Big firms, feds blow hard at wind conference

Power, Jul/Aug 2003 by Robb, Drew

This year's American Wind Energy Association (AWEA) conference in Austin, Texas, drew its highest ever attendance of 3,450 attendees and 160 exhibitors--up from 2,300 attendees and 90 exhibitors last year. What gave this year's event a distinctly different flavor from previous years was the presence of energy industry giants such as Shell and GE and major utilities including American Electric Power (AEP), Long Island Power Authority (LIPA), and FPL Energy. Several top Federal Energy Regulatory Commission (FERC) commissioners also came to lend their support.

"We are true believers in wind," declared Linn Draper, CEO of AEP, the largest burner of coal in North America. "It's good for the environment, adds diversity to your portfolio, and reduces the risk of fuel price volatility."

Draper drew some disapproval, however, by asserting that there was a place for nuclear power and burning coal cleanly in the nation's energy mix. He gave a realistic assessment of wind's position in the bigger picture: It is a small but growing resource that isn't about to displace coal, oil, and gas anytime soon, if ever. Others, however, were quick to trumpet wind power as the ultimate replacement for fossil fuels. One speaker even called the 19th century the age of coal, the last century the age of oil, and the current one the century of wind.

Two FERC commissioners were also, surprisingly, champions of wind. Commissioner Bill Massey stressed that he intends to make energy markets fair to consumers. He explained that an essential element of that strategy is to ensure that renewable energy sources like wind can compete on an even playing field with traditional sources.

FERC Commissioner Nora Mead Brownell reinforced Massey's comments. "Wind is the bright light in a dismal energy landscape with 10% growth in 2002 during a time of massive drop in market cap for energy as a whole," she said. "We need to end discrimination on the grid against new technologies."

Rookie year

As a sign of the industry's growing maturity, GE Wind announced the results of its first year in the business: $2 billion in orders and commitments. The figure includes turbine sales to offshore wind farms in Ireland and Cape Cod as well as big projects planned for Spain, Japan, and at least five sites throughout the U.S. for FPL Energy. "Harnessing the power of the wind for clean energy production is a concept that is gaining tremendous momentum worldwide," asserted Steve Zwolinski, president of GE Wind.

While Zwolinski was clearly thrilled with his company's first-year stats, he cautioned that the industry needed to eventually reduce its reliance on subsidies such as the production tax credit (PTC) if wind is to become competitive. He envisioned a system of liquid green credits that could be interchanged between utilities or cashed in. Shell Wind Energy CEO David Jones concurred that subsidies would eventually have to be phased out. "The big challenge to this industry is achieving cost-competitiveness without subsidy," he said.

Gusty subsidy stifling U.S. market

To ensure the industry's survival in the short term, however, many presenters called for further PTC extensions as a means of keeping its expansion on track and bringing about market stability. One talk covered the recent cycle of rapid buildout of wind turbines followed by stagnation: The federal government issues a PTC, and developers rush to complete wind farms before the deadline; many wind farms are built; the PTC expires, and almost all wind development ceases; Congress finally issues a PTC extension, and another flurry of wind development takes place; and so on.

As a result of this uncertain climate, the U.S. added around 2,000 MW of wind power capacity in 2001 but only about 400 MW in 2002 as the PTC expired. But now that the PTC has been reinstated, AWEA expects another good year--around 1,500 MW of new installed capacity. Political uncertainty, however, is dampening more rapid growth.

"One of the major obstacles to wind expansion is the fact that the production tax credit continues to be allowed to expire," said AEP's Draper. "We need either a multiyear or a permanent PTC to bring stability to the marketplace."

A presenter from wind turbine manufacturer NEG Micon said he believes a 10-year PTC would make the U.S. the biggest wind power market in the world by far. As an example, he cited Germany, whose stable energy policy has made it the world leader in the field, enabling the employment of 40,000 people. But in the absence of a stable PTC in the U.S., financing is harder to come by, and most of the big European wind firms are playing a wait and see game with the American market.

Vestas, for example, has postponed plans to open a wind turbine manufacturing facility in the Pacific Northwest due to political uncertainty. This new factory looked to be a go until two events changed the picture: the result of the last presidential election and the financial downturn. Now Vestas awaits "the right signals" before it moves forward. "Consistent policy equals jobs and growth," said Vestas CEO Svend Sigaard.