REPORT CARD GRADES WIND’S PROGRESS TOWARD 20%

20% Wind Report Card: B Overall, Transmission Lags At C-; National Policy Commitment Urgently Needed to Ensure Greater Use of Clean, Abundant Energy Source
July 8, 2009 (American Wind Energy Association)
and
Pickens Pulls Up Stakes; After encountering some Texas-sized opposition to his alternative-energy plans, oilman T. Boone Pickens has shelved plans for a giant wind farm
Susan Berfield, July 8, 2009 (Business Week)

SUMMARY
In Spring 2008, the U.S. Department of Energy (DOE) described as feasible the possibility of wind energy providing 20% of U.S. power by 2030.

The 20% Wind Energy By 2030 2009 Report Card, from an in-house team of American Wind Energy Association (AWEA) experts, some of whom worked on the DOE report, analyzes the wind industry’s progress toward its 20% goal in the key areas of Technology Development, Manufacturing, Transmission & Grid Integration and Siting.

The most important conclusion from AWEA’s Report Card is not about this year’s grade but about next year’s grade. Supportive policies are to energy industries what good teaching is to students: Without it, the chance of keeping grades high is low.

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The wind industry’s overall grade for 2008 was a B. New installed capacity once again set records and wind power accounted for 40% of new U.S. power generation.

Installations for the first part of 2009, coasting on last year’s momentum, have remained somewhat prolific. But the momentum is slowing. If numbers do not rise, volumes for the year will likely fall to levels not seen since the early, pre-boom years of this decade. And, given the recessionary economy, installation numbers are unlikely to rise again without a boost from the passage by Congress of a national Renewable Electricity Standard (RES) requiring regulated U.S. utilities to obtain a significant portion of their power from New Energy sources by 2020 or 2025.

Obviously, the failure of Congress to institute a national RES by now would be cause for a poor grade if AWEA were to give a grade on the subject of Policy but, since that subject was not part of last year’s DOE report, AWEA did not grade it in the 2009 Report Card.

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Technology Development earned an A-, Manufacturing got a B+, and Siting got a B to help keep the wind industry’s grade point average up. Where wind fell was in Transmission and Grid Integration. It earned a C-.

There is crucial legislation now before Congress that addresses the planning, financing and siting obstacles blocking the building and integration of new transmission. The Report Card findings suggest it would behoove lawmakers to get to work on that legislation.

To provide 20% of U.S. power by 2030, the wind industry must keep growing uninterruptedly. The report calculated the industry would need to add 3,260 megawatts in 2008 and reach a cumulative capacity of 17,970 megawatts. It actually added 8,500+ megawatts last year to reach a cumulative capacity of 25,300 megawatts.

To get to the cumulative 300,000 megawatts that will be 20% of U.S. power in 2030, the industry must be adding 16,000 megawatts a year in 2018. It must add 4,180 megawatts in 2009 and 2010 and 6,350 megawatts in 2011 and 2012. Even with the financial downturn and uncertain policy support, AWEA predicts there will be 5,000 megawatts built this year and most economists predict a return to expansion in 2010. But without suppoortive policy, growth will continue to flag and could stall.

(1) On the Report Card’s Technology Development evaluation, challenges and current status are provided for turbine productivity, offshore wind, small turbines and component reliability.

(2) On the Report Card’s Manufacturing evaluation, challenges and current status are provided for investment in American manufacturing, increasing domestic content in turbines installed in the U.S., workforce development, overcoming supply bottlenecks, and collaboration between states, federal entities and businesses.

(3) On the Report Card’s Transmission & Integration evaluation, challenges and current status are provided for transmission policy, transmission planning, transmission cost allocation, transmission siting, more efficient use of existing transmission, less balkanized grid, updates to grid operations, ancillary services markets, wind energy forecasting, interconnection standards and wind integration studies.

(4) On the Report Card’s Siting evaluation, challenges and current status are provided for comparative wildlife impacts, wildlife research, risk analysis, regulation, approval processes, public education and federal and state offshore wind.

The high number of issues requiring comment for transmission and integration is indicative of the complexity of those subjects. The complexity adds enormously to the cost. The cost must be financed. Financing under the best of circumstances is challenging. The present economy cannot be described as the best of circumstances.

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COMMENTARY
As if to validate the accuracy of the low grade given by AWEA to transmission, legendary energy entrepreneur T. Boone Pickens shook the New Energy world with his announcement he would postpone his planned multibillion dollar 1,000-megawatt Texas wind project because, among other things, inadequate transmission makes the undertaking uneconomic at present.

A variety of factors played into Pickens’ postponement of his Pampa, Texas, wind project. Political opposition stopped his controversial plan to pipe underground water from the Texas Panhandle wind region to Dallas. He suffered billion-dollar hedge fund losses from the market crash. But the final blow to the Pickens Plan, for which T. Boone spent $60 million promoting increased use of wind power for electricity and compressed natural gas heavy vehicles to end dependence on imported oil, was his inability to get financing for the transmission system needed to deliver the abundant winds of the West Texas plains to the populous demand centers in Dallas-Fort Worth and Houston.

Without the ability to deliver his wind-generated electricity to market, the $2 billion, 667 turbine project planned by Pickens’ Mesa Power was almost pointless. With the financial downturn, financing to build new transmission has simply become too expensive, even for T. Boone Pickens.

Oh the irony. The day he proclaimed Energy Independence Day was the day the news hit. From PickensPlan.

But transmission is only part of Pickens' story. From the beginning, the wind project was linked to a plan to pipe water and sell it. In his speech at the AWEA convention last May, Pickens joked that his friend Ted Turner’s land holdings make his own seem small, but Pickens’ water rights will sooner or later be far more valuable than Turner’s arid real estate. Pickens owns more water than any other single individual, not just in drought-ridden Texas but in the entire nation.

Like a character from a Western horse opera, Pickens has been buying up water rights in the Panhandle for years and waiting for the moment when Dallas, 250 miles to the southeast, became thirsty enough to pay him to drink. His plan was to use the power of eminent domain to force Texas landowners along a proposed water pipeline to allow him to build. He got the bill he needed from the Texas legislature but the State Justice Department stopped him when the landowners rebelled.

He stopped pipeline construction in September 2008. Though he has continued to confidently talk wind, money troubles were mounting, especially in the absence of the anticipated return on the water. In the end, however, the water project back story is a cautionary tale and an uncompleted distraction from the much more serious matter of wind and transmission.

The bottom line is this: Without transmission, there is no wind project. Without wind projects, the U.S. must turn to Old Energies that either spew greenhouse gases or radioactive waste.

Losing the water project pleased landowners in the Texas Panhandle who didn’t want to give up chunks of their land to see their water transported elsewhere. Losing the wind project – and all the benefits to the local communities like jobs, tax revenues and economic revitalization – pleases nobody.

If things continue along these lines - or perhaps that should be "without these lines" - the nation will remain dependent on Old Energies, droughts everywhere will worsen, the rich who own water will get richer and the wind industry's grades will plummet.

Pickens continues to buy water rights and will tranfer the turbines he purchased for Pampa to smaller installations in Texas, Oklahoma, Kansas, and Wisconsin.

T. Boone Pickens is betting the answer is no. Which is another reason to bet on wind.(click to enlarge)

QUOTES
- From the AWEA Report Card: “…wind farm installations were very strong in 2008, and remain somewhat strong in 2009 compared to historical levels, especially in light of the difficult environment facing the U.S. economy. However, if installation rates do not revert quickly back to 2008 levels, the U.S. could fall behind the trajectory to its goal in the early part of the next decade. The U.S. wind industry needs a policy that will provide the near-term boost to development that we would expect from a national renewable electricity standard (RES) with strong near-term targets for renewable electricity generation.”

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- Rob Gramlich, Senior Vice President-Public Policy, AWEA: “With Americans back to work after a long 4 th of July weekend celebrating America’s independence, we think it’s an appropriate time to take a look at one of the key ingredients of energy independence: expanding our use of renewable energyThe DOE report found that 20% wind energy is feasible and would carry with it a host of benefits for our economy, environment and energy security, including half a million jobs. While headway has been made, today could become a high-water mark unless Congress enacts a Renewable Electricity Standard with strong near-term targets.”
- Gramlich, AWEA, on the RES being considered in the Senate: “A strong RES is essential to give businesses the certainty they need to invest in factories in the U.S. and create new jobs…There is an opportunity to reach 500,000 U.S. jobs related to the wind industry alone under a 20% scenario, but a commitment from manufacturers and wind companies to add jobs requires a commitment from the U.S. policymakers to domestic renewable energy.”
- Gramlich, AWEA, on legislation streamlining transmission permitting and siting: “New transmission is critical, not only to develop our abundant renewable energy resources, but to upgrade and improve the reliability of the existing transmission system.”
- Bobby Stillwell, General Counsel, Mesa Power: "[We] got too clever..We had thought that doing [wind and water] jointly would be a convenience and maybe even a cost savings to us and the landowners. There were two things that we misjudged. To do that we would have to acquire a 250-foot right of way instead of just a 150-feet one for electricity. That was enough difference to the landowners…Secondly, they were criticizing the whole project, both water and electricity, when they were really concerned about water. We didn't want both to be subject to the same criticism."
- Robert Duncan, Texas State Senator: "Everybody kind of thought that the wind was a Trojan horse for the water. And if you look at how it all came down, it would seem to me that those were legitimate concerns."

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- From the AWEA Report Card, under challenges for transmission and integration: “Policies for planning, paying for, and permitting transmission need updating to effectively promote grid expansion…Planning is reactive, complex and slow; processes need to be overhauled…Broader cost allocation needed to fairly allocate costs with benefits…Streamlined siting needed to allow grid to expand as required…Promoting adoption of Conditional Firm service, other innovative techniques for using existing grid more effectively…Making grid less balkanized through balancing area consolidation…Moving from hourly to 5-or-10-minute power plant dispatch intervals…Greater use of ancillary services markets to provide needed grid flexibility at lower cost...Increase use to reduce utility wind integration costs...Address technical interconnection concerns…Conduct more integration studies”