Wind energy could be the savior of natural gas consumers, reducing the amount of gas used to fuel the nation’s many gas-fired power generation plants and helping to relieve some upward pressure on gas prices, according to the American Wind Energy Association (AWEA). At least one expert, however, says that’s a bunch of “baloney.”

The AWEA is trying to get the word out about the benefits of wind generation while it anxiously awaits Congress’ decision on whether to extend the current wind power production tax credit (PTC), which is set to expire Dec. 31. The measure provides a 1.5-cent per kWh tax credit (adjusted annually for inflation) for electricity generated with wind turbines and is among several other substantial tax benefits that help make wind energy development a lucrative investment for energy companies.

Sen. Pete Domenici (R-NM) said on Wednesday the wind power subsidy “is so big that it is quite obvious that there will be huge numbers…of those giant wind mills built in America” (see related story).

The wind association says that the wind farms currently in place and being installed this year will displace about 0.5 Bcf/d of gas demand from gas-fired power generation. AWEA Executive Director Randall Swisher said the current gas supply shortage would be 10-15% worse at the end of this year if it weren’t for wind power. In addition, he said, rapid expansion of the nation’s wind turbine fleet could sharply boost wind generation over the next four years, increasing its output to the equivalent of 3 Bcf/d.

“Wind plants can be permitted and built relatively quickly — typically, within one to two years,” Swisher said. “AWEA has proposed specific transmission plans for 30,000 MW of wind in the Midwest and West. We believe that at least that much new wind development is feasible by the end of 2007 under strong policy leadership. AWEA expects a cumulative total of 6,000 MW of wind will have been installed in the U.S. by the end of this year.”

AWEA also estimates that as many as 100,000 MW of wind generation in the United States — enough to power 25 million homes — is feasible by 2013. The maximum amount of wind power that could be added if gas prices remain at more than $4/MMBtu, would be about 600,000 MW, according to AWEA.

The association said it believes that with the depletion rate for new gas fields accelerating and continued demand for natural gas in electric generation applications, an “ongoing long-term natural gas crisis is now a reality.” But unlike natural gas prices, which are subject to the vagaries of the market, wind energy costs are predictable over time: once a plant is built, the cost of producing electricity is stable and the fuel source is free, AWEA said.

“The days of $2 gas are gone,” Swisher said. “What we can look forward to instead is a price range of $4 to $5/Mcf, with regional shortages and occasional spikes to $6-$10. The hardship this could wreak on consumers is severe. By contrast, wind energy is renewable and its cost from year to year is very stable. In addition, it works well in tandem with natural gas generation.”

As a result of all these substantial benefits, wind energy producers are pushing a “national policy agenda” that includes the following:

“These effective, responsible solutions would create thousands of jobs and millions of dollars in royalty income for hard-pressed farming and ranching states and provide stability to American businesses and consumers who expect to have power when they need it,” Swisher said. However, Glenn Schleede, a Reston, VA-based energy consultant, believes the AWEA is just trying to pull the wool over taxpayers’ eyes. According to Schleede, former associate director of energy and science for the Domestic Policy Council, which used to be part of the Executive Branch of the federal government in the 1970s and 1980s, building more giant windmills to produce electricity is extremely costly to electricity customers and taxpayers. He said the true cost of wind energy is much higher than electricity from other sources, and it imposes other costs, specifically adverse impacts on environmental, ecological, scenic and property values.

“AWEA has often contended that electricity from wind is ‘almost competitive’ with electricity produced from natural gas when gas was selling for $2.00 to $2.50/Mcf and, therefore, federal and state tax breaks and subsidies were still needed to make it competitive. Now AWEA is contending that gas prices are likely to be in the $4.00 to $5.00 range, but it is still arguing for even more tax breaks and subsidies that shift costs from ‘wind farm’ owners to taxpayers and electric customers,” Schleede noted in an interview with NGI.

He said that owners of wind farms that begin operation in 2003 or 2004 are able to write off over 60% of the total cost of the installation in the first year, which leads to a huge reduction in their tax liability. “If 1,000 MW of wind capacity is added in 2003 at a cost of $1 billion, the depreciation deduction would be $600 million,” he said. “With a marginal tax rate of 35%, the accelerated depreciation deduction will permit wind farm owners to avoid $210 million in federal corporate income taxes in 2003 alone as well as tens of millions in state corporate income taxes.

“But that’s not enough for the wind industry. AWEA’s latest agenda calls for hundreds of millions in additional tax breaks and subsidies for wind.” Schleede said the “renewable portfolio standard” is “probably the most insidious way yet derived to force electric customers to buy high cost electricity from wind farms.

“Hopefully, the U.S. Congress, state legislatures and regulators will soon begin to recognize the true economic and environmental costs of electricity from wind and dismiss AWEA’s latest ‘wish list.'”

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