FEDERAL POWER AGENCY ISSUES
LARGEST WIND SOLICITATION EVER  

Request for 1,000 MW of New Capacity Signals
'Breakthrough' for Wind in Pacific Northwest, U.S.

WASHINGTON, D.C. February 23, 2001 -- The Bonneville Power Administration's (BPA) decision to solicit proposals Feb. 21 for 1,000 megawatts (MW) of new wind energy generating capacity is a "major breakthrough" for the increasingly-competitive clean energy technology, the Washington, D.C.-based American Wind Energy Association (AWEA) said today.

The BPA request for proposals (RFP) is a clear signal that the federal agency recognizes the potential of wind energy to provide near-term, stably-priced electricity supplies as California and the Pacific Northwest grapple with gyrating energy prices and power shortages, AWEA said.

It said the new wind plants that should result within two to three years, more quickly than other new power plants can be built, would provide enough electricity for 150,000 households or 400,000 people.

According to BPA, "Wind projects are particularly attractive because they can come online in a relatively short time (24 to 30 months), offer power that is competitively priced with other sources such as combustion turbines, are relatively easy to site and expand, have low environmental impacts (including no carbon emissions) and are highly desirable to buyers of 'green' power."

AWEA executive director Randall Swisher said the BPA solicitation, which amounts to roughly $1 billion in new business for the wind industry, "takes wind energy to a whole new level in the Pacific Northwest and the United States.  What BPA is saying is that wind energy has arrived as a recognized source of bulk electricity supply."

Wind energy has attracted increasing attention in recent years as the fastest-growing energy source worldwide, expanding at an average clip of 29% over the past five years, but the BPA solicitation is still quite large. In addition to the 1,000-MW RFP, the agency is buying or has under consideration nearly 300 MW of wind power from wind projects already installed or under development in the region.  If the power agency were a country, the 1,300 MW of wind energy would place it fifth in the world in wind capacity (behind Germany, the U.S., Spain, Denmark).

Although wind energy is intermittent (wind plants produce no electricity when the wind is not blowing), it has many other benefits that make it a good choice for California and the Northwest as the region's energy crisis intensifies:

Wind is highly compatible with natural gas -- gas plants can be turned up or down as needed to match changes in the wind energy supply.  And adding wind to gas plants helps to conserve natural gas supplies, easing pressure on gas prices.

Using wind power when it is available helps provide opportunities to take aging fossil-fueled plants off line for needed maintenance or to comply with air pollution limits.

Wind energy is abundant, with large resources located throughout the West.

         "With power supply looming as a critical issue in the region, wind is obviously an attractive choice," Swisher said.  "We are just beginning to recognize its true potential."

Relevant background information about wind energy in the U.S. and the world.

Growth of the Wind Energy Industry

Total worldwide wind capacity today is approximately 17,000 MW, enough to generate about 34 billion kilowatt-hours of electricity each year.  This is about the same amount of electricity as 5 million average California households (containing 12.5 million people) use.

Wind energy was the world's fastest-growing energy source during most of the 1990s, expanding at annual rates ranging from 25% to 35%.  In 2000, about 3,500 MW of new wind capacity (close to a $4 billion investment) was installed around the world, but only 53 MW of that total, or a little more than 1%, was installed in the U.S.  However, AWEA expects as much as 2,000 MW of new wind capacity to be installed in the U.S. this year.

Leading states in terms of installed wind capacity today are California (1,646 MW), Minnesota (272 MW), Iowa (242 MW), and Texas (188 MW).

U.S. wind potential is enormous -- many times the amount installed.  California's potential, for example, is conservatively estimated at 5,000 MW of wind capacity.  Other western states have much larger potential -- e.g., Wyoming has more than 10 times California's.  The U.S. is, quite literally, a "Saudi Arabia of wind," with vast resources throughout the Plains states.

Market Drivers Behind Wind Energy's Growth

(1) Federal government policy:  The federal government provides a tax credit of 1.5 cents per kWh (adjusted for inflation) for electricity generated by a wind plant during its first 10 years of operation.  This credit is intended to "level the playing field" for wind, which must compete with other energy industries that receive billions of dollars in federal subsidies each year.  The wind energy credit will expire at the end of this year unless it is extended by Congress.

(2) State government policy:  Several states, as part of electric utility restructuring legislation, have enacted policies to encourage clean energy sources like wind.  The state of Texas, for example, has passed a law requiring the construction of 2,000 MW of new renewable energy generation by the year 2009, of which wind is expected to capture a major share.  New wind projects of 160 MW, 208 MW, and 82.5 MW have been announced in Texas within the past few months.

(3) Declining costs:  The cost of producing electricity from wind energy has declined by more than 80%, from about 38 cents per kilowatt-hour in the early 1980s to a current range of 3 to 6 cents/kWh (levelized over a plant's lifetime).  In the not-too-distant future, analysts believe, wind energy costs could fall even lower than most conventional energy sources, reaching an unsubsidized cost of 2.5 cents/kWh.

(4) The green power market:  As the electricity market becomes more competitive, utilities and other power suppliers are looking for ways to differentiate their products.  One of the best ways to do that is to offer "green power" -- electricity from clean energy sources like wind -- at a premium price.  Today, over 190 utilities nationwide are selling wind-generated electricity as part of green power programs, and consumer demand for green power (even though still very small) is beginning to result in the building of new wind power projects, including some in southern California.

Clean Energy Policy Options

(1) Renewables Portfolio Standard (RPS):  The RPS is a "minimum content requirement," which specifies that a certain minimum percentage of electric power must be generated from renewable energy sources (wind, solar, and others).  Typically, RPS legislation provides that the minimum percentage increase gradually over time to encourage the sustained, orderly development of the renewable energy industries.   Several states, including Texas, have enacted RPS laws, and the concept is also being considered by the U.S. Congress.  More information on the RPS is available from http://www.awea.org/policy/index.html#RPS .

(2) Production Tax Credit (PTC):  The U.S. government currently provides a tax credit of 1.5 cents per kilowatt-hour (adjusted for inflation) for all the electricity generated by a new wind plant during its first 10 years of operation.  Under current law, the credit is scheduled to expire at the end of 2001.  The American Wind Energy Association (AWEA) is seeking its extension for at least five years.  More information on the PTC is available from http://www.awea.org/policy/index.html#PTC .

(3) Incentives for Small Wind Turbines:  Tax incentives or rebates help make the purchase of a small wind turbine for household use more attractive to potential buyers.  California currently provides a rebate of up to 50% of the purchase price of a small turbine, and that has helped to sharply increase demand for the units in the state.

(4) Disclosure of Energy Sources:  AWEA also supports "disclosure" laws, which require sellers of electricity to inform customers of the sources of energy (coal, nuclear, natural gas, etc.) that are used to generate the electricity.  Such information is important for consumers to be able to make intelligent choices in a competitive marketplace.

(5) Fair Transmission Policy:  The nation's electricity transmission system operates based on rules that were designed to fit the characteristics of fossil fueled power plants.  Congress should take appropriate steps (including guidance to the Federal Energy Regulatory Commission and the emerging Regional Transmission Organizations) to ensure that wind energy is not disadvantaged in the market simply because it is an intermittent power source.

Benefits of Wind Energy Development

Wind energy provides both environmental and economic benefits.

Windy counties profit from wind development through:

(1) Tax Payments: Every 100 MW of wind development generates about $1 million in property tax revenue.  Development of another 2,000 MW of wind this year will mean $20 million annually in tax revenues to rural communities.

(2) Jobs:  Every 100 MW of wind development creates about 500 job-years of employment.  Installation of 2,000 MW will result in 10,000 job-years.

(3) Payments to landowners: The development of 2,000 MW in the U.S. will mean annual payments of approximately $4 million to farm and ranch landowners.

(4) Stable electricity prices: A recent study (January, 2000) found Iowa's electric utility customers could save over $300 million over a 25-year period if a proposal to meet 10% of the state's electric demand through wind energy is adopted.  The savings result because the cost of fossil fuels is expected to rise over time, while wind's costs decline.  Savings in California, where prices have skyrocketed because of supply constraints, would be enormous.

(5) Reduced emissions of pollution and greenhouse gases: A single 660-kW wind turbine will displace emissions of 1,100 tons of carbon dioxide (the leading greenhouse gas), 6 tons of sulfur dioxide (the leading component of acid rain), and 4 tons of nitrogen oxides (the leading component of smog) every year, based on the U.S. average utility fuel mix.  375 acres (more than half a square mile) of forest would be needed to absorb the same amount of CO2.

Quotation

        "Wind energy is a clean, domestic electricity source that is not subject to the sorts of supply constraints and price spikes we have seen with natural gas.  The Pacific Northwest has flourished over the years because of low-cost hydropower -- wind energy can provide the same benefit to much of the Western U.S." -- Randall Swisher, AWEA Executive Director.

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AWEA, formed in 1974, is the national trade association of the U.S. wind energy
industry. The association's membership of more than 700 includes turbine
manufacturers, wind project developers, utilities, academicians, and interested
individuals from 49 states. More information on wind energy is available from the home page
of the AWEA web site: www.awea.org 

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