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wind energy policy, transmission & regulation
Wind Energy and Climate Change
A Proposal for a Strategic Initiative
Executive Summary
The United States faces a formidable challenge in seeking to reduce its greenhouse gas emissions to 1990 levels by the year 2010. Current projections indicate that it will fall far short, with emissions of carbon dioxide (CO2) from the electric utility sector alone exceeding 1990 levels by more than half a billion metric tons.
Wind energy is a clean, abundant U.S. resource that produces electricity with virtually no CO2 emissions. Given strong policy support, the wind industry can ramp up production rapidly and can, through displacing emissions from coal, make a significant contribution toward helping the utility sector meet its share of the 2010 objective. The American Wind Energy Association (AWEA) estimates that U.S. installed wind capacity can reach 30,000 megawatts (MW) in 2010 (compared to just 1,700 MW today), generating 105 billion kWh annually. This is enough electricity to meet the needs of more than 10 million homes, and to displace 100 million metric tons of CO2, or 18% of the utility sector's excess emissions.
This paper outlines a series of 10 policy steps needed to achieve the 30,000-MW goal, including in particular a 10-year extension of the existing wind energy production tax credit (PTC); a national renewables portfolio standard (RPS) of 10% by the year 2010; an enhanced federal wind research and development (R&D) program; and policies intended to facilitate rapid growth in the global wind market.
Taken together, these 10 measures constitute a proposed Strategic Wind Energy Initiative. In addition to helping the U.S. meet its greenhouse gas reduction goals, the Initiative will result in healthier air and water for millions of Americans and in the creation of tens of thousands of new jobs, as it propels the nation's wind industry to a strongly competitive position in the surging world market for wind equipment. The clean energy equipment manufacturing industry is likely to be one of the next century's largest sources of new manufacturing jobs--the World Energy Council has estimated that new wind capacity worldwide will total 180,000 MW to 474,000 MW by the year 2020, which equates to $150 billion to $400 billion worth of business. It is vital that the U.S. make a strenuous effort to compete in this rapidly growing field.
For all of these reasons, the proposed Initiative should be a component of a comprehensive climate change policy.
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Introduction
Currently, the United States obtains approximately 85% of its energy from fossil fuels, which emit large quantities of the atmospheric heat-trapping greenhouse gas carbon dioxide (CO2) when burned. The U.S. also derives 55% of its electricity from coal, the fossil fuel with the highest CO2 content per unit of electricity produced. From a global perspective, the U.S., with 5% of the world's population, is responsible for 23% of world CO2 emissions. If the U.S. is to provide leadership in dealing with the serious threat of global climate change, it must begin now to make a meaningful transition away from over-reliance on fossil fuels toward broader use of environmentally-benign energy resources.
Wind energy, which produces virtually no CO2 emissions,[1] has been long recognized as an abundant potential source of electric power. A detailed analysis by the Department of Energy's Pacific Northwest Laboratory in 1991 estimated the energy potential of the U.S. wind resource at 10.8 trillion kilowatt-hours (kWh) annually, or more than three times total current U.S. electricity consumption.[2] Given this vast, virtually untapped clean energy resource, and the fact that wind power is one of the lowest-cost power generation technologies, large scale wind power development should be among the highest U.S. priorities for consideration in meeting national CO2 reduction goals.
However, notwithstanding wind's very large potential, inherent constraints limit the amount of generation from any energy source that can be brought on stream within the near to medium term. Accelerating wind energy's contribution to our electric generation portfolio will require proactive steps.
The purpose of this paper is to examine wind energys capability to reduce U.S. electric sector emissions of carbon dioxide by the year 2010, to set forth a Strategic Wind Energy Initiative consisting of the policies needed to realize that capability, and to summarize the value to the U.S. of moving decisively to implement those policies.
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I. How
much can Wind Energy Contribute to Reducing Global Climate Change Emissions?
The United States is currently expected to fall far short of reducing CO2 emissions to 1990 levels by the year 2010, according to projections from the Energy Information Agency (EIA). In fact, emissions in that year from the electric utility sector alone (which produces about a third of the nation's overall CO2 emissions) are predicted to exceed those in 1990 by some 548 million metric tons (MMT).[3]
Every 10,000 MW of wind installed can reduce CO2 emissions by approximately 33 MMT annually if it replaces coal-fired generating capacity, or 21 MMT if it replaces generation from the U.S. average fuel mix.[4] The American Wind Energy Association (AWEA) estimates that wind energy, if encouraged vigorously, could reach 30,000 megawatts (MW) of installed generating capacity in the U.S. by 2010 (compared to current capacity of 1,700 MW). If this target is achieved, wind would reduce national CO2 emissions by 100 MMT annually, or more than 18% of the 548-MMT excess [based on displacement of coal-fired generation].[5]
A Cost-Effective Option
Wind technology provides an outstanding opportunity to cut carbon dioxide output at an extremely reasonable cost. Wind costs are expected to be among the lowest of generating technologies by early in the next century,[6] when most of the new wind capacity would be installed. Wind energy is already within a cost-competitive range if its cost is examined on a true life-cycle basis over the lifetime of a typical wind plant. The levelized cost of power from a wind project is now about 4.5 cents/kWh, compared with levelized coal plant costs of about 3.9 cents/kWh.[7]
The cost of avoiding carbon dioxide emissions with wind technology is currently about $6 per ton avoided,[8] and will decline even further over the next decade, perhaps even to zero if wind achieves cost parity with fossil fuels, as the industry is now seeking to do. The goal for wind technology is to have winds total costs equal to the variable cost (i.e., the fuel and O&M costs) of its fossil fuel competitors. That goal can be reached within 5-10 years if a high growth path for wind is chosen. Over recent years, wind technology has consistently beaten predictions about future cost improvements.
30,000 MW--An Achievable Goal?
To reach 30,000 MW by the year 2010, installed wind capacity would have to expand at a compound growth rate of 25% annually. This rate is achievable, but must be stimulated by policies that are steady and consistent[9] so that investment in new production capacity can be made as needed. We know that it is achievable because:
- The global wind industry has been expanding at a similar rate or higher for the past five years. While the U.S. wind market has stagnated since 1991, the world market has accelerated swiftly enough to make wind the world's fastest-growing energy technology. Capacity additions outside the U.S. jumped by 40% in 1994, 65% in 1995, and 35% in 1996, and the pace of growth is expected to gather momentum again in the 1999-2000 time frame.
- AWEA's detailed global market projections, which are conservative, indicate that new worldwide installations will total 30,000 MW in the next 10 years, which again suggests that the Strategic Wind Energy Initiative's goal of boosting U.S. installations by 28,300 MW over the next 13 years is ambitious, but achievable.[10]
- In 1991, the European Wind Energy Association set a goal for European installations of 4,000 MW by the year 2000. That target has already been achieved; recently the Association established new goals, of 8,000 MW by the year 2000 and 40,000 MW by 2010.[11]
European domestic policies have fueled strong market growth in Europe and elsewhere[12] --the U.S. can do the same for its domestic market while also encouraging continued rapid growth in the global market.
New wind projects can start going up within one to three years after new policies or incentives encouraging wind are put in place. Wind turbines themselves are modular and are composed of factory-built components which are already mass- produced or can be mass-produced when a market develops. Industry experts compare the manufacture of wind turbines to that of trucks, and expect manufacturing capacity to ramp up rapidly to respond to market demand.
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The Price of Inaction
Should the necessary policy support for wind not be forthcoming, development would lag, resulting in AWEA's "base case" projection, which forecasts cumulative installations of 7,875 MW for the U.S. by 2010. This still assumes very moderate but clear policy changes to encourage development of wind projects in the U.S. However, 7,875 MW of wind capacity makes only a small contribution to achieving CO2 emissions reductions in 2010, a date by which substantial progress needs to be made if the U.S. ever hopes to stabilize emissions at 1990 levels. It is therefore essential to take more significant policy steps so that AWEA's "high growth" scenario, under which wind reaches 30,000 MW installed by 2010, takes place.[13]
II. What
Policies or Programs do we need in Place to Achieve the 30,000-MW Target?
Cutting greenhouse gas emissions can go hand in hand with economic growth in clean energy industries--if we provide the right incentives.
For example, small investments in the form of tax incentives for wind can provide big dividends in cleaner air and economic development. A federal commitment to purchase a small, but ever-increasing, amount of renewable energy would set the example for states and businesses to do the same, and encourage the adoption of a minimum content standard for electricity generation from renewables. Assisting developing nations in their desire to purchase U.S.-made renewable energy technologies will slow the rate of emissions increases worldwide while creating jobs here at home.
However, renewable energy comes in a variety of forms; there is no "one-size- fits-all" provision that can meet the needs of all renewable, or even all wind, technologies. Offered below is a series of policy options aimed at reducing domestic and international greenhouse gases through reliance on wind energy technologies. Taken together, these policies comprise a proposed Strategic Wind Energy Initiative.
Building the Domestic Market
1. A 10-year extension of the existing wind energy production tax credit (PTC).
The PTC provides an inflation-adjusted 1.5 cents/kWh credit for electricity produced from a new wind facility for the first 10 years of its existence. The purpose of the credit is to provide equitable tax treatment for wind in comparison with tax breaks provided for its fossil fuel competitors. The PTC is scheduled to expire in less than two years (i.e., plants built after June 30, 1999, will no longer qualify for the credit), but financing and permitting requirements for a typical wind plant take two to three years lead time. Therefore, investor uncertainty regarding the PTC's continued existence is already drying up financing and halting project planning, just as wind stands to assume a new and more competitive role in the domestic energy industry. The Congressional Joint Committee on Taxation has estimated that a five-year extension[14] of the credit would cost $156 million over the next 10 years.
2. A federal Renewables Portfolio Standard (RPS) of 5% by 2005 and 10% by 2010 should be included within federal electric utility restructuring legislation.
The RPS is essentially a "minimum content requirement" for electricity from renewable sources as a percentage of all electricity generated in the U.S. Generators of electric power would either have to use renewables to supply part of their generation, or buy tradable credits from the owners of renewable energy projects located anywhere in the U.S. The Tellus Institute estimates that a 10% RPS in 2010 would add approximately $1.30 to a typical monthly household electricity bill.[15] The RPS is already included in some form in four major utility restructuring proposals in Congress, and should be coupled with a System Benefits Charge (SBC) to provide funding for emerging renewable generation technologies (such as photovoltaics and small wind turbines) and with legislation requiring disclosure of electricity generation fuel sources.
3. A federal agency renewables purchase requirement, steadily increasing over time.
An Executive Order should place a minimum renewables content requirement similar to the Renewables Portfolio Standard on electricity used by federal agencies. This is an immediate action the Administration could take to demonstrate a serious commitment to reduce greenhouse gas emissions. By 2005, agencies should be required to obtain 10% of their electricity supply from nonhydro renewable resources.
4. A Small Turbine Investment Tax Credit (STIC).
This provision would create a new 30% tax credit for business users of small wind energy equipment (no greater than 50 kW capacity). An STIC would stimulate the U.S. domestic market for small turbines, increasing equipment production volumes and reducing production costs. Currently, about 70% of U.S.-made small turbines are exported to more than 75 countries. Due to low energy prices, full expensing of business energy costs, and no applicable federal incentives, the domestic market for small wind turbines is limited to a few remote, high-value, off-grid applications. But small wind turbines have great potential to displace highly-polluting diesel systems and in even moderate wind regimes will be the least-cost option. The cost of this credit is estimated at $4.3 million over five years.
5. A federal commitment to multi-year spending of $60 million annually for wind technology development.
Working with the Department of Energy, the U.S. wind industry has achieved cost reductions of more than 80% over the last 16 years. During that time, industry has developed an effective working relationship with the Department that is yielding increasing dividends, but that is jeopardized annually by threats to reduce or eliminate DOE wind program funding or to gut the program through changes in authorization language.[16] Increasing the wind budget from the fiscal 1998 level of $33 million to $60 million and seeking a multi-year authorization would strengthen the program, allowing further efforts aimed at core research activities, better technology validation, more focused turbine research, and the development of a more comprehensive testing and certification program. Experts believe the cost of wind equipment can be reduced by another 40% from current levels, which would greatly expand its potential market.
6. "Net Metering" for renewable energy systems of 1 MW or less.
In 16 states, consumers can install small, grid-connected renewable energy systems to reduce their electricity bills using a technique called net energy metering. Under net metering, consumers feed excess electricity generated by their renewable energy systems back to the grid, in essence running their electric meter backwards. At the end of the billing period, the consumer pays for the net amount of electricity supplied by the grid at the regular retail electricity rate. The purpose of this provision is to incentivize small renewable energy installations.
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7. Establishment of renewable energy as a "must take" resource within utility power pools.
A series of "power pools," which aggregate the electricity from individual power plants as needed and parcel it out to demand centers over the utility transmission network, oversee electricity distribution in this country. The rules for these pools are being rewritten as the utility industry is restructured and may, intentionally or unintentionally, discriminate against intermittent power sources like solar and wind. For example, one pool has already proposed that power transactions be scheduled 24 hours in advance, something that cannot be done with wind plants, whose output varies from hour to hour. This provision would ensure intermittent resources access to the market by requiring that electricity from renewables is "taken"--or purchased--first, with the seller paid only the prevailing market price for that particular hour. The "must take" provision would be subject to some necessary limits based on the amount of power the pool is handling during any given hour and its ability to absorb the amount of intermittent power that is offered.
Selling U.S. Technologies Abroad to Achieve International Emissions Reductions
8. A strengthened existing Export/Import Bank program to more effectively support wind development around the world.
U.S. companies labor under a disadvantage in international markets, due to the strong and effective support many other countries provide their domestic wind turbine manufacturers. In addition to policies supporting domestic wind development, which are common throughout Western Europe, many countries provide foreign aid programs (grants or loans) that are specifically linked to the purchase of equipment from their domestic manufacturers. This so-called "tied aid" has become a key driver in the rapidly growing wind energy export markets. The U.S. has two options: (1) work to ban tied aid, which is likely to be unsuccessful; or (2) provide development assistance that is equally attractive and therefore provides a level playing field for U.S. manufacturers. AWEA believes the Export/Import Bank should be given authorization and appropriations sufficient to ensure that U.S. manufacturers are not disadvantaged and can compete effectively against growing reliance upon tied aid by some nations.
9. Incentives for developing countries to pursue wind projects.
Many developing countries have little incentive to use foreign energy technologies, whether wind, solar, or advanced gas, to reduce their emissions despite the fact that the most rapid growth in CO2 (and other) emissions is in the developing world. Two related activities could give both U.S. firms and developing countries incentives to develop wind projects. The first is joint implementation, a program under which firms from the developed countries can earn carbon offsets by building clean energy projects in the developing world. The U.S. should endorse and push for joint implementation to move from its current pilot project status to full-scale implementation. There is little or no cost to the U.S. Treasury for such a program, and substantial benefits would be provided to the U.S. economy through the thousands of jobs that would be created. The second activity is the World Bank's Global Environmental Facility (GEF), which can cover the incremental cost of developing environmentally benign or beneficial projects in the developing world, such as building a wind project instead of an apparently cheaper coal project. This incentive is particularly important for countries such as China and India, which have tremendous power needs and must build energy capacity quickly at the lowest possible cost.[17]
10. A global resource assessment program aimed at mapping high quality wind sites.
The state of knowledge of wind resources today is comparable to the early days of the petroleum industry. Many people in those early days, including most of the later icons of the oil industry, believed oil would never replace coal and kerosene as the fuel of choice for the industrializing world. It was only after substantial exploration that the magnitude of the oil resource became understood. Similarly, little is known today about the wind resource in most countries, which means that it is virtually always underestimated and thus believed to be marginal in size. The U.S. should urge the United Nations, the World Bank, and other multilateral organizations to invest in wind resource assessment as they have in petroleum and geothermal exploration. In addition, the U.S. should agree to co-fund wind mapping activities with countries or international organizations that are willing to cost-share.
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III.What is the Value of such an Initiative?
A Strategic Wind Energy Initiative, while contributing to the campaign to lower U.S. greenhouse gas emissions, would provide a series of additional environmental and economic benefits. A summary of these benefits includes:
Healthier Air and Water
Because wind produces no emissions of any kind, it not only displaces carbon dioxide, but also other harmful emissions produced by fossil fuels which contribute to smog, acid rain, and airborne particulates that impair respiratory functions. Though the combustion of natural gas produces no sulfur oxide (SOx) emissions, gas does produce significant amounts of nitrogen oxides (NOx) and particulates, as well as about 40% of the carbon emissions produced by coal.
Emissions
Factors of Gas, Coal and Wind Technologies
(lb/MWh)[18]
|
| Pollutant |
Advanced Coal |
Advanced Gas |
Wind |
| Sulfur Oxides |
0.83 |
0 |
0 |
| Nitrogen Oxides |
1.82 |
0.61 |
0 |
| Particulates |
0.14 |
0.10 |
0 |
According to the Environmental Protection Agency, some 90 million U.S. citizens still breathe air that is too dirty to meet existing air quality standards, even though those standards do not yet address fine particulates (perhaps the most dangerous emission to human health) or mercury emissions. Domestic air pollution kills over 50,000 persons annually--a death toll higher than that of traffic accidents, breast cancer, or AIDS.[19] In addition to reducing carbon emissions, pursuing the "high growth" case goal of 30,000 MW by 2010 could reduce electric sector emissions of sulfur and nitrogen oxides in that year by some 4-6%.
The Strategic Wind Energy Initiative would also fit well within a comprehensive electric-sector strategy for reducing carbon emissions that includes wind, other renewable technologies, energy efficiency measures, and cleaner fossil fuel technologies. Such a comprehensive strategy was proposed recently by several environmental groups and the Tellus Institute, which concluded that the strategy could reduce U.S. CO2 emissions to 27% below the 1990 level in 2010, and reduce sulfur, nitrogen, and particulate emissions by 78%, 48%, and 36%, respectively, while also reducing total electric sector cost.[20]
Growing Economic Activity Based on Clean Energy
Increasing our domestic use of wind energy and supplying a growing share of multi-billion-dollar international wind technology markets also offers important economic benefits for the country. And since these benefits are based on clean energy, rather than fossil fuels, they do not carry concealed long-term economic costs such as environmental cleanup expenses, health care bills from air pollution and mercury deposition, and the like, which exert a hidden drag on economic growth.
This point bears repeating: a strategy that promotes renewables and wind is synergistic, encouraging economic growth while reducing damage to the environment, unlike most economic stimulation strategies that policymakers consider.
Positive economic impacts of the Strategic Wind Energy Initiative include:
- Jobs associated with exports--Projected growth in the international wind energy market offers significant export opportunities for U.S. wind turbine and component manufacturers. If U.S. manufacturers captured just one-fourth of the global wind equipment market under the "high growth" scenario through 2010, some 157,000 jobs would be supported.[21] The clean energy equipment manufacturing industry is likely to be one of the next century's largest sources of new manufacturing jobs. The World Energy Council, for example, has estimated that new wind capacity worldwide will total 180,000 MW to 474,000 MW by the year 2020, which equates to $150 billion to $400 billion worth of business. It is vital that the U.S. make a strenuous effort to compete in this rapidly growing field.
- Jobs associated with use of domestic energy resources--Net imports of natural gas have nearly tripled in the last decade, from 5% in 1987 to 13% today.[22] Gas imports are expected to account for over 20% of increased U.S. gas consumption through 2010,[23] absent climate change policies that would further boost gas use.[24] The substitution of domestic renewable energy resources and technologies for imported fuels creates significant net increases in jobs for Americans, both direct and indirect.[25] For example, a study by the State of Wisconsin found that the net impact of increased use of renewables would be three times more jobs than that from conventional generation.[26]
- Economic stability through reduced energy price fluctuations --Fuel price increases caused by fossil fuel supply/demand imbalances and international politics take a large toll on household budgets and the national economy. The wind fuel is not subject to such disruptions, so it has a stabilizing effect on energy prices. In addition, price stability results from (1) greater overall resource diversity and (2) a larger number of smaller generating facilities, which reduces the probability of significant outages.
Meeting Climate Change Goals Efficiently
Reducing carbon emissions from electric generation to the level required to stabilize atmospheric carbon concentrations is most cost-effectively achieved through a combination of energy efficiency, natural gas and renewable energy--using the most cost- effective resources available from each, rather than over-relying on any one source.
To achieve carbon reductions without a significant contribution from renewables:
- the country would need to rely excessively on natural gas, which would bring with it increased imports, increased prices and vulnerability to supply disruptions; and/or
- the lives of existing nuclear plants would need to be extended, entailing operational safety risks, high operating costs and the generation of additional radioactive wastes for which no long-term storage is available.
Within a few decades, the world economy must make a transition to non-carbon-based fuels, due to the limited supply of fossil fuels and the already saturated capacity of the atmosphere to absorb their emissions without dramatically altering the earths climate. A renewable energy infrastructure cannot be created spontaneously. It will take decades of sustained and predictable development to make the transition to a renewable energy future. We must begin now.
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IV.
Conclusion
A Strategic Wind Energy Initiative that includes the implementation of policies aimed at encouraging the installation of 30,000 MW of wind electric generation capacity in the U.S. by the year 2010 will:
- Materially assist the U.S. in meeting its pledge to reduce carbon dioxide emissions to 1990 levels;
- Foster economic growth through increased exports of wind equipment and increased use of domestic energy resources;
- Create over 150,000 new jobs; and
- Positively impact a series of other environmental and economic problems that flow from over-reliance on fossil fuels.
For all of these reasons, the proposed Initiative should be a component of a comprehensive climate change policy.
Notes
[1] A small amount of carbon dioxide is emitted during wind's "total fuel cycle," which includes fabrication of wind equipment and construction of wind plants. However, this amount is estimated at less than 1/100 of CO2 emissions from coal's fuel cycle. Dr. Robert L. San Martin, Environmental Emissions from Energy Technology Systems: The Total Fuel Cycle (Washington, D.C.: U.S. Department of Energy, Spring 1989), p. 5.
[2] D. L. Elliott, L. L. Wendell, and G. L. Gower, An Assessment of Windy Land Area and Wind Energy Potential in the Contiguous United States (Richland, Wash.: Battelle Pacific Northwest Laboratory, 1991). Total U.S. consumption for 1996 is estimated at 3.2 trillion kWh. Annual Energy Review 1996 (Washington, D.C.: Energy Information Administration, U.S. Department of Energy, July 1997), p. 227.
[3] Personal communication, Energy Information Administration, U.S. Department of Energy, September 30, 1997. U.S. electric sector carbon emissions in 2010 are projected at 626.4 MMT, compared to 476.9 MMT in 1990. The excess is therefore 149.5 MMT of carbon. Carbon dioxide has two oxygen atoms (atomic weight 16) in addition to a single carbon atom (atomic weight 12), and so the carbon number must be multiplied by 3.667 (44/12) to arrive at the carbon dioxide equivalent. 149.5 x 3.667 = 548.2 MMT of CO2.
[4] Displacement of Coal-Fired Generation: Wind generation results in the emission of 7,400 metric tons of CO2 per billion kWh generated (due to emissions during turbine fabrication and installation). Coal-fired generation results in the emission of 964,000 metric tons of CO2 per billion kWh. Source of emissions data: Dr. Robert L. San Martin, Environmental Emissions from Energy Technology Systems: The Total Fuel Cycle (Washington, D.C.: U.S. Department of Energy, Spring 1989), p. 5. The benefit when wind displaces coal is therefore 964,000-7,400, or 956,600 metric tons (0.9566 MMT) per billion kWh. For 10,000 MW of wind capacity, generating at an average of .40 capacity factor, the calculation to derive displacement is: 10,000 MW (10 million kW) x .40 x 8760 (hours) = 35.04 billion kWh. 35.04 x .9566 = 33.52 MMT of CO2 emissions displaced. (Capacity factor of .40 is an estimate for 2010 technology. See Scenarios of U.S. Carbon Reductions (Washington, D.C.: U.S. Department of Energy, September 25, 1997), p. 7.20). The Scenarios study uses slightly different, even higher numbers for replacement of coal generation with wind. We have used the San Martin study where possible, however, because it is the one available source with total fuel cycle emissions numbers for wind.)
Displacement of Average Utility Mix Generation: If wind is assumed to displace the average fuel mix instead of coal, 160 kg of carbon is displaced per 1,000 kWh (1 MWh). Scenarios of U.S. Carbon Reductions, p. 7.19. Multiplying by 3.67 to convert this rate to CO2 from carbon yields a displacement of 587 kg of CO2 per MWh, which is equal to 0.587 metric tons/MWh or 0.587 MMT per billion kWh. Displacement for 10,000 MW of wind is thus 10,000 MW (10 million kW) x .40 x 8760 x .587 = 20.6 MMT of CO2. We have assumed displacement of coal for the purposes of this paper based in part on the Scenarios report, which finds that wind displaces primarily coal in the High Efficiency/Low Carbon (HE/LC) scenario. Scenarios, p. 7.19. The HE/LC scenario envisions a $50/ton charge for carbon emissions. Whether this policy approach or some other is taken, we assume that policies to limit coal-fired generation will be implemented.
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[5] See note 4, supra, for displacement of carbon dioxide from coal-fired generation with wind. For 30,000 MW of wind, the calculation is 30,000 MW (30 million kW) x .40 x 8760 x .9566 = 100.5 MMT of CO2 displaced annually.
[6] "Wind is poised to become one of the lowest-cost sources of electrical energy," quote from Edgar DeMeo, Electric Power Research Institute, The Los Angeles Times, February 5, 1995, p. A1. The Scenarios study also projects wind's costs falling to a range of 2.5-3 cents/kWh by 2010. Pp. 7.17-7.18.
[7] Wind cost figure is AWEA's. Coal cost source: Energy Choices in a Competitive Era (Alexandria, Va.: Resource Data International, Inc., for the Center for Energy and Economic Development, April 1995). These are conservative numbers--other analyses have shown no gap in the direct cost of power from wind and coal technologies. For example, an analysis by the California Energy Commission of levelized power plant costs shows the cost of wind at 4.6 cents/kWh as compared to 4.6 to 6.0 cents/kWh for coal technologies (all figures in 1993 constant dollars and assuming utility ownership). 1996 Energy Technology Status Report: Report Summary (Sacramento, Calif.: California Energy Commission, CEC report P500-96-006, April 1997 [Draft Committee Report]), pp. 73- 74. On the other hand, to directly compare the value of wind, an intermittent resource, to the value of baseload coal would require the addition of some dispatchable generation capacity to wind plant costs. We believe the very conservative direct cost comparison used in the text (given the fact that some recent wind contracts have been signed in the U.S. at a levelized cost of less than 4 cents/kWh) will be sufficient to cover the cost of dispatchable capacity.
[8] This figure is calculated on the basis of an 0.6 cents/kWh premium for the cost of new wind generation over the cost of new coal-fired generation, and assumes that one gigawatt-hour (1 million kWh) of wind generation displaces 956.6 metric tons of CO2 from coal-fired generation. Source of emissions data: Dr. Robert L. San Martin, Environmental Emissions from Energy Technology Systems: The Total Fuel Cycle (see note 1, supra). 0.6 cents/kWh x 1 million / 956.6 = $6.27 per displaced metric ton of carbon dioxide. $6.27*3.67 = $23 per displaced metric ton of carbon. The wind cost premium assumes continuation of the federal wind production tax credit, which has a 30-year levelized value of 0.7 cents/kWh, according to the Union of Concerned Scientists. Michael C. Brower, Michael W. Tennis, Eric W. Denzler, and Mark M. Kaplan, Powering the Midwest: Renewable Electricity for the Economy and the Environment (Boston, Mass.: Union of Concerned Scientists, 1993), pp. 93-94.
[9] This point is discussed at length by R. Wiser and S. Pickle in Financing Investments in Renewable Energy: The Role of Policy Design and Restructuring (Berkeley, Calif.: Lawrence Berkeley National Laboratory, March 1997). A typical quote from the Executive Summary of this document: "Renewable energy policies should be designed with consideration given to the realities of power plant financing. Policies that do not provide long-term stability or that have other negative secondary impacts on investment decisions will increase financing costs and may reduce policy effectiveness. Stable and predictable policy commitments can, on the other hand, lead to a decrease in financing costs, which should result in reductions in renewable energy costs and in more effective policies."
[10] "AWEA Projects 30,000 MW of Wind Capacity Installed Worldwide Over Next Decade," Wind Energy Weekly, Vol. 16, No. 745 (Washington, D. C.: American Wind Energy Association, April 28, 1997), p. 1. AWEA's market projections, based on information gathered from industry and government sources around the world, also indicate that "a significant event such as a fossil fuel price spike or a strong move to slow global climate change" could result in 60,000 MW of new wind generating capacity, or double the base case projection, being installed by 2006.
[11] Scenarios of U.S. Carbon Reductions: Potential Impacts of Energy Technologies by 2010 and Beyond (Washington, D.C.: U.S. Department of Energy, September 25, 1997), p. 7.19.
[12] Denmark, Germany, India, Italy, The Netherlands, Spain, and the United Kingdom have all experienced substantial growth in wind energy capacity during the past decade as a result of aggressive public policies favoring clean energy development. The case of Denmark is instructive: a country with a population about the same as that of the state of Indiana and a land area less than half Indiana's size went from 343 MW of installed wind capacity in 1990 to 972 MW today while the U.S. market, once the largest in the world, stagnated. Recently, Denmark unveiled plans to boost its onshore wind capacity to 1,500 MW by the year 2005 as part of a national program to reduce CO2 emissions in that year to 20% below 1988 levels. To indicate the lengths the Danes have gone to to encourage clean energy development and energy efficiency, electricity in Denmark currently costs US 18 cents/kWh (7 cents for production and 11 cents added by a series of taxes to discourage consumption, pay for CO2 reductions, etc.). Meanwhile, Danish wind developers receive a payment of 11 cents/kWh for the electricity they generate.
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[13] In the "out years" beyond 2010, the difference between the base case and high growth case continues to widen. By 2020, nearly 66,000 MW of wind capacity would be in place in the U.S. in the high growth case, generating 231 billion kWh annually and displacing 221 MMT of carbon dioxide emissions based on coal, compared to base case totals of 28,000 MW, 98 billion kWh, and 94 MMT.)
[14] The term "five-year extension" means changing the deadline date to qualify for the credit (i.e., the date by which a wind plant must be placed in service to qualify) from June 30,1999, to June 30, 2004. Once a wind plant has qualified, the credit applies for the first 10 years of its operation.
[15] Steve Bernow, Bill Dougherty, and Max Duckworth, "Quantifying the Impacts of a National, Tradable Renewables Portfolio Standard," The Electricity Journal (Seattle, Wash.: May 1997). Stephen Bernow, "Analysis of Renewable Portfolio Standards" (Boston, Mass: Tellus Institute, June 1997).
[16] While U.S. government wind energy R&D funding has declined over the past 15 years (even taking account of recent increases), wind R&D funding in Europe has continued to grow. U.S. R&D funding: 1983: $43 million; FY 1998: $30 million. European R&D funding: 1983: $41 million; 1995: $109 million. All figures in 1992 dollars. Source of funding data "International Wind Energy Research, Development and Demonstration: Government Funding," compilation maintained by U.S. Department of Energy. Source of inflation data: Annual Energy Review 1996 (Washington, D.C.: Energy Information Administration, U.S. Department of Energy, July 1997), p. 367. Deflator for 1997 has been conservatively estimated at 111.0.
[17] Without a financial incentive to do otherwise, China may well choose the more expedient route of relying heavily on coal power plants with potentially disastrous consequences for itself and other parts of the world. The U.S. must support expansion and replenishment of the GEF and, where appropriate, be willing to provide direct support to China and other countries to avoid a high carbon path.
[18] Michael C. Brower, Michael W. Tennis, Eric W. Denzler, and Mark M. Kaplan, Powering the Midwest (Boston, Mass.: Union of Concerned Scientists, 1993), p. 97.
[19] Curtis A. Moore, Dying Needlessly: Sickness and Death Due to Energy-Related Air Pollution (College Park, Md.: Renewable Energy Policy Project, Issue Brief No. 6, February 1997), p. 1.
[20] Alliance to Save Energy, American Council for an Energy-Efficient Economy, Natural Resources Defense Council, Tellus Institute, Union of Concerned Scientists, Energy Innovations: A Prosperous Path to a Clean Environment (Washington, D.C.: Alliance to Save Energy, June 1996), p. 50.
[21] Calculation: 20,000 MW annual sales x 1/4 (U.S. share) x $0.75 million/MW x 42 jobs/ $1 million = 157,000 jobs. An employment multiplier of 49 is used for the wind industry in Anne Polansky, Skip Laitner, and Marshall Goldberg, "Assessing the U.S. Employment Hurdles from Increased Production of U.S. Renewable Energy Technologies: Part 2: Multipliers for Export Products" (Washington, D.C.: Solar Energy Industries Association, December 1996. The multiplier is reduced here to 42, as it will decrease with increasing sales. Under AWEA's high growth case, about 21,500 MW of wind capacity would be installed worldwide during the year 2010, excluding U.S. installations.
[22] Energy Information Administration, U.S. Department of Energy, Annual Energy Review 1996 (Washington, D.C.: July 1997), pp. 8-11. Annual Energy Outlook 1995 (Washington, D.C.: ), p. 37.
[23] Annual Energy Outlook 1995 (Washington, D.C.: ), pp. 37.
[24] "Gas Seen Gaining Due to Green Power, Climate," Wind Energy Weekly, Vol. 16, No. 761 (Washington, D.C.: American Wind Energy Association, August 25, 1997), p. 2.
[25] Polansky et al, note 21 supra.
[26] Wisconsin's Economy With Renewable Energy (Madison, Wis.: Energy Bureau, Wisconsin Department of Administration, July 1995).
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