The United States: The Saudi Arabia of Wind

Introduction

The United States has the opportunity to meet all of its growing demand for electricity with wind power.  Wind is an economic clean energy source with significant scale, as well as being domestically produced.  It is an important part of our new energy strategy to strengthen our economy, reduce carbon emissions, and enhance our balance of trade, comprised of four fundamental strategies:  (1) Accelerated Renewable Electricity - principally wind as well as biomass and solar; (2) Super Efficient Transportation with plug hyper-hybrids; (3) hyper efficient end-use technologies - focusing on very high efficiency combined heat and power and geothermal heat pumps, along with efficient lighting and appliances; and (4) hyper efficient buildings embracing envelope, controls and systems.  This article focuses on wind.

United States - The Saudi Arabia of Wind

The wind resource in the United States is known as the Saudi Arabia of Wind.  In 2001, Lester Brown of the World Watch Institute referred to the U. S. wind resource as the Saudi Arabia of wind power, identifying three states that could meet 100% of the U.S. electrical requirements:  North Dakota, Kansas and Texas.  Lester Brown was writing an article in response to the Bush energy plan of that time, with limited wind.  He considered it a plan for the early twentieth century instead of the twenty-first century because of its emphasis on coal, and diminishment of wind as a resource.  

More recently, there are two prominent players on the national stage that are referring to the Saudi Arabia of Wind, namely T. Boone Pickens and the former governor of Maine, Angus King. The Pickens Plan is promoting a significant wind development project, amounting to  4 gigawatt wind project, five times larger than any other project.  He is developing is project in the Texas Panhandle.  Angus King uses the term as well, referring to the Gulf of Maine as the Saudi Arabia of Wind.  He is developing a project that is a 5 giga watt project off the coast of Maine.  

According to the American Wind Energy Association, the achievable wind resource in the United States is equivalent to twice what we need, with wind able to provide 10.7 trillion kWhs per year, leveraging just the available resources on land.  Most of this resource would be realized in just twenty states.   Simply put, we have an extraordinary amount of available wind resources to drive our economy forward, creating jobs, clean energy and reducing foreign dependancy for our resources.  

Wind Power Economics

Wind is frequently referred to as being competitive with coal power plants.  There are many factors which come into play, which determine the resulting economics of wind power installations.  These factors include site specific influences, specific wind turbine design and size, as well as state and federal incentives.     

Wind Resource - One of the most critical factors impacting the economics of a specific wind development is the location relative to the wind profile.  Wind profiles are categorized by the quality of the wind, represented by seven classes that correlate to Wind Power Density (watts/meter squared).  It is critical that any wind project seek to maximize the potential energy yield based on the wind profile of each  specific location. 

When characterizing the wind resource, the amount of energy in the wind increases with the square of its speed, such that average wind speed is not an adequate measure of the energy potential in the wind.  Also, the wind speed at which the wind turbine cuts in and cuts out is a critical factor in determining how much of the wind resource is realizable.

Wind Turbine - The choice of wind turbine is important in two principal regards - the size of the turbine and its power curve, i.e., rated output at different wind speeds.  In the past ten years, the average size of wind turbines installed in the United States has doubled, from just over 700 kW in 1997 to 1.6 MW in 2006.  These larger wind turbines are more efficient per unit of energy generated per dollar invested due to scale economies, more efficient designs, lower cut in speeds, and lower manufacturing costs.  In the past two years, however, turbine costs have increased along with increased global demand for wind turbines and increasing commodity materials' costs.         

Production Tax Credit - The economics of wind projects are enhanced by the variety of financial incentives provided at state, regional and federal levels.  One of the important economic contributors in the United States is the Renewable Electricity Production Tax Credit.  The PTC provides tax credits on a per kWh basis for specific renewable electricity sources.  The credit for wind is 2 cents per kWh.  

Renewable Portfolio Standards - Currently, 24 states and the District of Columbia have instituted renewable portfolio standards that require electricity generators to provide a specific percentage of their energy in the form of renewable energy.  These 24 states and the District of Columbia represent approximately 50% of all of the electricity consumed in the United States.  RPS requires electricity suppliers to sell an increasing percentage of renewable electricity, which they can satisfy either by producing or purchasing qualifying renewable electricity, purchasing renewable energy credits, or by paying penalties.  In Massachusetts, for example, retail electricity suppliers must provide a minimum of 4% of their retail kWh sales from renewable sources in 2009.  The required percentage is increasing by 1 percentage point each year without end.  RPS standards result in increasing the demand for renewable energy resources, creating a higher market price for wind power.

Renewable Energy Credits, Renewable Energy Certificates, Green Tags and Carbon Offsets - Global warming concerns have resulted in a range of voluntary and compliance initiatives to decarbonize our energy resources and economic activities around the world.  For wind power developers, the opportunity exists to monetize the environmental attributes associated with electricity production.  These environmental attributes can either be retired or applied to meet social or obligatory environmental objectives.  For example, compliance RECs in Connecticut are about $25/MMWh for Tier 1 renewables, and $45/MWh in Massachusetts.  Solar RECs in New Jersey are about $265/MWh, while RECs in Texas are selling for about $5.25, with pricing reported for July, 2008 as reported by Evolution Markets.  Voluntary REC markets are pricing wind from $3 to $9/MWh in regional and National markets (source: Evolution Markets).

Accelerated Depreciation - Wind projects also qualify for 5 year accelerated depreciation schedules.  

Land versus Water - Water based installations are typically more expensive from a capital installation cost perspective than land based installations, yet offer significant counterbalancing financial benefits.  The cost of supporting an ocean based turbine can result in an increase of about 35% to the total cost.  On the other hand, the wind resource in the ocean is typically greater and more consistent, the projects can be much larger, and can be closer to population centers, reducing transmission losses.  For example, the installed cost per kW could be $1,200/kW on land, while costing as much as $1,500/kW in the ocean.  The favorable aspects can more than outweigh the disadvantages, especially with recent advances in sea based tower designs.  

Summary

The results of these economic drivers is that an unsubsidized wind energy project today can produce electricity for about 4 cents per kWh, as compared to 5 cents per kWh  2000, and 40 cents per kWh in 1979.

Wind power installations in the United States are growing at approximately 35-40% per year, with the current installed based of wind power projects exceeds 20,000 MW, with another 9,000 currently under construction, according to the American Wind Energy Association.    

The US Department of Energy, along with AWEA and others now expect that achieving 20% electricity market penetration by 2030 is achievable, representing approximately 300,000 MW of connected load, according to the US DOE and AWEA. Based on recent trends driving wind power costs down, coupled with the identification of large scale locations favorable for development, it is very likely that we will realize an even greater level of wind power in the United States.  The effect of achieving this level of wind power development will be significant in terms of job creation, electricity price stabilization, and environmental benefits.