“The Wind Bloweth where it Listeth”: The Past, Present, and Future of the US Wind Energy Industry (Part 2)

By Vernon Trollinger, May 16, 2013, Energy Efficiency, Green

windfarmDepending on who you talk to about wind energy and how it powers the electric grid, there’s bound to be… well, some spin. Much of the discussion centers the reliability of wind energy in terms of how it meets base load compared to the zero fuel cost and extremely low carbon emissions, as well as concerns about whether or not the wind industry can compete with other forms of energy fuels. With this new three-part series, we hope to provide a quality overview of the wind energy industry – its early development, how it operates now, and where the industry is heading.

In the second installment of “The Wind Bloweth where It Listeth,” we will examine how the industry came of age and some of the challenges it faces. In the later half of the 20th century, with energy prices increasing as well as a greater concern for the environment, government and business devoted more attention to renewable energy policy, including wind power development.

California’s Fan Club

Early commercial wind energy projects, like California’s Altamont Pass, were fueled by investment tax credits, but instead of basing that investment upon energy output performance (the correct metric), they were based upon the number of wind turbines. For example, in 1985, wind energy projects in California began with 7,035 wind turbines with a generation capacity of 500 megawatts (MW). When the tax credit ended in 1986, there were 14,609 wind turbines with a generation capacity of just over 1200 MW for California. However, 9,381 of all 14,609 wind turbines deployed by 1986 had capacities of 100 kw or less.

In order to stimulate growth and innovation in the wind energy industry, Congress augmented existing renewable energy policy and developed a production tax credit that focused on increasing energy output rather than the number of wind turbines installed. The Energy Policy Act of 1992 (EPACT ’92) set up a Federal Production Tax Credit (PTC) of 1.5 cents/kWh of generated output. To take advantage of this tax credit, wind energy investors had to look more closely at how well their wind turbines performed, what technologies could improve performance, and where would they perform best. As it turned out, there were other states that offered much better wind conditions than California, particularly Iowa and Texas.

Changes rattled the electricity industry in the late 1990s when several states began deregulating their utilities, including New York, Pennsylvania, and Texas. These changes required the Federal Energy Regulatory Commission (FERC) to reorganize the electric power grid so that all players in the industry (generation, transmission, and distribution) had fair and unfettered access. To bring their own renewable energy policy in line with EPACT ’92 (and to stimulate investment), states developed their own renewable energy standards. Among these laws were those established by the newly deregulated states:

  • Pennsylvania passed its “Alternative Energy Portfolio Standards Act of 2004” mandating that 18% of consumed electricity must be renewable energy by 2020.
  • New York State authorized The “Renewable Portfolio Standard 2004” that designates 30% of electricity consumed by New York customers must be from renewable energy sources by 2015.
  • Texas passed Senate Bill #7 in 1999, establishing a Renewable Portfolio Standard (RPS) of 2,000 megawatts (MW) of renewable energy to be available by 2009. In 2005, this was increased to 5,880 MW in 2015, and 10,000 MW in 2025.

Wind Energy’s Big Fan

The combination of federal and state renewable energy policy with the EPACT’92 tax credits propelled utility-scale wind turbine manufacturers to develop larger capacity wind turbines. In addition, the long dormant residential wind energy industry begin showing renewed signs of life. “Small wind,” as it is known, relies on wind turbines that generate 100 kW or less (the same capacity deployed during the 1980s in California). By 2007, 8,905 small wind turbines had been sold in the US, representing $42 million in sales and a generation capacity of 55-60 MW.

Part of the technology behind these increases is the size of the blade and the rotor circumference. Blades in the 1980s measured roughly 22 feet, their rotor circumference being 45 feet (approx. 15 meters). By 1999, blade length had been extended to 75 feet and rotor size increased to 150 feet (50 meters). By 2007, the blade length stretched as long as 150 feet with the rotor spanning the area of a football field—up to 300 feet (100 meters) allowing wind turbines to catch more power from even a gentle breeze.

But it isn’t always the wind turbine’s size that matters. A wind turbine only produces as much power as long as there’s a steady breeze. Location and elevation have everything to do with harvesting wind power capacity. New York has taken advantage of wind on the Allegheny and Adirondack mountains to develop 1400 MW of wind energy with 18 projects. Pennsylvania, too, has built 24 wind energy projects, mostly in its southwestern mountains, that combined have a capacity of 1,340 MW —just above 1 gigawatt (GW).

Texas is currently the wind energy production leader, mainly because West Texas and the Panhandle region have constant and reliable winds. With Texas electric energy demand one of the highest in the nation, wind energy development grew to … well, Texas-sized proportions. In 1999, Texas had 180 MW installed, but Texas’s renewable energy policy helped drive development. By 2005 it had installed 1,995 MW — just 5 wind turbines short of surpassing its 2009 RPS goal of 2,000 MW.

During this period natural gas prices were surging. Since natural gas generated about half of Texas electricity, electricity prices were also on the rise, making wind farms an even more attractive investment. In 2007, Texas had installed wind capacity of 4,296 MW, and by 2012 it grew to 12,214 MW. On March 18, 2012, wind energy generation hit 7,917 MW, representing 24 percent of the total ERCOT area load (33,373 MW). Texas now has 6 of the largest wind farms in the US, and investment continues to roll in. In January 2013, Google announced it was buying a $200 million stake in the 168 MW Spinning Spur project.

To be sure, Texas is wind energy’s biggest fan.

An Ill Wind Blows

In the summer of 2008, natural gas prices were still closely linked to petroleum because it was a by-product of oil drilling. That July, speculation drove petroleum/natural gas prices higher and higher. Gasoline surged to over $4.00 per gallon, while natural gas prices jumped to $13.69 per billion BTU (mmBTU). In Texas, the cost of electricity in exploded. Inundated with high fuel prices, consumers all across America cut their travel and their energy use. In fall 2008, the US economy started contracted so severely that businesses laid off workers in droves or simply closed.

With little demand for heat or electricity from shuttered businesses as winter came on, natural gas prices fell. At the same time, a new process for extracting natural gas from shale opened up ocean-sized reserves of natural gas in North Dakota, New York, Pennsylvania, and Texas. By fall of 2009, natural gas had lost over 80% of its July 2008 value and plummeted below $2.409 per mmBTU. With the US suddenly awash in cheap natural gas and new EPA regulations making it more expensive to burn coal, electric generating companies began switching their plants over to cleaner burning natural gas.

While some believed cheap natural gas would knocked the wind out of wind energy’s sails, other factors were propelling it forwards. Chief among these was that the PTC was set to expire in 2012, and this drove utilities and others to invest in building or expanding wind farms before that credit ended. Years of development and competition among wind turbine makers was not only lowering wind turbine prices, but also created lower maintenance and operational costs. So, even though cheap natural gas caused a few rumbles, wind energy seemed unstoppable. Except that on some windy days, the blades stand still because there was nowhere to send the electricity.

Lightning in a Bottle Neck

In an extreme case of stating the obvious, one of the most important attributes of wind power is the location of a given wind turbine. Wind farms are located on sprawling, wide-open landscapes that are far from cites and towns … and power lines. If a wind farm sits in the Texas Panhandle, it’s several hundred miles from a junction with the rest of the Texas grid, and it must be connected with an expensive transmission line. Even then, the wind farm’s energy output might curtailed because high demand is constraining transmission on the rest of the grid.

In Texas, from December 2008 to December 2009, between 500 MW and 2000 MW of wind energy was curtailed daily, totaling 16% for the year. Throughout America, electric transmission congestion is a daily problem for all generators (especially in summer) when supplying consumer demand and the physical limitations of wire cable threaten to cause blackouts. The answer at first seems to be, “Build more transmission lines.” The problem is that someone must pay for them, and no one wants these monsters in their back yard.

All of these developments – technological, political, scientific, pricing, and otherwise – bring us into 2013. Challenges continue to abound in the electric industry, including issues with transmission capacity as well as cheap natural gas prices to run conventional generators. Although the PTC had become quite controversial and was set to expire back in December, 2012, it was quietly extended for another year. An astute observer might note cynically that this comes as no surprise as 70% of all U.S. Congressional Districts have an operating wind project and/or a wind-related manufacturing facility.

This simply means that there are many more wind farms out there than before, including several schools, businesses, and universities deploying wind turbines of their own. Currently, there are 60 gigawatts (GW) of installed wind energy capacity in the US. That’s up from the 10 GW of installed capacity in 2006 that took 25 years to build. While all this capacity is currently land-based, there are plans for bigger off-shore wind farms in the works.

And in a development straight out of science fiction, there are even some plans being pushed in some quarters for adding batteries and putting wind turbines in the sky. Check out Part 3 next Thursday for the Future of the Wind Energy Industry.

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