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Earth Policy News - Wind Energy Demand Booming: Cost Dropping Below Conventional Sources Marks Key Milestone

Eco-Economy Update 2006-2
For Immediate Release
March 22, 2006


WIND ENERGY DEMAND BOOMING:
Cost Dropping Below Conventional Sources Marks Key Milestone in U.S. Shift
to Renewable Energy
www.earthpolicy.org/Updates/2006/Update52.htm

Lester R. Brown


When Austin Energy, the publicly owned utility in Austin, Texas, launched
its GreenChoice program in 2000, customers opting for green electricity
paid a premium. During the fall of 2005, climbing natural gas prices
pulled conventional electricity costs above those of wind-generated
electricity, the source of most green power. This crossing of the cost
lines in Austin and several other communities is a milestone in the U.S.
shift to a renewable energy economy.

Austin Energy buys wind-generated electricity under 10-year, fixed-price
contracts and passes this stable price on to its GreenChoice subscribers.
This fixed-price energy product is quite attractive to Austin’s 388
corporate GreenChoice customers, including Advanced Micro Devices, Dell,
IBM, Samsung, and 3M. Advanced Micro Devices expects to save $4 million
over the next decade through this arrangement. School districts are also
signing up. Round Rock School District, for example, projects 10-year
savings to local taxpayers at $2 million.

Facing a Texas-style stampede of consumers wanting to sign up for the
current remaining supply of green electricity, Austin Energy has resorted
to a GreenChoice raffle that will be held on March 23. All its
customers—both residential and business—were invited to participate in the
drawing.

A similar situation has unfolded in Colorado with Xcel Energy, which is
the state’s largest electricity supplier. Xcel’s 33,000 Windsource
customers, who until late 2005 were paying $6 more each month for their
electricity, are now paying slightly less than those using conventional
electricity, which comes mostly from natural gas and coal. To meet
fast-growing demand, Xcel is currently soliciting proposals from wind
developers for up to 775 megawatts of new wind power generation, enough to
supply 232,000 Colorado homes with electricity.

Austin Energy and Xcel Energy are among the first utilities to pass on the
falling cost of wind energy to their customers. In the short run, the
price advantage of wind over conventional electricity may disappear as the
surging demand for wind electricity from climate-conscious customers
outruns the supply, driving up the price, and as natural gas prices fall
from their late 2005 highs. Over the longer term, however, as reserves of
natural gas are depleted, its price is projected to rise, giving a strong
advantage to wind.

Interest in wind energy is rising as production costs fall. Although media
attention focuses on communities with a not-in-my-backyard (NIMBY)
response to wind turbines, such as the large, off-shore wind farm planned
off Cape Cod, in most of the country wind farms are enthusiastically
welcomed. Here, it’s the PIIMBY syndrome—put-it-in-my-backyard.

When Xcel announced it would develop several hundred megawatts of
additional wind-generating capacity, it got the attention of ranching
communities throughout wind-rich eastern Colorado. In tiny ranch-country
towns like Grover, near the Wyoming border, ranchers welcomed a proposed
300-megawatt wind farm that would span some 30 ranches.

With a large, advanced-design wind turbine generating easily $100,000
worth of electricity per year, even a 3-percent royalty would earn
ranchers $3,000 a year from leasing a quarter-acre of ranchland. And they
can still run cattle on the land. If the proposed project is approved as
expected, these 30 or so ranchers will have an average of seven turbines
each, yielding roughly $21,000 a year in additional income. A decade from
now, there may be thousands of ranchers who will be earning more selling
electricity than they do selling cattle.

In upstate New York, dairy farmers in Lewis County near Lake Ontario
warmly embraced the 195-turbine Maple Ridge Wind Farm, and the $5,000 to
$10,000-annual royalty offered for each of the turbines on their land.
Rural communities welcome wind farms because they provide income to
farmers and ranchers, skilled jobs, cheap electricity, and additional tax
revenue to upgrade schools and maintain roads.

The growing profitability of wind energy is attracting big-time players.
Four years ago, General Electric purchased Enron Wind, one of Enron’s few
profitable segments, parlaying its advanced wind turbine design into a
leading position in the world wind turbine market.

In mid-2005, Goldman Sachs purchased Zilkha Renewable Energy, a small wind
farm development company. Now called Horizon Wind Energy, this
wholly-owned subsidiary of Goldman Sachs has under construction or in the
planning stages 4,000 megawatts of wind-generated electricity, enough to
supply electricity to 1.2 million homes.

AES, a leading international player in electricity generation, has used
its purchase of SeaWest, another wind developer, to establish a strong
position in the U.S. wind sector. It now has under development 1,800
megawatts of wind-generating capacity. Shell, one of the leading bidders
for offshore wind rights in the United Kingdom, owns 315 megawatts of
wind-generating capacity in the United States and is planning more. And BP
is mapping out areas in the United States where it could build some 2,000
megawatts of wind-generating capacity.

Overall, U.S. wind-generating capacity expanded by 36 percent in 2005,
reaching 9,149 megawatts. This year it could expand by 50 percent. At the
end of 2005, there were commercial wind farms in 30 states. (Data at
www.earthpolicy.org/Updates/2006/Update52_data.htm.)

Wind power generation would grow even faster if it were not constrained by
the availability of turbines. General Electric, now supplying 60 percent
of the U.S. wind turbine market, is sold out through 2007. Clipper
Windpower, a startup turbine manufacturer, is planning to produce 20 of
its 2.5-megawatt Liberty turbines per month by mid 2006 and a total of 250
turbines in 2007. Its production is also committed well into the future.

After years of industry uncertainty, when Congress allowed the wind
production tax credit (PTC) to lapse several times, the 2005 PTC extension
through 2007 has given investors renewed confidence in the future of wind
power. The extension of the PTC, which is designed to offset subsidies to
fossil fuels and nuclear power, is leading to record growth in the number
of new wind farms planned.

Wind energy is emerging as a centerpiece of the new energy economy,
because it is abundant, inexpensive, inexhaustible, widely distributed,
clean, and climate-benign. Three of the 50 states—North Dakota, Kansas,
and Texas—have enough harnessable wind energy to satisfy national
electricity needs. The cost of wind-generated electricity has fallen from
38¢ per kilowatt-hour in the early 1980s to 4¢ to 6¢ today, offering an
almost endless supply of cheap energy.

Beyond that, these wells will never go dry. No one can cut off the supply
or raise the fuel cost. And wind can supply our energy needs without
disrupting the earth’s climate.

#    #   #

Lester R. Brown is President of the Earth Policy Institute and author of
Plan B 2.0: Rescuing a Planet Under Stress and a Civilization in Trouble.


Data and additional resources at
http://www.earthpolicy.org/Updates/2006/Update52_data.htm or contact
jlarsen(at)earthpolicy.org

For more in-depth information see Chapter 10, in Plan B 2.0, at
http://www.earthpolicy.org/Books/PB2/Contents.htm

For reprint permission contact rjkauffman(at)earthpolicy.org