Wind energy was the second largest source of new power after natural gas in the United States last year, but it still only represented a tiny portion of the overall domestic power supply. Still, with carbon-based fuels perhaps becoming an "increasing problem," executives with several top utilities last week said they expect their wind energy businesses to continue to grow, backed by growing support for the clean -- and virtually infinite -- renewable.
"Renewables and wind are going to be a very important part of our future," said Dennis Welch, senior vice president of environment, safety and health for American Electric Power (AEP). Speaking at the American Wind Energy Association (AWEA) WINDPOWER 2006 conference in Pittsburgh last Tuesday, Welch said AEP believes "wind is gaining a much wider acceptance in the market and with regulators...This is an opportune time to take advantage of it."
Frank Prager, Xcel Energy Inc.'s managing director of environmental policy, called wind "a valuable resource." Xcel already is the top purchaser of wind-generated electricity in the United States, and Prager thinks the company's portfolio will continue to grow. "For Xcel, wind provides us with a hedge for natural gas prices, and it offers benefits for emission control requirements."
Exelon Corp.'s Sharon Hillman, vice president for resource planning, said her utility supports wind power also as part of a long-range plan to "develop and sustain environmental leadership." But she also sees carbon-based fuels as "an increasing issue in industry," which needs to be watched by utilities across the country. But regardless, Exelon's Peco utility already is garnering strong support for wind power from its customers. Peco's retail choice program, which allows customers to choose wind for a premium price, "is one of the most rapidly growing retail choice programs in the country," Hillman noted.
In general, the cost of wind-generated power is stable; historically, costs have not fluctuated on volatile commodity prices. But the costs to build a wind facility are huge: $1-1.3 million per generated MW. A gas-fired facility costs about $700,000 per generated MW.
To obtain a return on wind-power generation, utilities use premium pricing. But even at higher prices, environmental benefits and growing consumer enthusiasm have created a "real regional market," said Audrey Zibelman, COO of PJM Interconnection LLC. "When we are able to able to eliminate impediments to wind-power development, there are real benefits to the consumers and real cost savings for the utilities," she said.
Both public policy and industry challenges lie ahead for the fledgling industry.
On a federal level, renewing the industry's production tax credit (PTC) is imperative, said panelists. The PTC, first enacted in the early 1990s, provides a 1.8 cent/kWh credit, adjusted for inflation, for electricity produced from a wind farm during the first 10 years of operation. The PTC originally expired in 1999, but it has been periodically extended and is due for extension again in 2007.
"As a facility, we need to have some consistency as to what we can cover in the future," Xcel's Prager said. "We can't work in uncertainty."
Welch thinks the PTC is likely to be reenacted. However, if it isn't, Welch still believes the wind power industry will continue to grow.
"We have to kind of look at what happens either way," said Welch. "But with or without a production tax credit, we will continue in our renewables efforts. But at what level? As we all have said, we need some long-range planning to ensure our costs...to move things forward on a state or federal level."
Exelon's Hillman agreed. "Wind is a big and growing part of our portfolio. It's increasingly important, but we have to factor in the price issue." Still, while the PTC is important, "a big if not bigger issue that will impact all renewables, including wind, is what is going to be the nation's carbon policy? Wind is a portion of our portfolio, but we also have to consider what are its costs and its competitiveness with other types of renewables... But we also have to figure out what is the presumption about carbon in the future. It could have a huge impact on portfolios."
To help meet some of the challenges, the AWEA, the Department of Energy (DOE) and National Renewable Energy Laboratory are working together to develop an action plan focused on eventually providing up to 20% of the nation's electricity from wind energy. With input from key stakeholders, including environmental groups and utilities, the plan is expected to be completed and released at the June 2007 WINDPOWER conference in Los Angeles.
"Coupled with modern technology, wind energy displaces the need for fossil generation and reduces U.S. dependence on imported energy," said Randall Swisher, the AWEA executive director. "As we have seen in Europe and with growing popularity in other nations of the world, wind power is proven and can play a substantial role in powering America's energy future."
Swisher said the DOE estimates the U.S. wind could generate more than 10,000 billion kW of electricity a year, or three times the amount it uses today. The U.S. wind potential may never be fully realized, but "it is realistic to believe that at some point decades from now, wind power could be providing 20% of the country's electricity," compared with the 0.5% it generates now.
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