit from technology from other GE businesses; and customers were increasingly interested in renewable energy.

The fact that thirteen states in the US now require utilities to include renewable energy in their energy mix is also a plus factor for market entrants, as is the accumulation of brownie points for doing good, green things.

AWEA is covering all bases as it positions the industry for future, faster development. In a report by the Renewable Energy Policy Project (REPP) presented at Windpower 2003 it was claimed that the first study to systematically analyze property values data has been conducted and the results published. This is seen as rebutting the charge by windfarm opponents that property values in view of the turbines will be lowered.

REPP looked at projects with a generating capacity of 10MW or more that were installed in the US from 1998 to 2001. Analyzing data from projects where there was enough input to support statistical analysis the study found that "for the great majority of projects the property values actually rose more quickly in the viewshed than they did in the comparable community. Moreover values increased faster in the viewshed after the projects came online than they did before."

In a qualification to the report, the research group noted that values may have risen because of factors other than wind.

There is no doubt the report will be studied and analyzed and reacted to with great intensity by all sides in the great windfarm debate.