wind in the pipeline

To make wind power more reliable, we must build new lines. But plenty of challenges exist.

By Jim Caldwell

It ought to be the best of times for the wind power industry. More than 1,600 megawatts of new wind power generating capacity were added in 2003 in the United States, and installations have grown at an average exceeding 20 percent annually over the past several years.

The prospects for an equally bright 2004 were dimmed, however, by the failure to secure a timely extension for the federal wind energy production tax credit, which expired at the end of last year. That points to one of the biggest stumbling blocks for the wind energy industry: a dependence on regulations that help make the cost of wind power competitive with other energy sources.

But while there are some policy and regulatory challenges facing wind energy, the industry also has developed some initiatives to help boost overall power reliability in the United States. Transmission tariff reform, investment in wind energy pipelines, and reliability standards will establish wind energy as a solid citizen on the grid.

Each of these turbines at the Mountaineer Wind Farm in West Virginia is rated at 1.5 MW.

In spite of the short-term setback with the tax credit, energy analysts foresee double-digit growth in the wind industry for the next decade. The industry has vast potential and increasingly favorable economics. A study by Stanford University published in 2003 found that as much as one-quarter of the United States has winds strong enough to provide electricity at a cost equal to that from a new natural gas or coal power plant. What's more, the cost of wind power, once a wind farm has been built, is steady over time, and not subject to fuel price volatility or increased liability for pollution.

Compare that situation to the condition of the natural gas industry. Many experts now agree that the nation is facing a natural gas shortage. The depletion of the North American supply of natural gas, these experts say, combined with continued demand for natural gas in power generation applications, is resulting in high, volatile prices for that fuel and a likely shortage for years to come.

With today's technology and today's fossil fuel prices, roughly 800,000 MW of wind capacity would be cost-effective to harness, according to comprehensive wind resource assessments. The American Wind Energy Association believes that between 100,000 and 250,000 MW of wind capacity could be built with reasonable land-use restrictions and transmission investment, thus supplying about the same amount of electricity that is currently derived from nuclear or natural gas plants.

That is wind energy's promise. What are the challenges?

LACK OF CREDIT

When the federal wind energy production tax credit expired on December 31, it was the third expiration in less than five years. Prospects for a swift renewal were uncertain as this article was being written. A three-year extension is included in the wide-ranging energy bill that Congress shelved at the end of 2003, after negotiations stalled over unresolved regional and partisan disagreements. The bill would provide a credit of 1.5 cents per kilowatt-hour (adjusted for inflation) for electricity produced from wind energy technology over the first 10 years of operation of a qualifying project. The credit is important for financing wind projects. A project becomes eligible if it comes online while the credit is in place.

The tax credit expiration-and-extension cycles inflict a high cost on the industry, as the uncertainty of credit availability causes investments to be suspended, contracts to be put on hold, and workers to be laid off. The American Wind Energy Association estimates that up to 1,000 megawatts of new wind projects are currently held up by the delay. When the tax credit previously expired in December 2001, about $3 billion worth of proposed projects were put on hold, and hundreds of workers were furloughed. The credit must be extended—and extended over several years to provide a signal of stability to the investment community.

Another policy to ensure a stable investment climate would be a national renewable energy goal, or renewables portfolio standard. A measure calling for an increasing share of the nation's power supply to come from renewable energy sources by 2020 was passed by the U.S. Senate, but the provision was not included in the final energy bill that Congress put on hold last year.

In addition to uncertainty on the legislative front, wind energy faces the institutional challenges of gaining access to the utility transmission system on a nondiscriminatory basis. The patchwork of separate and overlapping systems and jurisdictions that make up the nation's transmission system make this a formidable task, one that is further complicated by the electric industry and Congress.

They are critical of efforts by the Federal Energy Regulatory Commission to overhaul and standardize rules governing transmission. The market rules proposed by FERC would eliminate non-cost-based penalties associated with wind's variable output, and level the playing field for wind energy with respect to transmission access. FERC's initiatives, if fully implemented, would have reduced wind's cost of delivery by nearly as much as the incentive provided by the federal tax credit.

Even if the energy bill is passed in 2004, it is not likely to improve the situation for transmission access for wind power. The bill, if passed in its current form, would place major constraints on the ability of FERC to institute reforms.

An additional layer of regulatory uncertainty was brought into play by the massive blackout that affected some 50 million people from New Jersey to Michigan and northward into Ontario and Quebec last August. The blackout exposed long-standing weaknesses in the nation's transmission infrastructure and management, and put pressure on the North American Electric Reliability Council and its regional and state counterparts to take measures to increase the grid's reliability.

GOING DOWN THE WISH LIST

The transmission and reliability regulatory arenas with which the industry must deal are multiple and complex, and the task is overwhelmingly large for an emerging technology like wind power. But there are definite items on the wind energy industry's wish list.

One item is getting the relevant regional and state transmission organizations and regulatory bodies to adopt market rules similar to those outlined by FERC, including elimination of penalties associated with wind's variable output when variation does not result in a cost to the system. Streamlined interconnection procedures and fair transmission access and costs would allow wind to have a place in interstate commerce as merchant generation, rather than being limited to power purchase agreements with willing utilities.

A few regional or state jurisdictions are showing the way. At the Electricity Reliability Council of Texas, nondiscriminatory pricing and investments to add transmission needed to bring west Texas wind to market help level the playing field. In California, wind farm operators are pooling their resources and participating in the California Independent System Operator Participating Intermittent Resource Program, which uses the most accurate technology available to transmit forecast information. The information allows Cal-ISO to schedule energy from wind farms into the California electric grid about an hour ahead of time.

PJM Interconnection, which oversees power markets in the mid-Atlantic region, employs a wind-friendly tariff. Last year, it became one of the first organizations to assign an explicit capacity value to wind power and allow wind projects to be paid for supplying this capacity.

The New Mexico Wind Energy Center near Fort Sumner came online in October 2003. The complex can generate as much as 200 megawatts.

Another important improvement would be the development of smart transmission systems to increase the grid's reliability and capacity. Sophisticated new communications and monitoring hardware and software would enable grid controllers to assess power flows more easily and expand the system capacity using the same physical infrastructure. The cost of such investments to expand capacity and efficiency, reported to be in the tens of billions of dollars, is in fact small compared to the costs of the blackout or to the savings from increased efficiency in the much-larger electricity generation sector.

There also have to be new rules governing the right to use the increased network capacity and who should pay for insurance against rare but catastrophic regional blackouts. In particular, the costs of upgrades should be borne by all who use the grid—not just the new entrants—and the right to use the transmission capacity should be open to all.

Any mandatory reliability standards developed by the North American Electric Reliability Council or by regional organizations should be forward-looking and nonexclusionary, and receptive to new technologies. Currently, utility-scale wind turbines are required and designed to shut down in the event of a system fault or blackout. Since they are controlled by sophisticated electronic equipment that maximizes their efficiency, these turbines also start up as soon as the grid becomes functional, without the delays typical of nuclear or coal plants. The Weatherfield wind farm in upstate New York, for example, was shut down for a half-hour during the August 2003 blackout—exactly as long as the local grid was down—and was back up and generating power as soon as the grid was restored.

This is well and good, but wind power technology could deliver even more. New configurations in turbine design allow turbines to go even further than simply being "system neutral" and turn them into active enhancers of the grid's overall reliability. New technology makes it possible for wind turbines to simply ride through a fault on the grid, such as a short circuit or a lightning strike. In fact, modern turbines have become so advanced that they not only can stay connected during short faults, but can actually supply active voltage support and frequency control, and improve the power quality on the grid. The new Horns Rev wind farm, off the coast of Denmark, provides an example of the advances in many of the new technologies that make such performance possible.

TRANSPORTING WIND ENERGY

The electric industry and its regulators need to prepare for the day when wind provides a much larger share to the US power generation pool, and must work now to develop standards that will allow wind turbines to contribute fully to the grid's reliability.

Instead, a commonly held assumption in utility and regulatory meeting rooms today is still that wind turbines pose a threat to grid reliability because of the wind's variability, and that efforts to increase the share of renewables on a grid should be put on hold as a result.

A far-reaching education effort is needed to ensure that system managers and regulators at the North American Electric Reliability Council and at regional and state organizations are aware of modern wind energy technology's capacity to enhance grid reliability—and that they develop forward-looking, nonexclusionary reliability standards in close cooperation with the wind energy industry.

A transcontinental wind energy "pipeline" could transport electricity from windy locations on the Great Plains to the cities on the East and West Coasts.

Not all that must be done is regulatory. As part of a national energy program aimed at increasing overall reliability of the national electricity transmission system and addressing the natural gas shortage, the American Wind Energy Association is also proposing phased development of Trans-Prairie and Interior West wind pipelines. They would collect wind-generated electricity from the windy, lightly populated High Plains and the interior West, and deliver it to cities in the Midwest and the West.

The system would replace gas pipelines now under consideration to supply fuel for new gas-fired units added to the nation's electric generation fleet in the 1990s. AWEA's proposal is for electric transmission pathways that would substitute lower-cost wind for that gas generation.

By relieving the demand for gas-fired electric generation, the wind pipelines would take pressure off gas prices. Less demand for natural gas-generated electricity means more gas supply, and more gas supply means lower gas prices.

At present, there are well-developed transmission networks east of the Mississippi and on the West Coast, but very few lines across the Missouri River basin or in the interior West, where brittleness of the transmission system leads to significant restrictions on regional electricity exports. The AWEA is working on the analysis needed to justify new transmission capacity to move much larger amounts of wind generation from the rich wind resources of the High Plains and Rocky Mountain states to market in the cities of the Midwest and West Coast.

BEYOND EAST AND WEST

Each wind pipeline project would consist of three phases. The first would be transmission tariff reform and other refinements in rules governing the transmission system to use power line capacity more fully and ensure nondiscriminatory access to transmission. This can be done at no cost and would facilitate the addition of about 4,000 MW of wind energy, the equivalent of 400 million cubic feet of natural gas.

Next, several new local 345 kV transmission lines must be added to the grid to remove system bottlenecks and bolster secondary-level reliability. This would cost approximately $1 billion, but would open up about 26,000 MW of new wind capacity. Finally, two major high-voltage lines, from the northern plains to the East (Trans-Prairie Wind Pipeline) and West (Interior West Wind Pipeline), would be built. This $10 billion to $20 billion project would open up the addition of a staggering 30,000 to 60,000 MW of wind capacity to the system, enough new power to serve up to 18 million homes.

Funding for the local transmission lines can be accommodated through the existing regional transmission planning process. Planners, including those at Midwest Independent System Operator, at utilities like PacifiCorp, a unit of Scottish Power, and at federal energy agencies like the Bonneville Power Administration and Western Area Power Administration, are looking into expansion of transmission in their areas. The new lines would be designed to serve new wind power along with new coal- and natural gas-generated power, although the proportion is one of the issues that will have to be decided.

Beyond the main east-west transmission paths, these planners are evaluating expansion of transmission lines for central Arizona, Arizona-California, Utah-Wyoming, and Washington-Oregon-Idaho-British Columbia-Alberta. The need for additional subregional plans in the Western Electricity Coordinating Council was outlined in a study launched by the Western Governors' Association in 2001, following the California power crisis, to ensure that the West would have enough power plants and transmission capacity to serve growing demand.

Of course, any construction of new major transmission lines will be difficult to justify unless nondiscriminatory tariff and reliability standards are in place, and the productivity of the existing system has been improved.

The AWEA proposal would massively strengthen secondary transmission, improve reliability of the electric system, and increase the nation's supply of low-cost, environmentally friendly, domestic energy. In addition, the proposal not only addresses two national priorities—natural gas price pressures and electric transmission reliability—but will provide enormous economic development benefits to regions that have been hemorrhaging population and jobs for decades.

Wind energy's improving economics make it likely that the technology will continue to enjoy double-digit growth throughout the decade. With a more supportive, steady policy signal from the federal government, and with the widespread adoption of nondiscriminatory transmission and reliability standards, prospects for wind energy technology would be even stronger.

Jim Caldwell is policy director at the American Wind Energy Association in Washington, D.C.

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