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The Big Picture: Wind Energy Markets
Greener Energy: The Case for Wind Power at SJU and CSB
The oil crises of the 1970s spurred the rapid development of alternative energy sources. Responding to state tax incentives, private producers in California installed hundreds of medium-sized power plants in large wind farms. Denmark also blew into the wind industry, but focused on smaller developments to supply its less populated rural areas. Tax credits and subsidies allowed both of these wind markets to grow so that now government help is no longer as necessary.
Today, global wind energy markets are growing rapidly. Both 1994 and 1995 were stellar years for the global wind energy industry. In 1995, new wind turbines with a rated capacity of 1,300 MW were installed, boosting global installed capacity by nearly 35% with 881 MW (or about 68%) attributable to Germany and India. (1 MW is equivalent to 1000 KW.) Germany, in fact, is set to surpass California as the world's leader in installed wind-generating capacity by the end of 1996. By early 1997, Germany will likely push past all of North America. Markets for wind are growing faster than any other energy technology. Global wind capacity has more than doubled over the past five years. (AWEA industry update)
Wind power generators currently can generate electricity at between 4 and 5 cents per kWh, which is more than 80% less than the costs associated with wind plants in the early 1980s. Three factors account for this drop in costs. First, actual field experience allowed for technological and operational refinements. Second, technical innovation was spurred by help from the U.S. Department of Energy's National Wind Technology Center as well as other agencies such as the National Renewable Energy Laboratory (NREL). Finally, economies of scale resulting from increased turbine size increased production capabilities. All three factors could not have been achieved as quickly without the political will in places such as California, Denmark and Germany to institute tax breaks and subsidies to help the wind energy industry grow. (AWEA industry update)
The U.S. market has reached a plateau due to changes resulting from deregulation. First, because of electric industry restructuring, electric utility planners are skittish about adding new generating capacity of any kind. Second, deregulation puts a heavy focus on short-run price competition so that capital-intensive technologies such as wind power do not fare well (Kerber, 1996). Longer-term economic, environmental and energy security benefits are not included in the price of fossil-fuel based electricity. In spite of these factors, utilities are investing in a more balanced resource mix. Northern States Power (NSP) in Minnesota, for example, has contracted for the next 100MW of its wind power energy component (it already has installed 25MW) and the total may reach 425 MW by 2002. Wind Power Acceptance: Acceptance of wind power is increasing because of rising concern over the greenhouse effect (especially in developed countries) and the rising global demand for electricity (especially in less developed countries). The major factor governing acceptance, of course, is the cost of wind power when compared with alternatives. The cost of wind power has dropped from an average of $.08/kWh in 1990 to $.05/kWh in 1995 and is expected to drop to $.04/kWh in 2000 (UWIG Brochure). One reason for this expected cost drop is better technology. For example, today's variable speed wind turbines are more reliable and have lower operation and maintenance (O&M) costs than constant-speed wind turbines. Additionally, new blades with airfoils designed specifically for wind turbines at the NREL capture about 20% more energy than previous blades.
Other Questions:
Various other considerations are required before making an investment decision. For example, it is not clear how a power producer will deal with land on which a wind turbine would be sited. Is it to be bought or leased? Should the land-owner be paid a lump-sum, fixed fees, or some sort of sliding-scale royalty? Should producers pay taxes? Should producers be exempt from paying taxes, given wind power's social value? These are some of the questions producers and legislators are dealing with in order to allow the wind energy industry to further develop.
What we've seen so far is that wind energy is a rapidly growing energy source, it is becoming more inexpensive, and that it has some industry teething pains to deal with. This is fine and good, but what of its availability and reliability?