Indirect Competition for Wind Power

Within the U.S. market, indirect competition from the transmission line industry and programs focusing on the reduction of end-user electricity consumption vie with wind power.  Increasing the transmission efficiency and decreasing energy consumption in the U.S., can also provide electricity for a growing U.S. demand.

Within the United States, national and regional power grids are near full capacity.  More efficient transmission technologies cut down on the energy lost as utilities transmit electricity from their power plants to their customers.  One such technology, created by the New York Power Authority (NYPA), will raise the state’s capacity of energy lines by 192 MW and enable the transfer of power from overloaded lines to under loaded ones with the flip of switch.  The NYPA and a consortium of utilities are investing $95 million dollars in this project .  That equates to approximately $500,000/MW, about half as expensive as the wind industry standard’s capital cost estimate of $1 million/MW.

Another up and coming technology called real time ratings will provide up to date information about energy resources for California.  This technology gives current information to system operators allowing them to transfer power from areas with a surplus to needy areas, avoid bottlenecks, and keep regional systems from experiencing blackouts.  Real time ratings provide the equivalent of 390 MW of electricity to the state of California .  A direct cost comparison with wind power cannot be made as of yet.

As well as working on advances in transmission, manufacturers in the U.S. produce energy efficient appliances, home electronics, lighting and much more for at-home use by the consumer.  Energy Star, a American government-backed program that helps business produce energy efficient products in the U.S., helped save $6 billion and enough energy for 10 million homes in 2002 .

Federal Governments Reliance on Fossil Fuels

Similarly, a systemic political challenge faces the wind energy industry is its status as the 'new kid on the block.'  Except for brief periods of interest in renewable energy in the 1980s, the federal government has retained its primary focus on fossil fuels, showing little true commitment to diversify energy portfolios by shifting priorities away from oil, coal, and natural gas toward renewable sources. 

This is important to note because the government shapes the market through research and development funding, energy regulations which influence transmission and generation planning, and tax credits.  In all of these areas, the influence of the old boy's network that determines energy policy in Washington DC can be felt throughout the entire Department of Energy (DOE) operation through budgetary expenditures. The size of the DOE Office of Energy Efficiency and Renewable Energy budget for wind energy is less than half that of hydrogen technology and is 13% of the budget for 'clean' coal technology, which represents a general decline of funds for wind energy R&D of 5.5%. This limits the National Renewable Energy Laboratory and other federal programs to act on plans that would significantly benefit the wind energy industry's competitive position with fossil fuels. The U.S. relies on fossil fuels for 85% of the energy it consumes, and this percentage is likely to increase by 2020, according to the Energy Information Administration.

Despite this situation on the federal level, regional initiatives have made it easier to take advantage of wind resources and install utility scale wind farms. According to the Union of Concerned Scientists' study on wind energy's potential analyzed with state level policies, the most significant potential exists in the Midwest, California, Nevada and the Northwest, and in the Northeast, although to a much lesser degree.

     CATHERINE - shorten this section, just present an analysis of the best markets because of policies and transmission lines and utilities and put other info in the appendix.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

United States regional areas of promise

The West and Northwest

The West and the Northwest in particular have areas with impressive wind resources. Nevada's RPS has an ambitious plan in relation to other states.  Their RPS requires that, by 2003, 5% of electricity sales are required to come from renewable sources, growing 2% biannually to 15% in 2013.  California is considering an RPS, yet its energy sales from renewables already ranks third in the nation. 

Washington state Governor Gary Locke announced the formation of the Northwest Energy Technology Collaborative (NWETC) in August 2002.  NWETC is a joint, voluntary effort of business, government, nonprofit, industry, and educational institutions in the PNW: Avista Corporation, BPA, PNNL, Spokane Intercollegiate Research and Technology Institute, and the Washington Technology Center.  The Center will invest financial and in-kind support for the next five years to accelerate the growth of the region's energy technology industry.  WTC could receive and benefit from this support.

"The cost for wind power is very competitive with pretty much any other option," says Jan Johnson, spokesperson for Pacific Corp. Power Marketing of Portland, OR, which purchases electricity and distributes it to various utilities.  Pacific Power Marketing is hoping to expand Northwest wind projects because of positive customer response.

Public utilities in the northwest are also recognizing the value of wind resources.  Energy Northwest, in Richland, Washington is building 37 wind turbines southeast of Kennewick.  The project, called Nine Canyon, generates enough electricity to power 12,000 homes, making it the largest public power wind farm in the U.S.

The Midwest

Iowa has an Alternate Energy Production Law in place that has resulted in about 250 MW of wind installed to date, representing 2% of 1999 energy sales.  Minnesota has goals to install 425 MW of wind by 2002, and 400MW more wind by 2012, which would represent 4.8% of 2012 sales.

On June 1, AWEA and Wind on the Wires submitted a pro-forma “Midwest Wind Development Plan” to the Midwest Independent System Operator (MISO) as part of their “long-range” transmission planning process.  The “Plan” calls for a study of the transmission expansion requirements to build 10,000 MW of wind in the nine state Western Midwest region (Illinois, Iowa, Kansas, Minnesota, Nebraska, Oklahoma, North Dakota, South Dakota, and Wisconsin) by 2007.  Matt Schuerger of Wind on the Wires put the plan together with input and advice from the industry.  Clipper, Energy Unlimited, enXco, FPL Energy, GE Wind, Wind Utility Consulting, and Zilkha all officially signed onto the “Plan.”

The Northeast

New Hampshire and Vermont are each considering an RPS, while Maine's RPS has already resulted in the share of its energy sales from renewables rising to 30%.  Connecticut's RPS stimulates investment in wind gradually with incremental goals, rising to as much as 6% of energy generation by 2009.  Massachusetts set its goal to improve sales from new renewables, (in addition to its existing 7% of renewables), to 0.5% per year to 4% in 2009.  It has had an RPS since 1997, and represents one of the more advanced places in the country with respect to the maturity of its policies.  New Jersey has adopted a standard with an expectation of 1% by 2006; +0.5% /yr to 4% by 2012.

Energy Sector 

Differentiate the traditional energy sector, grid system and centralized plants, from the decentralized, distributed energy of renewable energy technologies  Catherine- I’m do not understand the centralized vs. decentralized situation very well

Diagram 1:  Players involved in the Stateline Project

Source: httpwww.fpl.comnews2000contents00154.shtml May 25th
            Interview with Raquel Bennet

Chart 1: Cost Comparison of Energy Technologies

However, one can see from the graph that wind power is extremely cost-effective when compared with all the other power producing technologies.  This graph also reflects the price of wind power when supplemented by the federal PTC.  The PTC enables wind to be more cost competitive.

 Table 1: Wind Farms Authorized by ANEEL

June 2002

World Market Share of Wind Turbine Manufacturers for 2002

Raquel Bennet form Seattle City Light
April 28th, 2003
By Gabriel Scheer and Josh Cochran

Seattle City Light’s green pricing program

• Began the program before state law in 2000 required such programs at all state utilities; decided they wanted to meet load growth with renewables only (at time of major dot-com growth, etc.)
• Income
• $300,000 in reserves right now
• 40% goes to school projects
• Installing solar panels
• 60% goes to resources that are more cost effective
• New Tech
• Market Transformation
• These other resources cannot be more than 2 times as expensive as power from the Stateline project
• Marketing

• Booths and Fliers
• Restricted by inability to use funds collected from non-green pricing customers to promote green pricing
• Green pricing has almost 1% of SCL customers

Stateline

• Requested proposals in 3rd quarter of 2000 and received 59; Stateline was the best

• SCL outsourcing
• SCL only builds through contractors

• They used wind and other consultants to help them decide which of the 59 proposals was best
•  The power tree
• FPL owns Stateline
• PPM buys the electricity
• SCL and BPA buy from PPM
• Many other utilities buy from PPM as well
• Why?à Every utility wants to have some renewables
• RPS will eventually pass and utilities want to be prepared
• RPS keeps down variability costs and costs of a crisis
• Many contracts signed in 2000/01 during energy crisis as people were caught short.  Some output wasn’t sold immediately; market crashed soon after Stateline went-online, so it sold on the market. 
• Builders had to build around ground squirrel nests since ground squirrels are protected in Oregon
• Instead of the planned 300MW, they only built 264MW, but more are planned to bring total up to 300MW

Drivers for SCL

• City Council sets goals and SCL follows
• SCL tries to leave the smallest possible footprint on environment – part of local culture
• Looking for a more diverse portfolio (RPS)
• Wind and Hydro vary with wind and run off, respectively
• Must have more diverse portfolio to keep energy supply more constant and predictable
• An RPS keeps prices from rising in a crisis
• With RPS, wind likely to rise – cheapest, currently most technologically advanced
• Federal Tax Credits
• New 5 year tax credit on the table

Comparing Different Technologies

• Wind
• Cheapest
• Provides only 1/3 of capacity per year (largely due to wind variability)
• By putting turbines at many different sites, intermittency can be reduced
• Geothermal
• Researching to find the right spot is very expensive
• Most spots are in National parks and no one wants a geothermal plant there
• Provides steady flow of energy

• Solar
• Extremely!! expensive in Seattle, not cost efficient at all
• Bio-Digesters
• Creates energy using cow manure
• Needs to be large scale to work
• Can provide enough energy for farms
• Positive bi-products
• Clean air
• Clean water
• Fertilizer
• Landfill Gas

Potential Weather Change or Technology

• Mooncell technology – Check out website
• Technology getting better to mitigate variability and to potentially store power.
• There are discussions to form regional transmission commissions/organizations so one directorate controls transmission.
• Storing wind energy for dead times
• Both for utilities and for individual farms/residential owners
• The Wind Turbine Company
• They have Federal Govt. grant
• They could be future of wind turbine industry

Referral

• Heather Rhodes-something
• President of NW SEED
• Tell her Raquel Bennet sent us over
• 206-267-2211
• Lisa Rennie
• Works next to Raquel
• In charge of marketing for SCL

Miscellaneous

• SEED
• They have federal grants
• They install 10kw wind turbines
• Average Seattle home uses approx. 800kw per year

Developer Loan

• Banks require developers have contracts with utilities who will agree to buy once project is completed
• Utilities want lots of safeguards in the contracts
• Conservation Goals
• Most potential is in commercial sector, the residential has been tapped out
• Transmission Lines
• One has to pay for space on the power line to send energy
• Most do not run at capacity even though often contracted out 100%
• If contracted out, but not being used, the lines can be used by others
• Stateline uses transmission lines from Pacific Corp.
• BPA own 75% of transmission lines
• Hydro power was 90% of SCL’s power before year 2000
• SCL looking at low-speed for investment – but small generational power so not likely worth much to SCL
• SCL won’t need more power till at least 2005 or 6.  In meantime, looking at renewable option
• SCL started conservation in 1983 – costs $ but used to save ~ 6 MW/yr (largely residential).  Next push will be commercial. 

Ken Deering of the Wind Turbine Company
Vice President of Engineering
April 29, 2003
by Alice Slovic, Catherine Pappas, Gabriel Scheer, Josh Cochran

Wind energy production without subsidies, what would it take (ie What are the limitations for wind in the marketplace)?

• technical
• policy/institutional

Technical

• capital cost (for installation and actual machine) is three fourths the cost of the system; there are some operation and maintenance costs and the cost of leasing the land.
• debt financing is frequently based on 10 year package
• conversion efficiency is pretty good – can’t get much farther with that (electrical/mechanical conversion of energy)
• another way to look at it: conversion efficiency isn’t necessarily applicable to wind because wind does not burn any fuel
• thermal efficiencies is the baseline - fuel cost
• *goal is to reduce cost relative to energy production*
• energy capture function of swept area, metric commonly used is swept area/mass resting on tower, if you can improve that ratio you can improve the cost of the system
• Swept Area

• Vesta V47 model is 660 kW with a 15.9 kilo/m3 swept area
• A low number means less mass needed to cover projected area of rotors – more efficient
• WTC’s new design is 9 kilos/m3

• Ken claims that the 3-blade technology has reached a plateau – but costs are going down because of economies of scale
• Key to WTC’s design isn’t the 2-blade or downwind design (see below), but the hinged rotor design

Hinged Rotor (Flapping) Design

• Teetered design – blade can teeter on axis
• Blades are separately hinged so they can flap
• But they aren’t the first to have a teetered design either – first was in 1940
• Turbine design needs to account for out of plane force.  If blade can flex, then the effect of this force is mitigated.
• Out of plane bending moments affect all parts of the turbine – blades, support system, rotor shaft, bearings – cost reduction of WTC’s 2-blade design comes from the fact that reduction of the strain on the turbine means that the cost of the structure can decrease (less structural demands)

Policy/Institutional

• air quality enforcement is an issue, lax enforcement means lower operating costs for coal and gas, stricter enforcement means higher costs for polluting generation plants.  $2 Billion subsidy for coal and methane.  Ironic, govt. pays health care for “Black Lung” treatment.
• everyone in the energy business receives some sort of a subsidy
• if got rid of these subsidies, then wind could compete directly
• in an ideal world the money paid to deal with the externalities (public health) caused by these energy generators would come from the same pot as the subsidy, which would stimulate more reflection on the use of the funds
• i.e. Centralia coal plant is out of compliance with the clean air act
• non rigorous enforcement affects the economics of a competing source
• Nixon, Carter and Bush senior all put into place Clean Air acts

Transmission

• since hydro facitlities drove the grid expansion, wind is in the same boat as hydro - it needs remote access to the grid to transmit power.  Location of wind sites is best where existing hydro lines can be used for energy generated from wind resources.
• the bigger strategic issue about transmission is not a major issue today at the scale wind is being implemented, but if wind would contribute 10% of the nation's energy, then there would have to be increased transmission capacity.

Competition from gas

• low capital intensity relative to coal (less than half of coal plant), short lead time to build are advantages of gas.  But you face the same thing with gas as with any fuel reliant source - how to move the gas to the plant from the source.
• Gas is 3 cents/kw, but that’s just the fuel and does not include capital costs

Reliability concerns

• a useful life of 10 to 20 years is required for wind.  Think about history, in the 'gold rush' period, 1983, the extremely attractive conditions to use wind as a tax shelter spurred the installation of inferior equipment that was under-engineered and under tested. No one could offer a warranty except Vestas, subsidized by the Danish government. Since the Vestas machines would be fixed and repaired, the Danish turbine manufacturers dominated the market and by 1990 other poor manufacturers (no gov’t support like Denmark) had dropped out of the market.  Some German companies and one American company remained.  The Danish subsidy is no longer in effect.
• WTC’s obstacle to bringing the 2-blade design to the market is overcoming reliability concerns because it is new technology.
• A company called Zon(spelling?) copied Vestas design.  Enron subsidiary bought Zon, GE bought Enron subsidiary.  Thus, GE wind turbine is a copy of the Vestas’ reliable wind turbine.
• At least a 10 year life of turbine, probably twenty

Birth of the 2-Blade design

• When Ken (and I think the president of WTC) worked for FlowWind in the 80s, management decided that they couldn’t compete with the Danes’ 3-blade design and therefore they should stop manufacturing and just buy from the Danish
• Ken became convinced that 2-blades were the way to go in 1989 and formed WTC in 1990.
• WTC is not the first to make a 2-blade design
• Pioneer 2-blade designs: United Technologies in 1982 – successful technically but no longer operating because company lost interest and therefore no longer a source for spare parts.  First turbine in Sweden in 1981.  Second in Wyoming in 1982. 
• ESI also had a 2-blade design
• 3-Blade will only extract 2-3% more than 2-blade for the same swept area (diameter).
• 2-Blade can work fine in high and low wind speed areas

Downwind design and hinged blades/rotor

• WTC can’t take credit for inventing the downwind design
• Smith Putnam in 1940 was first inventor of hinged blades/rotor

Instability of companies

• this is a major repeating theme in Ken's descriptions of why great ideas were not able to go anywhere in the business. the level of bankruptcy of companies in the 80s was high, the market narrowed, designers responding to RFPs could only follow the three blade rigid design because standardized meant less risk.
• the inability of companies to stand behind their systems over time to maintain and repair them meant loss of investment in turbines that would stop working or be taken down due to lack of care.

Costs

• economies of scale are reached by Vestas: they reduce the cost per system because of building over 1,000 machines per year.
• WTC would have to produce 200 machines per year to begin to be less expensive than Vestas.
• there are a series of cost trajectories with a new product, we could not reach economies of scale on par with Vestas for a long time, we need a pilot project of 20 or 30 machines as a next step.
• there is not really a limitation in terms of getting materials from our suppliers, the barrier would mainly be financing

Design for extreme events versus low wind systems

• design for four phases: start, run, shut down, stationary (park) in extreme winds
• a design driver is the once in 50 year extreme wind event -  industry standards dictate that this event must be accounted for in the design
• a low wind system that will be installed in a place without extreme events can be "resource and design matched": the opportunity is, if the confidence about the wind resource is there, to whittle down the design you don't need the capability (strength) in structure and therefore cost goes down.
• Best turbine site: No fluctuation in turbulence and no extremes.  Doesn’t exist.

Comments on NREL low wind program

• The low wind speed turbine program distinction is somewhat artificial. How do you sell the idea to Congress? If you use colors to show the wind resource, you can show that the enormous area of Class 4 with the annual average wind speed, it is not a difficult sell for a program level.
• you can tailor a machine for a specific wind regime according to the fluctuation in wind speed, turbulence, etc.
• It always comes back to basics. If the wind speed is diminished, the annual energy collected is lower so the basics of cost of machine still hold. The emphasis for low wind is a political sell, of recent years. Low wind turbine should be renamed "resource and design matching."
• I'm certain GE will respond to the RFP and be awarded a contract due to their political connections with DOE and the resources of the company to solicit government cost sharing for a program.

WTC business history and current opportunities

• long term warranty is a barrier to Pacific Power Marketing, although they want to be a first customer. The driver for the next step would be the ability to offer warranty. This would come from capitalization of the company. 
• steps in process to yield product:

• step 1: first machine was built at the Wind Technology Center, a 250 kW machine with large structural margins intended to prove the concept.  Turbine was 23 kilos/m3
• step 2: was to build the California machine in Lancaster with a 48 meter rotor with a ratio of 13 kilos/m3
• step 3: is to expand the rotor on the machine to a 60 meter rotor with 9 kilos/m3, using $5 million in additional equity investment in addition to the federal funding.
• step 4: then WTC moves out of the product development phase and into the commercialization phase if the company can find risk capital for a pilot project.
• Final Goal = commercial deployment

• currently WTC is a product development and design company but want a *lead* customer (someone willing to be the guinea pig)
• meetings with Hitachi, Nippon Steel, Kawasaki, Caterpillar, John Deer, Lockheed, UK aerospace
• contracts with California Energy Commission
• *WTC wants to sell equity ownership in the company to carry the design farther (step 3 and beyond)*
• affordable computing power and the Internet allows us to source from many places and do our work
• Buys turbine components from Machinist Inc. in Seattle and companies in California, Toronto and France.
• intellectual property code, written for the operating of the wind system, is pretty much secure since no component maker has access to the whole product
• GE sent representatives to check out WTC’s first prototype – there is an ongoing dialogue with them.
• Pilot project potential location: Goldendale.  Gathering wind data for 2 years – wind resource is moderate, but good existing transmission line.
• Production/supply network is not a concern – would love to have the problem of not having enough resources to meet demand
• They use two firms to simulate for their turbines.  Windward in Salt Lake City, which uses the “Adams” structural code.  Also, Garattson & Partners in U.K. who
• Currently funded by NREL, California, Dow Chemical and some other private investors.
• NREL put out request for proposals in 1994.  10 respondents were selected for Phase 1 in which they were to prepare an elaborate proposal.  3 were selected for Phase 2.  After six months, one company dropped out leaving WTC and Zon.

Other Contacts

• Dave Simms, the contract manager at NREL for WTC

Mark Aalfs of Tacoma Power’s EverGreen Options
Date
By Gabriel Scheer

History

 - Two main motivating factors for EverGreen Options starting Earth Day 2000:

• Late 90’s, energy crisis brought up need for energy conservation, talk of privatization and the need to compete for the retail choices of customers
• Driver - wanted to differentiate their utility
• Driver - wished to support conservation – reflected citizenry
• Post-crisis, the need for regulation heightened because of Enron and energy traders  - reduced discussion about retail choices for power

Current

 - Participation

• Relies on proactive consumers (to sign up) which, in turn,
• Depends heavily on marketing
• Budget cuts have limited marketing

• National rate is around 1% “green” power in portfolios
• Tacoma Power is around 0.4% after marketing it heavily for one year
• Currently purchases 1 MW annually from BPA, w/ a two year contract

 - Doing the economics

• Who does the economics how they come up with the numbers matters a great deal
• Capital cost if spread over the lifetime of the system may enable wind to seem like a better option
• Pulling costs apart, amortizing over a longer life would help wind's competitive position

 - New generation potential

• Tacoma Power is seeking Low Impact Hydropower Institute certification of a 3 small dams on rivers out on the Olympic Peninsula where dames are above fish runs, i.e. the Nisqually River (http://www.lowimpacthydro.org/)
• Due to cost of certification ($25000), difficult for utilities to generate own Green power
• BEF/middlepeople essential to ability to offer Green power
• BEF operates between the producer and the supplier in a position that is high profile for the public eye.
• BEF operates on a large scale that makes green power cheap enough to compete

 - “Green Power” options

• 2 ways to buy power: 
• Contracting for EP (environmentally preferable) power through Bonneville Environmental Foundation or someone similar
• Gives more credibility this way (than purchasing from the market or generating internally)
• BEF can bundle “Green” power sources – wind, power, hydro, etc, then market and broker it.
• Purchase Green Tags on the market

National Issues

 - Regional variations exist, particularly w/ wind, which needs wind and grid access
 - Hydro-reliant states are more likely to have the transmission capacity to handle wind (given hydro production is often in more rural areas, similar to wind)
 - Combo of hydro and wind could reduce wind’s variability problems

Technology/Long-Term Potential

 - Wind might have better costs if the costs of infrastructure are subdivided

• For example, towers will likely last longer than the blades and generator

 - Mid to long-term, he thinks wind is a “very viable resource”

• Relatively simple wind harvest methods
• Advanced technology
• If a carbon tax were added to carbon-generating fuel sources, wind could easily compete
• If the nation focused more on incremental steps instead of hydrogen, we could see wind take off

Miscellaneous

 - WTC – he doesn’t know much about them (besides that they exist)

• He’s confident that technological advances are still likely, and thought it possible that WTC could be working on one of the next advances

Biggest Lesson

 - Middlepeople (BEF or similar) are critical to create scale necessary for renewable power generation growth!!!   (biggest lesson for Gabriel, anyway)