Wind Power Is Ready

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  • Nice presentation. Yes, wind power is ready in a sense that it is already present in our environment. There will be no preparation needed to get this. All you have to prepare is a wind turbine to convert the kinetic energy into free electricity.
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  • Wind power is a reality today. Nearly 1,700 megawatts—enough to serve about 475,000 average American homes--were installed in the United States in 2001 alone. With continued government encouragement to accelerate its development, this increasingly competitive source of energy will provide at least six percent of the nation’s electricity by 2020 and revitalize farms and rural communities – without consuming any natural resource or emitting any pollution or greenhouse gases.

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  • 1. Wind Power is Ready Clean Energy Technology for Our Economy and Environment American Wind Energy Association, 2002 Image courtesy of NEG Micon
  • 2. Wind Power Market Overview
  • 3. Ancient Resource Meets 21 st Century Technology
  • 4. Wind Turbines: Power for a House or City
  • 5. Ready to Become a Significant Power Source Wind could generate 6% of nation’s electricity by 2020. Wind currently produces less than 1% of the nation’s power. Source: Energy Information Agency
  • 6. Wind is Growing Worldwide Source: AWEA’s Global Market Report 1. Germany: 8754 MW 2. U.S.: 4260 MW 3. Spain: 3195 MW 4. Denmark: 2492 MW 5. India: 1507 MW
  • 7. Wind Taking Off in the U.S.
    • U.S. installed nearly 1,700 MW in 2001
    • Wind power capacity grew by 66%
    • Over 4,265 MW now installed
    • Expecting over 2,500 of new capacity in 2002-2003 combined
    Source: AWEA’s U.S. Projects Database
  • 8. United States Wind Power Capacity (MW) 4,270 MW as of 07/31/02 Alaska 0.9 California 1,715.9 Colorado 61.2 Hawaii 1.6 Iowa 324.3 Kansas 113.7 Maine 0.1 New Hampshire 0.1 Massachusetts 1.0 Michigan 2.4 Minnesota 322.7 Montana 0.1 Nebraska 3.5 New Mexico 1.3 New York 48.2 North Dakota 1.3 Oregon 156.9 Pennsylvania 34.5 Tennessee 2.0 Texas 1,095.5 Utah 0.2 Vermont 6.0 Wisconsin 53.0 Wyoming 140.6 Washington 180.2 South Dakota 2.9 Source: AWEA’s U.S. Projects Database
  • 9. 1,697 MW added in 2001 Kansas 112 Wisconsin 30 Pennsylvania 24 New York 30 Oregon 132 Washington 180 Iowa 82 Minnesota 218 Texas 915 Main Areas of Growth in 2001 Source: AWEA’s U.S. Projects Database
  • 10. U.S. Wind Power Capacity Growth *Source: AWEA’s U.S. Projects Database
  • 11. Wind Power Economics
  • 12. Cost Nosedive Driving Wind’s Success 38 cents/kWh 2.5-3.5 cents/kWh Levelized cost at excellent wind sites in nominal dollars, not including tax credit
  • 13. Wind Power Cost of Energy Components
    • Cost ( ¢ /kWh) = (Capital Recovery Cost + O&M) / kWh/year
      • Capital Recovery = Debt and Equity Cost
      • O&M Cost = Turbine design, operating environment
      • kWh/year = Wind Resource
  • 14. Capital Costs
    • Revenue Streams
      • Commodity Power Sale: $30-$45/MWh
      • Production Tax Credit: $18/MWh
      • “ Green Credit”: New Market, Values Vary
    • Debt/equity ratios close to 50%/50%
      • Increased debt/equity ratios can significantly increase return
  • 15. Long-Term Debt
    • Better loan terms with longer-term power purchase agreement (PPA)
    • Loan terms up to 22 years, determined largely by PPA
    • Debt coverage ratios close to 1.4
  • 16. Equity Considerations
    • Return requirements vary with risk
      • Percieved risk of wind projects may be larger than real risk
    • Returns evaluated after tax credit
      • Wind energy projects can expect return in low teens
  • 17. Turbine Technology Constantly Improving
    • Larger turbines
    • Specialized blade design
    • Power electronics
    • Computer modeling produces more efficient design
    • Manufacturing improvements
  • 18. How big is a 2.0 MW wind turbine? This picture shows a Vestas V-80 2.0-MW wind turbine superimposed on a Boeing 747 JUMBO JET
  • 19. Construction Cost Elements
  • 20. Technology Improvements Leads to Better Reliability
    • Drastic improvements since mid-80’s
    • Manufacturers report availability data of over 95%
    1981 '83 '85 '90 '98 % Available Year 0 20 40 60 80 100
  • 21. Improved Capacity Factor
    • Capacity Factors Above 35% at Good Wind Sites
      • Performance Improvements due to:
      • Better siting
      • Larger turbines/energy capture
      • Technology Advances
      • Higher reliability
    • Examples: Project Performance (Year 2000)
    • Big Spring, Texas
    • 37% CF in first 9 months
    • Springview, Nebraska
    • 36% CF in first 9 months
  • 22. Bottom Line 20 Years of Wind Technology Development Economy of scale reduces price per kw of capacity Technology improvements yield more energy bang for the buck Combined, they dramatically reduce turbine price per unit of energy produced 1.5 2.2 2.6 3.6 5 9.6 Amortized cost of turbine per unit of energy 84,000 33,000 22,200 8250 3300 675 MWh produced over 15 years 39% 33% 31% 28% 25% 21% Capacity Factor $790 $950 $1,050 $1,333 $1,650 $2,600 Cost/kw $1300 $730 $580 $300 $165 $65 Total Cost 1650 750 550 225 100 25 KW 71 50 40 27 17 10 Rotor (Meter) 2000 1999 1996 1990 1985 1981
  • 23. Benefits of Wind Power
  • 24. Advantages of Wind Power
    • Environmental
    • Resource Diversity & Conservation
    • Cost Stability
    • Economic Development
  • 25. Benefits of Wind Power Environmental
    • No air pollution
    • No greenhouse gasses
    • Does not pollute water with mercury
    • No water needed for operations
  • 26. Electricity Production is Primary Source of Industrial Air Pollution Source: Northwest Foundation, 12/97
  • 27. Benefits of Wind Power Economic Development
    • Expanding Wind Power development brings jobs to rural communities
    • Increased tax revenue
    • Purchase of goods & services
  • 28. Benefits of Wind Power Economic Development Case Study: Lake Benton, MN $2,000 per 750-kW turbine in revenue to farmers Up to 150 construction, 28 ongoing O&M jobs Added $700,000 to local tax base
  • 29. Benefits of Wind Power Fuel Diversity
    • Domestic energy source
    • Inexhaustible supply
    • Small, dispersed design reduces supply risk
  • 30. Benefits of Wind Power Cost Stability
    • Flat-rate pricing can offer hedge against fuel price volatility risk
    • Electricity is inflation-proof
  • 31. Wind Project Siting
  • 32. Siting a Wind Farm
    • Winds
      • Minimum class 4 desired for utility-scale wind farm (>7 m/s at hub height)
    • Transmission
      • Distance, voltage excess capacity
    • Permit approval
      • Land-use compatibility
      • Public acceptance
      • Visual, noise, and bird impacts are biggest concern
    • Land area
      • Economies of scale in construction
      • Number of landowners
  • 33. Power in the Wind (W/m 2 ) Density = P/(RxT) P - pressure (Pa) R - specific gas constant (287 J/kgK) T - air temperature (K) Area =  r 2 Instantaneous Speed (not mean speed) kg/m 3 m 2 m/s = 1/2 x air density x swept rotor area x (wind speed) 3  A V 3
  • 34. Perceived Market Barriers
    • Siting
      • Avian
      • Noise
      • Aesthetics
    • Intermittent Fuel Source
  • 35. Actual Market Barriers
    • Transmission constraints
    • Financing
    • Operational characteristics different from conventional fuel sources
  • 36. Wind Characteristics Relevant to Transmission System
    • Intermittent output
    • Generally remote location
    • Small project size
    • Short/flexible development time
    • Low capacity factor
  • 37. Wind Development Issues Transmission Grid Operating Rules
    • What wind wants:
      • Liquid, transparent spot market for imbalance settlements
      • Near real time, flexible scheduling protocols
      • Robust secondary markets in transmission rights (“flexible firm”)
      • Postage stamp pricing allocated to load (or volumetric pricing)
      • Statistical determination of conformance to load shape to set value
    • What wind gets:
      • System designed exclusively to transport firm, fixed blocks/commodity strips
      • Rigid advance scheduling protocols/onerous imbalance charges
      • License plate pricing allocated to incremental generation
      • Grid balkanization/rate pancaking
  • 38. Wind Development Issues Transmission Expansion
    • What wind wants:
      • Pro-active regional planning with political buy-in.
      • Programmatic expansion focused on shared goals.
      • Public infrastructure financing repaid through user fees.
    • What wind gets:
      • Reactive, piecemeal gridlock decoupled from political process.
      • Project specific expansion focused on immediate needs of existing players.
      • Uncertain capacity rights as sole rate recovery mechanism.
  • 39. Consequences of Wind Characteristics
    • Remote location and low capacity factor = higher transmission investment per unit output
    • Small project size and quick development time = planning mismatch with transmission investment
    • Intermittent output can = higher system operating costs if systems/protocols not designed properly
  • 40. Federal and State Policies to Promote Wind Power
  • 41. Production Tax Credit
    • Lowers price of electricity to make it more accessible to customers
    • Currently provides credit of 1.8 ¢ per kWh
    • Industry needs long-term extension to encourage investment
  • 42. Renewable Portfolio Standard
    • Requirement that U.S. suppliers get 10% of supply from renewable sources by 2020
    • Texas example shows how RPS can enable green power markets to flourish by creating a supply of reasonably-priced renewable energy
    • Can create incentives to solve transmission issues
  • 43. Standard Market Design & Interconnection
    • Wind is “square peg in a round hole”
      • Intermittent
      • Site-specific, often rural
      • Small, with short construction lead time
    • SMD & Interconnection NOPRs designed to make markets more efficient, which could make a big difference in cost and availability of wind power
  • 44. Clean Air Act
    • Expect to see amendment to the Clean Air Act before 2004 elections
    • Without set-asides or direct allocation for renewables, would strip wind projects of ability to claim emissions reductions
    • Output based compliance that includes NO x , SO 2 and CO 2 could add revenue stream of 0.4 - 0.5 cents per kWh
  • 45. Small Turbine Incentives
    • 30% Investment Tax Credit
    • Net metering
  • 46. State Incentives
    • State renewable portfolio standards
    • Public Benefits Funds
    • Electricity source disclosure
    • Government procurement
  • 47. Green Power Market
  • 48. Green Power Market
    • Places a monetary value on environmental benefits
    • Raises visibility of renewable power & promotes customer awareness
    • Usually small scale, short-term contracts
    Premium prices
  • 49. Different Ways to Buy
    • Green Pricing
      • Regulated utility offers customers choice to support wind power construction
    • Green Marketing
      • In competitive market, customers empowered to choose service providers that contract to purchase renewables
    • Green Tags
      • environmental attributes divorced from energy
  • 50. Competitive Green Market
    • Has encouraged about 25 MW in CA & PA to date
    • Will encourage more than 75 MW in PA in next two years
  • 51. Green Pricing
    • Has encouraged over 15 new wind projects to serve green pricing market
    • Smaller projects
    • Spread throughout the U.S. – raises visibility of wind power
  • 52. Green Tags
    • Two or three products offered now
      • BEF
      • PureWind
    • Has encouraged new capacity in New York, Iowa
  • 53. The Story So Far...
    • 40% of households have access to green power
      • Green Pricing: 20 million
      • Competitive Markets: 17 million
    • 380,000 households are buying green power
      • Green Pricing: 130,000 households
      • Competitive Markets: 250,000 households
        • 165,000 in CA; 80,000 in PA, much less elsewhere
    • 330 aMW of renewables being supported
      • Green Pricing: 50 aMW
      • Competitive Markets: 280 aMW
  • 54. Small Wind Turbine Market Development
  • 55. Programs for small wind development
    • Buy-down programs
    • Exemptions from sales, property tax
    • Standardized zoning requirements
  • 56. Buy-down programs
    • CA renewables fund refunds 50% of the cost of a renewable system
      • CA sales account for over half of the small wind turbine market
    • MA buy-down program refunds 10% capped at $100
      • does not appreciably affect the market
  • 57. Property-Sales Tax
    • Property or sales tax exemption offered in several states
    • Programs to affect initial purchase price work best
    • Net metering programs (equalizing kWh costs paid and received by residential generators) do not seem to drive purchasing decisions
  • 58. Future Trends in Wind Power
  • 59. Expectiations for Future Growth
    • 2,500 MW new added by end of 2003
    • 20,000 total installed by 2010
    • 6% of electricity supply by 2020
    = 100,000 MW of wind power installed by 2020
  • 60. Wind Energy “U.S. Proven & Probable Reserves” Nameplate MW 600,000 36,000 4,000 4,262 Total 600 100 20 2 South 40,000 --- 300 1,016 Texas 7,000 500 330 90 East 350,000 400 500 900 Midwest 200,000 35,000 2,750 2,254 West @$4 natural gas @$2 natural gas Developable in Reserve In Development On-Line Region
  • 61. Future Cost Reductions
    • Financing Strategies
    • Manufacturing Economy of Scale
    • Better Sites and “Tuning” Turbines for Site Conditions
    • Technology Improvements
  • 62. Future Technology Developments
    • Application Specific Turbines
      • Offshore
      • Limited land/resource areas
      • Transportation or construction limitations
      • Low wind resource
      • Cold climates
    ® Middelgruden.dk
  • 63. Want to Know More About Wind Power?
    • www.AWEA.org
    • [email_address]
    • Or write to
    • American Wind Energy Association
    • 122 C St, NW, Suite 380
    • Washington, DC 20001