Wind Industry Continues to Surge

Wind Industry Continues to Surge

May 26 - Power Engineering

Public policy and transmission access issues dominated the program as the wind industry showcased its march into the energy mainstream to 3,500 attendees and 225 exhibitors at Global Windpower 2004 in Chicago in late March. Randall Swisher, who heads the American Wind Energy Association (AWEA), organizer of the event, began the proceedings with an overview of wind's expansion, as well as its ambitious goals. The U.S., he said, had another great year, reaching 6,374 MW in total installed capacity. AWEA predicts aver- age annual growth of 2,000 MW through 2010. This will then accelerate to about 8,000 MW per year. By 2020, he envisions 100,000 MW coming from wind, or 6% of the total U.S. supply.

"One hundred and forty GW of capacity by 2020 is well within the bounds of reality," said Swisher, who couldn't resist a dig at the Energy Information Administration's (EIA) prediction of a mere 16 GW by 2010. EIA's figures anticipate only a tiny rate of wind expansion through 2010, and actually forecast less wind capacity to be added in the U.S. over the next six years than was added last year alone.

INCENTIVE UNCERTAINTY

Legislation will greatly influence the fate of AWEA's ambitious goal. The production tax credit (PTC) for wind remains tied up in the Energy Bill. Efforts to push through a separate PTC were regarded as largely futile, so the pending nature of energy legislation could well create a major slowdown in 2004 wind development. According to Swisher, inconsistent policy is the reason for a roller-coaster wind market in the U.S. He believes that wind energy still merits a PTC to put the industry on a level footing with the rest of the energy sector, which enjoys various government subsidies. But he doesn't believe the PTC will be there in 20 years - by that time, wind energy's economics will be fully competitive with those of mainstream energy sources.

In the meantime, wind energy continues to make headway on a state- by-state basis. Fourteen states have passed renewable portfolio standard (RPS) legislation. Wherever such a legal foundation is established, wind flourishes. In some cases, notably Texas, a wind boom has been experienced independent of any PTC.

"Our strategy is diversity in the supply and fuels serving the U.S. economy," said Kyle McSlarrow, U.S. Department of Energy Deputy Secretary. "Wind, for instance, appears to be a good match with gas as a means of easing pressure on the natural gas supply." In some areas, he said, wind costs less than gas. Further, due to fluctuations in natural gas prices, wind has a built-in hedge value of 0.5 cents/kWh. That's one of the reasons the DOE is funding a lot of R&D in wind and other renewables. McSlarrow announced 21 new partnerships with the private sector aimed at expanding wind's potential. These are primarily aimed at technology to make low wind sites viable for large-scale production.

McSlarrow also promoted wind in the context of the envisioned hydrogen economy. While hydrogen is theoretically available in an almost limitless supply, it's the harvesting of it that poses the problem. One way to produce hydrogen is by splitting water through electrolysis. Wind farms could potentially be erected in the vicinity of hydrogen plants to power the electrolysis process. This view is validated by a National Academy of Sciences study that emphasizes the importance of wind in hydrogen's future.

ACCESS TO THE GRID

Transmission and access issues also held center stage during the conference. "The electric industry operating rules are a barrier to wind," said Swisher. "However, you have to bear in mind that the entire electrical industry is transmission constrained and we need to work with the industry to develop policies and incentives to encourage transmission build out."

PPM Energy, a subsidiary of ScottishPower, is planning to add 1,400 MW of wind power over the next decade, but sees regulatory and transmission barriers to achieving that goal. "A federal renewable portfolio standard (RPS) is important, as is the urgent need for more transmission," said Robert Klein, Group Energy Risk Director for ScottishPower. "We can see 20,000 MW of wind being added in the west over next ten years, but that requires a major transmission expansion."

Klein believes RTOs are a big part of the solution through pricing and market policies that resolve transmission and access challenges. Mike O'Sullivan, FPL Energy's vice president of development, agreed. "There is an obvious lack of transmission and that alone can make an otherwise great wind site uneco- nomical," he said.

FPL Energy has 2,791 MW of wind assets around the world, and intends to expand that to more than 6,500 MW. He attributes the hundreds of millions of dollars FPL Energy has invested in wind to date as being due to banks being more comfortable deal- ing with a mainstream utility rather than a developer who focuses solely on wind.

O'Sullivan did, however, question the validity of some of the projections announced at the show, such as the European Wind Energy Association's goal of 12% of world's electricity by 2020. To his thinking, that is somewhat unrealistic, as coal and nuclear power are not going to go away. "The U.S. energy demand cannot be met by wind alone, but wind can supplement it," said O'Sullivan. "I believe there is a place for wind in everybody's portfolio."