The document summarizes the history and future of the wind energy industry in the United States. It discusses how the industry began in the 1970s but struggled until policy support in the late 1970s. Europe then led wind development in the 1990s before the U.S. regained leadership in the 2000s. The industry has grown rapidly but faces challenges around transmission infrastructure and grid integration. Studies show 20% of U.S. electricity could come from wind by 2030 with the right policies around transmission and a production tax credit.

1. The Wind Industry: Past, Present, Future Randall Swisher Power Test Conference February 15, 2010

2. The Past: A Brief History of the Wind Industry

3. Growing a New Industry A complex mix of technology, policy and business/economics must all work together

4. In the Beginning: A Vision

5. The context: 1973 was the first Arab oil embargo “ It would not be foolish at all to state that this country could be totally energized by solar energy and other renewable processes by the year 2000.” - William Heronemus, 1973, before a U.S. Senate subcommittee Heronemus founded the UMass alternative energy engineering program, was a pioneer of the wind farm concept and offshore wind power His vision: 300,000 wind turbines on the Great Plains providing 10-15% of the nation’s electricity In the Beginning: A Vision

6. Late 70’s Policy Provided a Foundation Federal Wind R&D Program Public Utility Regulatory Policies Act of 1978 (PURPA) Requires utilities to buy electricity from renewable and cogeneration facilities Energy Tax Act of 1978 Creates 15% Energy Investment Tax Credit (EITC) Added to existing 10% ITC Limited Partnership Structure -> Wind Farms California policy Tax incentives Strong regulatory support Standard offer contracts

7. In the 1980s, the U.S. led the World in Wind Technology The first successful windfarms were established in 1981 in California Many U.S. turbine manufacturers were established in the early 80s By 1989, the U.S. was home to 85% of the world’s installed wind capacity – almost all in California – and a leading manufacturer: US Windpower (founded in 1976)

8. But Turning Vision to Reality was Tough Harnessing the wind was tougher than it looks First California Wind Farms – 1981 Poor performance - very low capacity factors But provided a successful laboratory – some turbines worked, some didn’t Building strong companies was a challenge – Engineering Business acumen Access to capital Knowledge of the utility industry

9. We Turned our Backs on the Opportunity The DOE Wind R&D budget was cut 90% through the 1980s The wind investment tax credit was abruptly ended in 1986 Most U.S. turbine manufacturers went out of business In 1989, the domestic wind market was lifeless . . . And seven years later US Windpower was bankrupt

10. Europe Took the Lead in the 1990s Strong market incentives in Denmark, Germany and Spain led to a thriving turbine manufacturing industry Germany was the largest single market until 2008 This European leadership made possible wind’s current competitiveness

11. Today, the Global Industry has Three Key Markets Europe – 76,000 MW (end of 2009) Most manufacturers based in Europe North America – 38,500 MW The U.S. is now the largest single market, and all major global companies want to participate Asia – 39,000 MW Chinese market growing most quickly, and establishing a strong manufacturing base

12. The U.S. Wind Industry in 2010

13. U.S. is World Leader in Wind Power With over 35,OOO MW, the U.S. is now the #1 wind energy producer in the world

14. 2009 Highlights 9,922 MW were installed in 2009, bringing the total to 35,159 MW. Growth in 2009 (annual to cumulative): 39% 5-year Compounded Growth: 39% The U.S. wind energy industry shattered all installation records thanks to the Recovery Act.

15. U.S. Wind Industry: 2009 Wind MW Installed Total Installation in 4Q 2009: 4,041 MW Total Installation in 2009: 9,922 MW Total U.S. Installation through 4Q 2009: 35,159 MW Source: American Wind Energy Association

16. Top Ten States in 2009 Source: American Wind Energy Association

17. State by State Installations (MW) Source: American Wind Energy Association

18. Market Players: Turbine Manufacturers Turbines Installed in 2009: Acciona WP Clipper DeWind Fuhrlander Gamesa GE Energy Mitsubishi Nordex REpower Siemens Suzlon Vestas

19. Manufacturers’ Share of Installed Capacity Share of 2008 2008 Installations by WTG Mfgr

20. U.S. Wind Manufacturing Source: AWEA, updated through 4Q 2009 Major facilities online prior to 2008 All new online in 2008 - 2009 Announced facilities

21. 300,000 MW of Proposed Wind in Interconnection Queues

22. Wind Power in Queues (MW) Iowa 14,569 Minnesota 20,011 New Mexico 14,136 North Dakota 11,493 Penn. 3,391 South Dakota 30,112 Oklahoma 14,677 Illinois 16,284 Ohio 3,683 Kansas 13,191 Wisconsin 908 Michigan 2,518 WV 1,045 New York 8,000 VT 155 Total 311,155 MW MA 492 Montana 2327 NJ 1416 Under 1000 MW 1,000 MW-8,000 MW Over 8,000 MW Missouri 2,050 Indiana 8,426 Maine 1,398 NH 396 RI 347 DE 450 MD 810 VA 820 Arkansas 210 Texas 63,504 Arizona 7,268 California 18,629 Colorado 16,602 Idaho 446 Nebraska 3,726 Nevada 3,913 Oregon 9,361 Utah 1,052 Washington 5,831 Wyoming 7,870

23. Note: AWEA does not make industry forecasts or endorse any external forecasts Other Analysts’ Projected Wind Growth Nationwide

24. Wind’s Long-term Potential

25. 20% Wind Energy by 2030 U.S. Department of Energy: “ The U.S. possesses sufficient and affordable wind resources to obtain at least 20% of its electricity from wind by the year 2030.” www.20percentwind.org

26. The 20% Technical Report Explores one scenario for reaching 20% wind energy by 2030 and contrasts it to a scenario in which no new U.S. wind power capacity is installed Not a prediction - an analysis based on one scenario Is the work of more than 100 individuals involved from 2006 - 2008 (government, industry, utilities, NGOs) NREL – analytical foundation/their model Black & Veatch – input assumptions/market data on cost AEP – independent transmission conceptual design

27. The 20% Wind Energy Scenario U.S. electricity consumption grows 39% from 2005 to 2030 – to 5.8 billion MWh (Source: EIA) 20% wind electricity requires about 300 GW (300,000 MW) of wind generation No technology breakthroughs required: 20% wind can be achieved with existing wind technology Technology will continue to improve: Productivity of wind turbines increases about 15% by 2030 This is an extremely conservative assumption

28. 20% Wind Energy by 2030 Installed Capacity at year end 2009 is greater than 35 GW; 3 years ahead of schedule 305 GW

29. 20% Wind: Electricity Sector Costs Both scenarios cost over $2 trillion in new investment in net present value terms by 2030 Incremental economic costs reflect: Capital costs of wind projects relative to other projects Incremental transmission investment 20% Wind Scenario requires only 2% more investment ($43 billion in net present value)

30. Savings from Reduced Natural Gas Price Pressure The benefits from reduced pressure on natural gas prices across all gas users would be $150 billion (NPV), by itself exceeding the incremental cost of investing in the 20% Wind Scenario. *NPV Source: Hand et al., 2008 Billions of Dollars* 0 20 40 60 80 100 120 140 160 Incremental C ost Natural Gas Savings

31. 20% Wind Impact on Generation Mix in 2030 Reduces electric utility natural gas consumption by 50% Reduces total natural gas consumption by 11% Natural gas consumer benefits: $86-214 billion * Reduces electric utility coal consumption by 18% Avoids construction of 80 GW of new coal power plants U.S. electrical energy mix Source *: Hand et al., 2008

32. Challenges to Achieving Wind’s Potential

33. Key Barriers to Achieving 20% Wind Need for long-term stable federal policy Need for transmission infrastructure Need to reshape the electric system to manage that percentage of a variable resource

34. The Longer Term Policy Challenge Inconsistent federal policy has been the single biggest constraint on growth of the U.S. wind industry

35. Need a stable long-term federal policy Long-term federal production tax credit (PTC) Federal renewable energy standard (RES) Climate policy that puts a price on carbon Long-term Policy Options

36. A Federal RPS Means Stable Policy AWEA Developed RPS Concept in mid-90s We needed a new policy vehicle PURPA was not effective RPS compatible with wind’s growing cost-competitiveness, more competitive electric industry States embraced the RPS concept 28 states have adopted A Federal RPS will likely be a central component of this summer’s energy legislation

37. Barrier 3: Transmission Infrastructure The lack of transmission infrastructure is the single greatest long-term strategic constraint facing the wind industry. There is a growing recognition of this barrier by policymakers National Clean Energy Summit

38. 20% Wind: Transmission Challenges Enhancement of electrical transmission system required in all electricity-growth scenarios Transmission is needed to: Relieve congestion in existing system Improve system reliability for all customers Increase access to lower-cost energy Access new and remote generation resources Wind requires more transmission than some other options as best winds are often in remote locations Over 300,000 MW of wind lined up in interconnection queues Growing action to build transmission But only 33,000 MW of transmission capacity planned to come on line in next five years

39. Getting our Huge Wind Resource to Market The solution is clear, but will take time to achieve: Green Power Superhighways: National electricity transmission “superhighways” to add reliability to our electricity supply and bring vast amounts of wind and other renewable energy to market. Key Issues: Regional Planning – interconnection-wide Siting Cost Allocation – regional Coordinated regional grid operations Model: FERC gas pipeline authority

40. Transmission States leading the way on proactive transmission planning: Texas (CREZ) $4.9 billion in transmission investments to major wind resource areas $2.4 billion ANNUALLY in reduced fuel costs (ERCOT estimate) Provides a model for other states and the nation

41. AEP’s Conceptual Transmission Plan to Accommodate 400 GW of Wind Energy

42. Managing Wind’s Variability

43. Wind is an energy resource, not a capacity resource Wind Power output is “variable” not “intermittent” There is a cost to managing wind’s variability That cost depends upon system characteristics, but is generally low Wind Integration

44. Lessons Learned about Wind Integration Wind forecasting can significantly reduce integration costs by reducing uncertainty Wind resources spread over larger areas are less variable Diverse wind has very little variability on the minute-to-minute time scale Wind is easier to integrate on more flexible power systems Market/system operation reforms, such as control area consolidation, can significantly reduce wind integration costs, as can coordinated regional operations A robust transmission grid can significantly reduce integration costs Integrating wind is a cost issue, not a reliability issue

45. The fact that wind is not dispatchable does not mean that it makes economic sense to add storage to back up specific wind units Storage should be viewed as a system resource and should be evaluated on that basis. Generally there will be more cost-effective ways to add needed system flexibility than by adding storage technologies. No Study or Report shows that new storage is needed to achieve 20% energy production from wind energy Wind Power & Energy Storage

46. Xcel Study Regarding Wind Integration Costs In the Xcel analysis, wind integration costs are: $3.51 per MWh in the 10% wind penetration scenario $4.77 per MWh in the 15% scenario $5.13 per MWh in the 20% wind scenario

47. Summary and Conclusion

48. The Way Forward The wind market has been one of the fastest growing segments of the economy over the past five years – an average annual growth rate of 32% This growth was achieved despite lack of stable, consistent federal policy support. The wind industry, similar to every other sector of the economy, has been hurt by the financial crisis. The wind industry is a capital-intensive industry The PTC is a key component of financing projects, and tax equity has been dramatically reduced by the crisis. Federal and state policy makers view wind and other renewables as key to our energy future and a foundation for job creation. A number of important policies were included in the economic stimulus bill. More pro-wind policies will be coming in the new energy bill. The industry is well situated strategically. Given growing concern about climate change, fossil fuel price volatility, national energy security, and the need to grow domestic jobs and economic development, the wind industry should see double digit growth for decades to come. If you want to be a part of this growing market, join AWEA and come to WINDPOWER 2010 (Dallas, May 23-26).

49. Further Information American Wind Energy Association www.AWEA.org [email_address] 1501 M Street NW, Suite 1000 Washington, DC 20005