You have been a pioneer in wind power and green energy generation for almost three decades and have won numerous awards for your work. How has wind power evolved over the decades you’ve been involved?
The U.S. wind energy industry came out of the energy crisis of the 1970s, which resulted in federal tax incentives to encourage the development of renewables. I formed Zond Systems to pursue wind in 1980.
There was rapid growth from 1980 to 1985 when the formative activity of the industry took place, primarily in California. This helped put a number of European wind turbine companies in business. Then, in 1985, the tax incentives and support that was given to wind was withdrawn. At about the same time, oil prices went from the $30s to about $10 per barrel, creating a general perception that wind energy wasn’t competitive, and that just about wiped out the whole industry.
Because Zond retained a piece of every wind energy project it developed, when times got hard, we had generating capacity, which provided a stream of recurring revenues. In the early 1990s, we started developing turbines, and that worked out pretty well. We got to the point where we were the second-largest wind turbine manufacturer and the largest wind developer in the world, but the industry was still pretty small. At the end of the 1990s, the business was purchased by Enron. When Enron got into trouble, GE acquired the turbine technology to enter the wind business.
Meanwhile, the European turbine manufacturers benefited from the U.S, development of wind projects, which were spurred by the earlier tax credits and long-term incentives in Europe. With
high energy prices and a stronger sense of environmental priorities, the European market grew rapidly.
It’s only been in the last few years that the U.S. wind industry has started to take off. The growth in the U.S. market has been driven primarily by the declining cost of wind energy, and rising cost of traditional fuels, particularly natural gas. We’re now at the point where utilities understand that there is a place in their generating portfolio for renewables. They see renewables as a way to economically displace the need to burn fossil fuels and significantly reduce environmental burdens. This perception set the stage for the U.S. wind industry, and it has been bolstered in the past few years with growing acceptance of the damage that can be caused by climate change.
So, most fundamentally, the economics are causing the industry to accelerate, along with the pressure that’s being brought to bear by greater awareness and concern for damaging emissions and climate change. Around the world, the wind industry is seeing rapid growth, which should represent revenues exceeding $20 billion in 2007.
How are countries approaching this issue of reducing carbon emissions? How do the regulations and incentives in Europe differ from U.S. policies?
In Europe there’s a defined structure of what you can do as an independent producer generating renewable energy. In Germany they have the Feed-in tariff; if you connect and feed power into the grid, the electric utility must buy the power at a small discount from what the retail customer pays. Some of the other European countries have similar incentives. Generators are paid a much higher rate than what the utilities would pay in the U.S. So, in Europe this creates an economic incentive for the wind business. In Spain, the government has announced that it intends to increase its wind energy capacity by up to 15,000 megawatts, and will offer long-term contracts at attractive prices to achieve this national goal.
While each European country may have a slightly different approach, the countries that have built a strong wind industry economy have been shown to have stable long-term policies in place, offering economically attractive markets for wind. As a result, about two-thirds of the global wind development resides in Europe.
In the U.S., the Production Tax Credit (PTC) provides a 1.9 cent-per-kilowatt-hour tax credit for electricity generated with wind turbines over the first ten years of a project’s operation. The PTC has been a major driver of wind power development since it was first implemented in 1992. Unfortunately, the PTC is short term and must be renewed prior to expiration each two or so years. It is currently set to expire again at the end of 2008. Because the PTC has been implemented, and then allowed to expire every few years, the discontinuity has made it difficult for the U.S. wind industry to invest adequately in materials and infrastructure, plan for manufacturing capacity and project development, and even to secure financing.
A number of states have become somewhat impatient with Washington, and have adopted what’s referred to as Renewables Portfolio Standards (RPS), stipulating the amount of renewable energy in the future energy additions within the state. This creates a separate market in which renewables can compete apart from the thermal generating options. Currently, twenty-one states have adopted RPS-type policies.
What should states and Congress do to harness the potential of windpower?
The most efficient approach would be to recognize each form of energy for not only the direct costs of the energy but also the indirect, “external costs.” Thus, carbon fueled power plants would also pay for the social costs of emissions, fairly leveling the playing field with renewables. That would effectively support greater development of renewables, because the external costs of renewables are negligible whereas the external costs of burning fossil fuels carry health costs, acidification of rivers and lakes, mercury into the oceans, and the emission of carbon dioxide and other greenhouse gases resulting in the enormous impact of climate change. If you account for those costs, it makes the economics for renewables very competitive.
How large will the U.S. and global market for wind power be in 2020?
In terms of the wind potential in the United States, there are a number of industry and government initiatives targeting 20 percent wind by 2020. That puts the potential market into the several hundred billion-dollar category. Europe would be on the same order and then India and China, which will also be substantial markets.
What advantages does wind offer over other alternatives to fossil fuels? What areas are best suited for wind?
Wind is an abundant energy resource that’s available across the planet. In America, the Midwest is a tremendous wind resource area. The Department of Energy has estimated that there’s about four times as much wind energy resource as there is demand for electricity in the country. Wind energy could well provide 20 percent of the power by 2030. Wind energy is a gift of nature where you put up a machine and the energy is delivered to you, and the machine just sits there quietly converting the wind force to clean electricity. You don’t have to transport fuel or deal with emissions or endure the cost of the military for your energy supply. It’s one of the great gifts of nature.
Would it be fair to say that one of the obstacles to wind power is local land-use ordinances and environmental review processes for approval of wind turbines?
In the Midwest, as you can imagine, farming communities strongly support wind energy. When you get near high-population areas, in some instances, people object to the visual aspect—primarily, the “NIMBY” followers. But I believe that the days of that kind of thinking are fading into the past. With the changes coming on from climate change and the increasing concerns about peak oil and energy security, people are becoming more realistic about what makes for a beautiful, safe community. The perception of what is appropriate in the zoning ordinances is changing in a very constructive way for wind energy.
This issue of verdeXchange features Robyn Beavers’s account of Google’s investment campus-wide in solar panels. How do solar and wind relate, and how great is the potential of these carbon-alternative, sustainable energy sources?
Solar panels on the Google campus should be celebrated; it’s a great move. The economics of solar are a little further out than for wind, but I think we need to be encouraging all forms of renewables and conservation. We should be embracing these other technologies and pushing their deployment vigorously while limiting new building of carbon fueled power generation. Recent estimates by a major financial institution put the potential for renewable power generation at $1.4 to $1.5 trillion by 2030.