Even with oil prices marching toward $70 a barrel, most alternative energy sources require heavy federal subsidies to allow producers to turn a profit. Wind power, though it still enjoys subsidies, is one of the few that is becoming economically competitive in its own right -- thanks to rising electric power costs in many parts of the world and technological advances in the design and manufacture of wind turbines.
As a result, total wind power generation capacity in the U.S. is expected to grow by about a third this year. But developers of wind power have begun to confront other barriers to the production this relatively cheap, clean renewable energy source.
Take the case of Jim Gordon, a private developer whose company, Cape Wind, has proposed building one of the largest and most ambitious wind projects in the U.S. -- the first offshore wind farm in the country. After four years of design and planning, Cape Wind is well on its way to building an $800 million, 420-megawatt, 130-turbine wind farm in Nantucket Sound offshore Cape Cod, Mass. The company says the project will supply about three-fourths of the power needed for Cape Code, eliminating about 4,000 tons of sulfur dioxide, about 1,000 tons of nitrous oxides, and about a million tons of greenhouse gases. The company has completed detailed engineering studies for the project. A 3,800-page Environmental Impact Statement, involving three years of study and 17 federal and state agencies, is awaiting final approval from the U.S. Army Corp of Engineers.
If approved by the Army, the project still faces one major hurdle. The neighbors don’t like the way it looks.
“People come to Cape Cod for natural beauty and the unspoiled horizon, and they’re not going to go there to see a power plant off the beaches,” said Audra Parker, assistant director of the , which has mounted a campaign to stop the project. “Our argument is that a lot of people do have an objection to the hard cost impact on property values.”
The Alliance is a well-organized, well-funded group of local residents who have been working to stop the Cape Wind project since it was first proposed. It has organized opposition through public meetings, newsletters, press releases and challenges to rulings by various state and federal agencies in favor of the project.
Gordon has defended the project with and press releases as he continues to grind through the lengthy permitting process with state and federal agencies. He’s also working hard to counter the objections raised by the Alliance.
“These are unfounded fears from very wealthy waterfront homeowners who believe that Cape Wind will impact their quality of life,” he said.
The four years of civic war over the project has left the locals divided. A poll conducted in May found that, of those aware of the project, 39 percent opposed it while 37 percent supported it – a dead heat when accounting for the poll’s margin of error. Some 24 percent haven’t made up their minds.
If built, Cape Wind would be the largest offshore wind farm in the U.S. -– and could well provide a roadmap for other large-scale projects of its kind. Officials in New Jersey are reviewing several proposals for offshore wind farms along the Jersey shore. The Long Island Power Authority wants to install 40 turbines more than 3 miles offshore Jones Beach on Long Island.
Bird brawl
Ironically, opposition to wind power –- currently the most economical form of clean, renewable energy -- generally centers on environmental issues. Developers of wind farms typically face local concerns about noise and the esthetics of huge wind towers, which now approach the height of a 40-story building. Opponents also claim offshore wind farms will interfere with fishing, aviation, marine transportation and recreation.
Wind energy opponents also cite the high risk of birds being killed by the massive, swiftly turning turbine blades. Last month, officials in Alameda County tentatively approved restrictions designed to reduce bird kills from wind turbines in Altamont Pass about 50 miles east of San Francisco. Companies operating those turbines would be required to replace some turbines with more efficient units, and close down others for two months in winter during periods of heavy bird migration, among other measures.
Proponents of wind power say the risk of bird strikes has been overstated. The American Wind Energy Association showing that the leading cause of bird fatalities -– more than half -- is birds flying into buildings. Other major causes are cats, high tension lines, vehicles, pesticides and communication towers. Wind turbines cause less than one bird death in 10,000, according to the study.
Opponents of wind power have also found support in Congress, where Sen. Lamar Alexander (R, Tenn.) has made several attempts to limit the expansion of windmills. The Senate recently voted down his latest effort: an amendment to the energy bill that would have cut tax credits for wind projects and required six-months notice to local communities before a project could receive a permit.
Local officials are also setting up restrictions as wind installations spread. Some are designed to protect the value of neighboring property for generating wind power. One county in North Dakota, one of the windiest states, recently required that turbines be set far enough from property lines so that they won’t interfere with a neighbor’s ability to set up his own wind farm.
While the local groups debate the pro and cons, wind power is picking up speed worldwide -– especially in Europe. Today, Germany, Spain and Denmark have the largest installed base of wind generators –- with nearly 60 percent of the total worldwide wind power capacity of 47 gigawatts, according to Wind Power Monthly magazine.
Though Europeans are far ahead of U.S. in developing wind power, North America is beginning to get serious about large-scale installations. In addition to offshore projects, a group called Linekin Bay Energy has proposed building a 500-megawatt project in northern Maine – the equivalent of two or three good-sized natural gas power plants. Last year, GE Energy filled an order for 660 wind turbines for eight projects in Quebec with a combined capacity of 990-megawatts, which are expected to come online between 2006 and 2012.In May, GE said it expects to generate more than $2 billion in revenues from its wind energy operations this year.
The big driver behind the growth in investment is the falling cost of making electricity from wind. Over the last 20 years, the cost of generating electricity from utility-scale wind systems has dropped by more than 80 percent, according to the American Wind Energy Association. When large-scale wind farms were first set up in the early 1980s, wind power cost as much as 30 cents per kilowatt-hour. Now, new installations in the most favorable locations can produce electricity for less than 5 cents per kilowatt-hour.
There’s little doubt that higher coal and natural gas prices are helping to make wind power more competitive. Even where wind power is still not able to compete head-to-head with cheaper power sources in some locations, it’s getting close.
“We’ve had some large wind customers tell us that at a natural gas price of $5 per (million Btus), that wind is competitive without the production tax credit,” said John Rice, CEO of GE Energy. “That’s always a function of the actual project. But at $5, you’re in the hunt, no question.”
A drop in the oil barrel
But even if wind power becomes widely developed, it will do little to reduce the U.S. dependence on foreign oil. The reason is simple: very little oil is used to make electricity. Of the roughly 20 million barrels a day consumed in the U.S., only about 500,000 barrels -– or roughly 3 percent -– are used to generate power.
About half the power consumed in the U.S. is generated with coal, according to the latest figures from the Energy Information Administration. Next on the list is nuclear (20 percent), natural gas (18 percent), and hydroelectric (7 percent.) Taken together, renewable sources like wind, solar, biomass, etc. make up some 2 percent of all power generated.
Even though more than half of all wind power capacity in the U.S. has been installed since 2000, it still generates less than one percent of the power consumed in the U.S. And the American Wind Energy Association says it forecasts that level will reach less than 6 percent by 2020. That’s because wind power developer still face some significant obstacles -- beyond the objections of local residents.
For one thing, continued investment will depend on whether energy prices stay high: developers of wind power installations are looking at a 30-to-40 year investment. If natural gas prices fall over that period, a project that’s profitable today could be a money-loser ten years from now.
An apples-to-apples comparison of the cost of wind power and conventional coal- or gas-fired turbines is not simple. A lot depends on the specific characteristics of the wind installation. In locations where wind doesn’t blow all the time, for example, the amount of power generated is less than a comparable fossil-fuel-powered plant.
“If you have the choice between a natural-gas power plant that you can turn on and off upon your command with a wind power project that delivers electricity in a variable fashion at the same cost, you pick the gas plant every time,” said Ryan Wiser, a scientist at the Lawrence Berkeley National Laboratory who specializes in the economics of renewable energy.
Then there is the issue of transmission costs: some of the best locations for generating wind are far from population centers. Some areas simply have a better, more reliable source of wind power. Though , the greatest potential for wind generation can be found in areas where this is little demand for power.
“We have to acknowledge that where the wind is located is typically not where people are located,” said Wiser. “There’s a lot of wind in North Dakota, there’s just not a lot of people in North Dakota.”
That means a massive upgrade of transmission lines is needed tap those distant sources. The recent energy bill included provisions to expand access to the grid for wind power installations and upgrades power lines. Though the capital to build those lines initially would be borne by investors, electricity users would eventually have to pay the freight. So any head-to-head cost comparison of alternative sources has to include the cost of transmission to move wind power to its customers.
Still, of all the alternatives currently available, the cost of wind power is the closest to that of power generated from fossil fuel. And because the cost of conventionally generated electricity varies widely –- -– wind can be a cheaper source of energy than fossil fuels. While cutting pollution is a major benefit, economics are going to be the biggest driver of the future growth of wind power.
“Consumers want to do the right thing, but they don’t want to pay extra for it,” said Kateri Callahan, president of the .
‘Not your father's windmill’
Technology is also speeding the expansion of wind energy, which – after fire – is one of the oldest energy sources known to man. First introduced for irrigation and milling in Persia as early as the 7th century, windmills appeared in France and England in the 12th century and spread throughout Europe. But today’s windmills bear little resemblance to the quaint wooden structures that dot the landscape in picture postcards from Holland.
For starters, windmills have gotten a whole lot bigger. Using lighter, stronger materials, manufacturers are producing wind turbines that can carry blades some 34 meters long. The next generation is headed for 50 meters – making the total span about the length of a football field. Bigger blades mean more power per turbine, boosting output to something like 1.5 megawatts.
“This isn’t your father’s windmill,” said Rice. “The materials in the blades, the way the loads are handled, the gearing, the generators that exist now 60, 70 feet above the ground in the nacelle of the unit – it’s pretty sophisticated technology.”
Further efficiencies are coming from larger installations. Setting up 200 windmills at a time reduces the cost per unit from setting up just 5 units.
In the U.S., more than 90 percent of installed wind generation capacity is in just 12 states. But that concentration may be changing. Some 2,500 megawatts of new power is expected to be installed this year, expanding the total capacity by a third. The expansion is being helped in 18 states by what are called , which require utilities to generate a minimum percentage of their power from non-polluting, renewable sources by a target date. A similar provision on the federal level, calling for 10 percent of power generated from renewable sources by 2020, was approved by the Senate but dropped in the final version of the recently enacted energy bill. (The White House also opposed the idea, saying it would raise consumer costs and was better left to the states.)
Wind power is turning out to be a popular way to satisfy those renewable fuel requirements because it is already cost-competitive in many regions. But there’s no question that government subsidies still give wind power a substantial boost. In the U.S., the wind power industry enjoys the tailwind of a special tax depreciation schedule for wind turbines, and a 1.8 cent per kilowatt production tax credit for equipment used to generate wind power.
In Germany, by far the biggest generator of wind power with about a third of the world’s total wind power capacity, , passed in 2000, aims to increase the share of power covered by renewables to 12.5 percent by 2010, and to 20 percent by 2020.
Some believe government incentives are a mixed blessing. The latest production tax credit for wind power in the U.S., for example, expired in Dec. 2003 and wasn’t renewed until Sept. 2004. The result, said Rice was “a tremendous amount of dislocation in the supply chain because you go from feast to famine.”
“You had no action in the U.S. for 8 months,” he said. “What you had is suppliers -- the manufacturers plus our supply base -- building up all this inventory and not really sure when it was going to flow through. Then all of a sudden the floodgates open and for the next 15 months we’re working overtime.”
Congress renewed the tax credit through 2007 in the recent energy bill, helping to maintain the momentum behind the business. Some 90 companies in 25 states now make wind turbine compensation, according to the American Wind Energy Association.
And as manufacturers churn out more and more units, factories become more efficient and the cost of manufacturing falls further. As alternative energy equipment makers ramp up to produce those economies of scale, the industry has begun to consolidate around fewer, bigger players.
“The number of players who can afford to take these relatively big bets are becoming less and less,” said Steve Westwell, head of BP’s renewable energy business.