The Wind Industry: Past, Present, Future Randall Swisher Power Test Conference February 15, 2010 The Past: A Brief History of the Wind Industry Growing a New Industry A complex mix of technology, policy and business/economics must all work together In the Beginning: A Vision 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 nations electricity In the Beginning: A Vision Late 70s Policy Provided a Foundation Federal Wind R 3 years ahead of schedule 305 GW 20% Wind: 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) 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 Cost Natural Gas Savings 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 Challenges to Achieving Winds Potential Key Barriers to Achieving 20% Wind 1. Need for long-term stable federal policy 2. Need for transmission infrastructure 3. Need to reshape the electric system to manage that percentage of a variable resource The Longer Term Policy Challenge Inconsistent federal policy has been the single biggest constraint on growth of the U.S. wind industry 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 OptionsLong-term Policy Options 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 winds 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 summers energy legislation 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 20% Wind: 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 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 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 AEPs Conceptual Transmission Plan to Accommodate 400 GW of Wind Energy Managing Winds Variability Wind is an energy resource, not a capacity resource Wind Power output is “variable” not “intermittent” There is a cost to managing winds variability That cost depends upon system characteristics, but is generally low Wind Integration Lessons Learned about Wind Integr