Wind Power Affordability Opens New Markets

by Denise Bode, American Wind Energy Association

Many in the electric industry know wind energy as an important part of a diverse generation portfolio. Wind has accounted for 35 percent of all new U.S. electric generating capacity in the past five years and is one of the country's fastest-growing new sources of U.S. manufacturing jobs.

But did you know that wind's rapidly decreasing price-driven by stable federal tax policy and that rapid, 12-fold increase in American manufacturing in recent years-also is driving wind power into new, previously untapped markets?

Toward the end of summer 2011, Alabama Power, a subsidiary of Southern Co., secured its first wind power purchase. In signing off on the contract, the Alabama Public Service Commission noted that the "price of energy from the wind facility is expected to be lower than the cost the company would incur to produce that energy from its own resource … with the resulting energy savings flowing directly to the company's customers."

And as 2012 got underway, American Electric Power Co. Inc. subsidiary Southwestern Electric Power Co. (SWEPCO), which serves Louisiana, signed long-term power purchase agreements for a total of 358.65 MW from wind projects in Texas, Oklahoma and Kansas. SWEPCO said in a news release that it estimates an average decrease in cost to its customers of about 0.1 cents per kilowatt-hour over a10-year period starting in 2013.

Meanwhile, wind's affordability is driving further investments in traditionally strong markets. Recently the Colorado Public Utilities Commission approved a wind power purchase by Xcel Energy. In signing off on the deal, the commission stated that "the contract will save ratepayers $100 million on a net-present-value basis over its 25-year term under a base-case natural gas price scenario" while providing the opportunity to "lock in a price for 25 years."

Across the country, more utilities than ever are using wind energy to meet their customers' electricity needs. Wind is a mainstream energy source and a readily deployable technology that serves as a beneficial component of a utility's diverse generation portfolio.

In other words, utilities understand wind power to be a good deal. Here's a little about the dynamics driving that good deal and a little about the wind industry's strong track record in creating U.S. jobs and economic opportunity.

Strong Numbers Reflect Strong Industry

The numbers are in for 2011, and through those numbers the U.S. wind power industry showed strength on several fronts. The industry continued to deepen its U.S. manufacturing roots with more than 470 U.S.-based manufacturing facilities serving the industry's supply chain. On the project development front, the industry installed 6,810 MW in 2011-a 31 percent increase over the previous year's 5,216 MW. At the end of 2011, more than 8,300 MW of wind power were under construction, setting the stage for a strong 2012.

Thanks to that supply chain manufacturing base and project development, the wind industry employs about 75,000 people in the U.S. That's good news for the industry, which is sharing those numbers with decision-makers to ensure that stable, long-term policy is put in place-the kind of stable policy that older technologies have enjoyed for some 90 years-allowing wind power to take root to an even greater degree.

Big Contributor

With wind energy's providing 35 percent of all new generation capacity during the past five years, installations are stacking up, providing significant portions of electricity. In 2011, Iowa (18.8 percent) and South Dakota (22.3 percent) produced wind energy levels in the neighborhood of 20 percent of their load, and they continue to add new wind power capacity. That 20 percent milestone is within reach for the rest of the country. Wind power is on track to meeting 20 percent of U.S. electricity needs and supporting 500,000 jobs by 2030. States that have some of the largest electricity loads-that is, states whose economies rival those of mid-size nations-also are tapping wind power's benefits to fuel their economies. On the Electric Reliability Council of Texas (ERCOT) system, wind penetration is approaching 9 percent, and California stands at about 4 percent wind power. Wind penetrations continue to climb at a strong clip in both states.

Such numbers show what wind power is capable of: building new projects, powering local economies and creating jobs-a welcome side benefit that would appeal to any state regulator or elected official. This tremendous activity is being driven by the federal production tax credit (PTC), which has leveraged as much as $20 billion a year in private investment and supports tens of thousands of manufacturing jobs. Part of the reason for the PTC's success is that it's performance-based (i.e., only awarded for kilowatt-hours that are generated).

Wind Power's Affordability

One of the great stories surrounding wind power is its affordability. Because of performance improvements over the years, a turbine with a nameplate capacity seven times larger than a typical turbine in 1990 can produce 15 times more electricity.

The more America's wind power supply chain is given a chance to take root, the more efficient it becomes. Today 60 percent of U.S.-deployed turbines' content is built in the U.S.-an impressive level, considering that domestic content was only 25 percent prior to 2005. The more than 470 U.S. plants serving the U.S. wind power industry are in every region of the country.

As a result, more efficient U.S.-based manufacturing is saving on transportation while technology improvements are resulting in turbines that generate more power. Wind turbine prices have dropped sharply in recent years, and a government report released in 2011 highlights that trend with some telling numbers. According to the Department of Energy's (DOE's) "Wind Technologies Market Report," turbine prices decreased by as much as 33 percent or more between late 2008 and 2010.

The report also found that the amount of land that can support 35 percent-plus capacity factors has increased by between 130 percent and 270 percent since 2002-2003, thanks to improvements in turbine technology.

A January 2012 study from the DOE's Lawrence Berkeley National Laboratory shows that it costs between 24 and 39 percent less to produce wind energy on a per-kilowatt-hour basis today than it did in 2002-2003.

The wind industry is passing those efficiencies and savings on to utilities, and they know a good deal when they see one. Wind power provides long-term stability by allowing utilities to lock in prices for 20-30 years and insulating them and their ratepayers from volatile fossil fuel price shifts. Wind power, therefore, offers the same peace of mind a 30-year, fixed-rate mortgage gives homeowners.

Serving Utilities

The only thing holding back wind power from serving utilities more is unstable policy. The wind power industry entered 2012 with its key policy driver, the PTC, scheduled to expire at the end of the year. The industry continues to work to meet robust orders for 2012, which, consistent with typical years of scheduled PTC expirations, is expected to be strong and finish significantly ahead of 2011's 6,810 MW installed-particularly given that more than 8,300 MW were under construction as the year began.

The U.S. wind energy industry is familiar with operating in a business environment characterized by short-term policy, so challenges faced in 2012 are hardly new ones. Still, with wind power now a key player on the energy landscape, the industry is working to establish a more consistent policy environment. The industry has taken hold as a major energy-sector player, and now it wants to finish the job.

Today clean, affordable, homegrown wind energy is helping many utilities from all parts of the country reliably provide electricity to their customers. The wind power industry is proud of its product and looks forward to continuing to be a key part of an increasing number of utilities' diversified portfolios.


Windpower Conference Shows Breadth of Industry, Supply Chain

One indicator of how U.S. wind power has become a mainstream energy source across the country is AWEA's annual Windpower Conference & Exhibition that will head to Atlanta for the first time June 3-6. (Visit http://windpower expo.org for details.) Windpower 2011 in Anaheim, Calif., in May drew nearly 16,000 participants and more than 1,150 exhibitors. Those exhibitors did business on a bustling 332,000-square-foot trade show floor spanning 14 football fields. The event, the largest wind-focused exhibition in the world, brings together the industry's top leaders and experts in addition to leading government and other officials.

Reflecting the industry's growth and complexity, AWEA hosts other seminars and conferences throughout the country on issues such as offshore wind power, small wind, siting, the manufacturing supply chain, resource assessment and health and safety. (Visit http://awea.org/events.) One other trend to watch on the conference front that's indicative of an evolving industry: In spring 2012, the AWEA Regional Wind Energy Summit-Midwest marked the start of the trade association's offering regionally focused wind energy events to better meet the industry's ever-growing educational and networking needs.


Author

Denise Bode is the CEO of the American Wind Energy Association, the national trade association of the U.S. wind energy industry. She is a nationally recognized energy policy expert and was elected twice to the Oklahoma Corporation Commission, where she served for 10 years. Her more than 30 years in the energy field includes having served as CEO of the American Clean Skies Foundation, president of the Independent Petroleum Association of America (IPAA), a tax partner in the Washington, D.C., law firm of Gold and Liebengood Inc., and nine years on the staff of then-U.S. Sen. David Boren as his legal counsel, focusing on energy and taxation and staffing the Senate Finance Committee.

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