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In the past, when people referred to wind power as a “green” energy source, it typically wasn’t because of the profit margins. Recently, however, due to improved economics and compelling future earnings, a number of corporations have been harnessing wind power to provide a more significant part of their powerplant portfolios worldwide.
The expansion rate of wind power is impressive. Total worldwide capacity has grown from 7,600 megawatts (MW) at the end of 1997 to more than 31,000 MW at the end of 2002, a cumulative $25-billion investment. The wind business represented a $6-billion investment last year alone and is expected to see double-digit growth for the next decade. At present, some 4,700 MW have been installed in the United States, but that number is expected to grow as large as 100,000 MW by 2020, according to the American Wind Energy Association.
These numbers help explain why growing numbers of corporate heavyweights like General Electric (GE), Shell, and BP are now investing large sums of capital into fine-tuning well-established wind turbine designs and new wind projects all around the globe.
“Wind is a natural part of our company’s portfolio,” said Steve Zwolinski, CEO of GE Wind Energy. “The issues shaping future power markets include policy and national security; the Kyoto protocols and other initiatives that limit greenhouse gases; the emergence of green power markets; and long-term trends toward distributed generation. It is clear that our customers are moving toward renewable energy technologies. Wind power is clearly a part of that trend.”
The most important plus for the domestic wind energy business may be the experience and knowledge base of engineers to look at each component of a wind turbine to better understand the performance tradeoffs without shifting performance risk to the customer. It was the need to finetune turbines in the field during the wind power industry’s rapid start-up phase that ultimately led to the bankruptcy of Kenetech in the early 1990s, what was then the world’s largest wind power company. While Kenetech went under, its archrival Zond survived and was ultimately purchased by GE.
Since GE purchased its wind energy unit in May 2002, the number of engineers working on wind has doubled and the amount of technology investment in the company has increased by a factor of four to five times. “Prior to our acquisition of the wind company, we had been assessing wind power for several years,” said Zwolinski. “When the wind acquisition came along, we knew we had a very significant opportunity and were prepared to jump in.” He believes GE’s strong technology portfolio and global sales infrastructure will all help push wind technology into the mainstream.
PPM ENERGY (formerly PacificCorp Power Marketing) recently purchased the
24-MW Klondike Wind Project in Wasco, OR.
Since the fall of Kenetech, advances in turbine technology have improved the efficiency and viability of wind-generated electricity. Customers can enjoy a reliable source of power backed by companies with the capital to perfect turbine components in the field without shifting the risk of project failure on wind energy buyers.
Utilities and their affiliates, such as FPL Energy, PacifiCorp, and American Electric Power (AEP), are also investing significant sums into wind projects. FPL Energy owns more wind projects than any other investor: 1,700 MW or roughly a third of the nation’s total wind turbine fleet. The utility affiliate plans on adding another 700-1,000 MW of capacity this year.
“We believe in wind power because it makes sense economically and from a public policy perspective,” said Steve Stengel, an FPL Energy spokesman. “Costs have come down dramatically over the last 20 years, and wind-power can be competitive today with other more traditional forms of generation.” Without subsidies, wind-generated electricity can cost as low 4 cents per kilowatt-hour (KWH) and is predicted by the Department of Energy to fall below 3 cents/KWH over the next decade.
In 1994, AEP built the first utility-scale wind farm in the Southwest, located near Fort Davis, TX. The company has invested $335 million into two wind projects totaling 310 MW. “Where wind resources make it viable and economical, we believe wind power ought to be developed,” said Peter Main, spokesman for AEP.
Much of this interest by utilities was originally driven by public policies such as federal production tax credits. “Only large companies have the ability to forecast their tax base over the long term. Typically the entities that can take advantage of a production tax credit that lasts 10 years were private utilities,” pointed out Stephen Probyn, CEO and president of Probyn Group, a firm that has worked with insurance companies and pension funds to invest $1 billion into wind projects across the country. With the production tax credit of 1.7 cents/KWH, wind projects in west Texas sold their output at below 3 cents/KWH. “That price is cheaper than the spot market prices utilities would otherwise pay for electricity from fossil fuel powerplants,” he says, adding that those numbers attract investors.
Large corporate electricity consumers such as DuPont, Kinko’s, Staples, Toyota, Patagonia, Interface Fabrics, and White Wave have also invested in wind power purchases as part of their corporate sustainability initiatives. To date, White Wave, the nation’s largest manufacturer of soyfood products, is the largest corporate buyer of wind energy in the country, purchasing 100 percent of its power from the wind and displacing 32 million pounds of carbon dioxide in the process.
These high-profile buyers have helped convince GE and other institutional investors to place their bets on wind power, a technology that offers many shades of green.
Peter Asmus is a business writer based in Boulder, CO. |
