Swept Up by Wind

 

April 14, 2008

Ken Silverstein, EnergyBiz Insider
Editor-in-Chief

Wind power is drawing some fancy suitors. The latest is Germany's E.ON, which just revved up a 335 megawatt plant in Texas. It's part of E.ON's business strategy, which considers North America to be the best market for renewable energy in the world.

Wind's allure is tied to its environmentally-friendly image -- a picture that is now enhanced because of global desires to curb the use of carbon-producing fossil fuels. With U.S. lawmakers and all the presidential candidates now talking about the enactment of legislation to deal with this, wind power's stock is rising. The point is underscored by the fact that the U.S. is now the world's second largest magnet for wind-powered investment.

According to Ernst & Young's Renewable Energy Country Attractiveness Indices, the U.S. posts the highest score of 72. It is followed by India, Spain and the UK, which score 64 each. The U.S. pulled in $9 billion last year and may collect another $65 billion by 2015, adds Emerging Energy Research. Denmark ranks first.

Foreign conglomerates are the most active with Denmark's Vestas, Spain's Iberdrola and Portugal's Energias helping to lead the charge. E.ON, which is the world's seventh biggest producer of wind power, says it will spend $3 billion to $4 billion on wind facilities here. "We believe we have an excellent platform in place to grow into one of the most attractive renewable energy markets in the world," says Frank Mastiauz, head of E.ON's climate and renewables unit.

The company entered the North American market in October 2007 with the purchase of Airtricity's domestic business. At the time, it had 215 megawatts of operational wind power plants and 370 megawatts under construction in this part of the world. Since the acquisition, E.ON has completed those projects and started the construction of four additional facilities that will produce 704 megawatts. E.ON says that it will also bring down its costs of production by growing its business volume.

And no where is that potential greater than in Texas, which now gets 3 percent of electricity from wind and which tops the nation in terms of wind production. Hundreds of millions are being invested there as the wind industry now supplies more than 4,300 megawatts and has another 1,200 megawatts under construction.

And it's only going to get bigger: Oil tycoon T. Boone Pickens is planning to plow $10 billion into a 4,000 megawatt facility to be located in the Texas Panhandle. Construction could start by 2010. Meantime, TXU and Shell are talking about building a 3,000 megawatt wind farm.

"I like wind because it's renewable and it's clean and you know you are not going to be dealing with a production decline curve," Pickens told the New York Times. "Decline curves finally wore me out in the oil business."

Tremendous Potential

Wind power now supplies almost 17,000 megawatts in the United States. It increased by 45 percent last year and is expected to perform just as well in the current year, although it still only provides about one percent of the electricity generated here. Two decades from now some say it will supply 20 percent and others say it will be around 5 percent.

To be sure, there are risks associated with constructing wind power. The most notable is that the wind does not blow on demand and that back-up fossil fuel sources must still be made available. Another key obstacle is that the nation's transmission system can't support those wind projects built in rural areas that are meant to service densely populated urban regions. And like other power projects, permitting issues are still rigorous and can weigh down the expansion of green energy.

Even E.ON's outlook is tempered: "To guarantee reliable electricity supplies when wind farms produce little or no power during periods of calm or storm-related shutdowns, traditional power station capacities must be available as a reserve. This means that wind farms can only replace traditional power station capacities to a limited degree."

The good news is that turbines are getting better and cheaper while storage technologies to allow wind to be used during calm days are in the offing. Federal tax breaks and state mandates, meantime, are offsetting some of the initial start-up costs, although developers complain of uncertain federal tax laws.

For its part, Texas has both a renewable portfolio standard and a favorable regulatory climate. The Texas Public Utility Commission, for instance, has given its okay to build a transmission system that could support 25,000 megawatts of wind power by 2012. Another state, Iowa, is producing 5.5 percent of its electricity from wind.

It has all enabled more development. The demand for wind energy components such as turbines is exceeding the supplies, which has driven up costs. In time, though, manufacturers will catch up and increase their production rates. Regardless, experts say that wind is competitive with natural gas at current rates and with newer coal plants that are required to use the best available technologies.

"The tremendous growth of our wind business is evidence that wind energy will continue to contribute toward a more diverse mix of environmentally compatible power generation sources," says Randy Zwirn, CEO of Siemens Power Generation. "In fact, we are growing faster than the global market, not only in North America but also in other important markets in Europe and Asia."

Indeed, blue chip enterprises have been swept up by the global green energy drive. It's evidenced by the billions being spent and the unrelenting demand. It's a healthy development. And while the surge will not supplant fossil fuels, it will help improve air quality and facilitate the growth of the new energy economy.

 

 

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