Wind Energy is Riding High
Jan 13, 2006, EnergyCentral.com
High gas prices and a concerted effort to curb global
warming are breathing new life into the wind industry.
About 2,500 megawatts of wind power have been added
to the United States' generation mix in the last 12
months, which equates to roughly 9,200 megawatts of
total generating wind capacity here.
Nations around the globe are taking action to diversify
their energy mixes and to cut harmful emissions. Beyond
that, specific industries are finding out that such
environmental strategies are good for business: Companies
are relying more on alternative fuel sources that
cut their energy use and subsequent overhead as well
as their carbon dioxide output. DuPont, for example,
has reduced its emissions by 40 percent -- between
1990 and 2000 levels by using such techniques as re-using
steam heat. Meanwhile, it's producing goods at a 30
percent faster rate.
Wind is one of the beneficiaries of these new dynamics.
The growth in wind power construction comes at a time
when customers across the country are facing electricity
and natural gas rate hikes because of the natural
gas supply shortage, with 2005-2006 winter gas prices
projected at $10-13 per million BTUs compared to last
year's average prices of $5-7 per million BTUs. Wind
power, which generates energy without using fuel,
provides a hedge against rising energy costs because
wind energy production is immune from fuel price spikes.
"The market forces are now in place," says Tom Matthews,
president of US Wind Force in Pittsburgh. "By that
I mean the numerous mandates that have been passed
in the Mid Atlantic region and in New England. The
tax credit has also been extended through 2007. Most
of the opposition with regard to wind energy is NIMBY
-- not in my backyard -- related. The vast majority
support renewable energy, particularly wind that is
100 percent emission free."
Certainly, wind is still a small component of the
nation's energy mix, producing less than one percent
of all electricity here. Still, the American Wind
Energy Association estimates that an installed capacity
of 9,200 MW of wind power will save over half a billion
cubic feet of natural gas per day in 2006, alleviating
a portion of the supply pressure that is now facing
the natural gas industry and is driving prices upward.
The U.S. currently burns about 13 billion cubic feet
per day of natural gas for electricity generation,
which means that by the end of the year wind power
will be reducing natural gas use for power generation
by 4-5 percent.
Wind power plants can be permitted and built in
one to two years, whereas the drilling of new natural
gas fields and the construction of Liquefied Natural
Gas terminals takes much longer. The wind association
projects that more than 14,000 megawatts of wind capacity
could be part of the nation's generation supply by
the end of 2007, producing the equivalent of .85 billion
cubic feet per day of natural gas.
Wind is also riding high because it does not contribute
to the nation's environmental problems. Burning fossil
fuels for electricity generation causes over a third
of the greenhouse gas emissions in the country, as
well as more than two-thirds of the emissions that
cause acid rain, and one-third of the emissions that
"Wind power's rapid growth provides what is potentially
the quickest and best supply-side option to ease the
natural gas shortage," says Randall Swisher, executive
director of the wind association. "We are hopeful
that the momentum started in this record-breaking
year will continue because of the Congress's foresight
in extending the wind energy production tax credit
through December 31, 2007. The wind power industry
is stepping up to provide the U.S. with a significant
amount of its power needs in this time of uncertainty."
To be sure, the wind industry faces many challenges.
The wind, for example, does not blow on demand and
it generally cannot be economically stored. That's
why wind farms must be backed up by conventional power
plants to ensure that electricity will be available
when needed. That duplication of capacity not only
diminishes the environmental benefits of wind, critics
say, but it also increases the cost of wind power
while adding an extra burden on the transmission system,
although federal regulators have acted to make it
easier for wind units to connect to the grid.
And then there's the issue of birds and bats running
into the windmills and dying. It's created a bit of
an uproar, although the Government Accountability
Office released a study on the environmental impacts
of wind energy that found that it is not a significant
source of bird deaths, especially when viewed in context
with other, much more deadly sources of bird mortality
like plate glass. "No fuel supply and no form of energy
are without consequences," says Frank Maisano, spokesman
for a coalition of wind developers in the Mid Atlantic
Wind farms, meantime, are generally more expensive
to build than fossil-fueled generation. The U.S. Department
of Energy says that roughly 80 percent of the cost
of wind projects is the machinery, with the balance
being site preparation. And with today's steel prices
at least 50 percent more than last year, constructing
a wind farm is a costly endeavor. Still, once a wind
farm is built, the price of the power is stable. Further,
with the current subsidy, it is also cost competitive.
Critics of wind power, however, say that the tax
breaks and subsidies are paid for by taxpayers and
electricity customers. MidAmerican Energy, for example,
is scheduled to complete by year-end a 310 megawatt
wind farm in Iowa -- a plant it acknowledges would
not have been built had it not been for the production
tax credit. "Every other form of power generation
is subsidized in some manner," says Matthews, with
Capital, of course, flows to where it is naturally
most welcome and where investors can earn reasonable
returns. Along those lines, Siemens AG says that it
sees a 10 percent growth in the wind energy market
and notes that it plans to invest primarily in China,
Europe, India and the United States. The hope is that
major players such as Siemens and GE Energy will facilitate
further development by making modern technologies
more accessible to the utilities that would use them.
"People will pay more for green energy and I wouldn't
underestimate the value of these projects in the market,"
says Barry Abramson, a Wall Street analyst with Gabelli
Utilities Fund. Puget Sound Energy, for example, says
that wind power is the best value.
The confluence of more government attention with
general demand in the market for greater efficiencies,
reduced energy costs and a cleaner environment have
joined to give wind energy a boost. While wind is
a relatively minor component of the nation's energy
mix, it is expected to gain a higher profile. And
with energy consumption expected to rise about two
percent annually for the foreseeable future, the nation
needs all the fuel supply it can get.