It has been 14 years since the last great boom and subsequent bust. Everyone is crossing their fingers that the projects being rushed to completion perform as projected.
Not since the wind rush of 1985 has the United States wind industry seen such furious development as is currently underway. More wind capacity was installed in the United States during 1998 than at any time since 1983. Even more is planned for the first half of 1999. But a bold gamble is being played on the Great Plains. Nearly half of the new capacity is being installed by a new manufacturer with a new turbine.
The Stampede Has Begun
This year 480 MW will be installed, significantly more than the previous US record of 400 MW in 1985 during the height of the last tax-credit frenzy. In a little over twelve months (from mid 1998 to mid 1999), developers will install more than 800 MW of new wind capacity in the United States. All of the new capacity must be completed before the June expiration of the federal production tax credit.
Canadians will add another 100 MW in Quebec, and 2 MW in Alberta during the same period.
Net capacity additions in the USA and Canada from mid 1998 to mid 1999 will be worth more than US$1.1 billion. These additions do not include more than 60 MW of new turbines being installed in California to replace turbines currently being removed, but do include Enron Wind Corporation’s project at a previously abandoned site near Palm Springs.
The boom is most intense in the heartland states of Iowa and Minnesota. Some 250 MW are in various stages of completion in each state. It is here that the new manufacturer, Enron Wind, is making its mark,. By mid year Enron Wind will have installed about 400 MW of capacity with its new turbine, the Zond Z750.
Deja Vu–Have We Been Here Before?
But old timers, those who survived the “wind fever” of the early 1980s tax-driven market, ask whether this is anyway to run an industry? The boom is clearly unsustainable and will turn to a bust when the subsidies for new projects expire in June. There will follow another massive contraction of the US wind industry similar to that in 1985. The few green power projects on the horizon will not support the hundreds of new employees hired during the past two years.
It has been 14 years since the last great boom, and subsequent bust. Everyone is crossing their fingers that the projects being rushed to completion perform as projected. No one wants a repeat of the shoddy projects that littered California with poorly operating–sometimes non-operating–wind turbines.
From 1981 through 1985 federal and state tax subsidies in California were so great that wealthy investors could recover up to 50 percent of a wind turbine’s cost. The lure of quick riches resulted in a flood of development using new and mostly untested wind turbines. By the end of 1986, when projects already underway in 1985 were completed, developers had installed nearly 15,000 wind turbines. These machines represented 1,200 MW of capacity worth US$2.4 billion in 1986 dollars.
It took nearly a decade from the time the first flimsy wind turbines were installed before the performance of California wind projects could dispel the widespread belief among the public and investors that wind energy was just a tax scam. This time around the stakes are equally big, especially for Enron Wind.
Gamble on the Plains
In early 1998 Enron Wind began installing the first commercial versions of its new turbine, the Z750, for one of two massive 100 MW projects in Southwestern Minnesota. The Tehachapi, California developer energized its first units in a project under contract to Minnesota’s Northern States Power at a site near Lake Benton on Buffalo Ridge, a 100 kilometer long gentle rise separating the drainages of the Mississippi and Missouri Rivers.
Disclosure: Paul Gipe has consulted to NRG Systems, SeaWest, Aerovironment, USDOE, NREL, NASA, AWEA, KWEA, CanWea, DGW, EECA, Microsoft, the Izaak Walton League, the Minnesota Project, and he has written for numerous magazines. From 1984 to 1985 he worked for Zond Systems. Zond fired him in December 1985.
The variable-speed turbine is the boldest gamble since Kenetech’s deployment of the ill-fated KVS33. And not even Kenetech rolled out new wind turbines as fast as Enron Wind. After testing a single prototype in Tehachapi for several years, Enron Wind began deploying the turbine commercially. By mid 1999 Enron Wind will have erected more than 500 of the new 750 kW turbines within eighteen months of their release.
After years of development and the testing of several prototypes in the Altamont Pass Kenetech began commercial production of its much-touted 33 meter, 300 kW variable-speed turbine in 1993. During the first year Kenetech installed only 33 of the machines. In 1994 Kenetech began full production and installed 276 turbines. In 1995 production peaked with nearly 400 units. By late spring 1996 Kenetech declared bankruptcy, a victim of hubris, poor management, and a flawed design. The company, once the largest in the wind industry with 400 employees, has been liquidated. Owners of Kenetech’s KVS33 turbines have since nursed most of them back into operation.
No significant operational data on the Z750 is publicly available. However, Enron Wind had installed its earlier model, the Z40, on two projects partially financed with public funds. Enron Wind, formerly Zond Systems, had installed twelve Z40 turbines in the Davis Mountains near Alpine, Texas as part of the Wind Turbine Verification Program. The program is sponsored by the US Department of Energy, the Electric Power Research Institute, and local utilities. The program was intended to demonstrate or “verify” state-of-the-art wind turbine technology to US electric utilities.
The Z40s in Texas use a 40 meter rotor with aileron control to drive a standard 500 kW asynchronous generator through an integrated gearbox. The turbines were first brought on line in September 1995.
“In the spring of 1996 the project experienced significant lightning damage,” according to EPRI’s report on the first year of operation. The participating utility, Central & Southwest Services, did not take control or “accept” the project until July, 1996, nine months after installation. CS&W is an electric utility serving four states including Texas and Oklahoma.
From July, 1996 through June, 1997 the total “system availability, which takes into account all downtime, was 81.4 percent” says EPRI. The report explains that it uses this measure of availability because “A utility is interested in the total amount of time that the project is available to produce power.” EPRI’s “warranted availability,” which “excludes interruptions not related to equipment failure,” was 87.9%. EPRI’s wind program manager, Charles McGowin, argues that when the experimental nature of the project is forgiven, availability reaches 91.3%.
The report goes on to say that “During certain periods of the year, a number of the turbines did not meet their power curves due to power regulation set point anomalies, controller problems, or other causes.” The turbines have since met their power curves.
Ward Marshall, CS&W’s manager of technology development, reports that all of the turbines were off line during July and August of 1998 for repairs to their ailerons. Since they were restarted, the turbines have been available for more than 95 percent of the time.
During the 1996 calendar year the turbines at Fort Davis generated 8.4 million kilowatt-hours for a capacity factor of 0.17 and a specific yield of 555 kWh/square meter of rotor area. Performance improved slightly in 1997 and again in 1998. In three calendar years (1996, 1997, and 1998) the turbines produced, on average, a capacity factor (plant factor) of 0.16 and yielded 568 kWh/square meter of swept area.
Eleven Z40s with full-span pitch control were also installed under the USDOE-EPRI verification program. These turbines were installed in Vermont during the winter of 1996 for Green Mountain Power. According to EPRI’s first-year report on this project, during initial testing one turbine damaged its gearbox. The turbine was subsequently replaced. In early 1997 Zond replaced the 2,600 blade mounting bolts on all turbines. Subsequently, Zond discovered additional gearbox damage and removed all eleven turbines and returned them to Tehachapi for repairs. Prior to removal of the turbines they were placed in “virtual operation” to keep oil circulating in the gearbox. Virtual operation “may have been more visually pleasing to the local townspeople,” than locking the rotors in place says the EPRI report. Green Mountain Power accepted the project in July, 1997, nearly eight months after the turbines were installed.
According to project engineer John Zimmerman, the GMP project lost one turbine to lightning for three months in 1998, but during the fall and winter Green Mountain’s Z40s have operated above 95 percent availability. EPRI’s McGowin, says “both projects are doing a lot better now.” During 1998 the turbines in Vermont generated 13.3 million kilowatt-hours, producing a capacity factor of 25.2%, and yielding 884 kWh/m2 of rotor area.
Enron Wind’s Mary McCann says that the Texas and Vermont projects “were experimental.”
Enron Wind’s Z40s have also been installed in Ireland and China in commercial ventures. No information on the performance of Enron Wind turbines in these projects is publicly available.
Though the control strategy of the Z750 differs substantially from that of the Z40, the gearbox on the bigger turbine derives from that on the Z40. Unlike the standard asynchronous generator on the Z40, Enron Wind’s Z750 uses a doubly-fed asynchronous generator and operates at variable speed. This is believed to reduce rotor-induced loads on the drive train.
By this time next year the wind industry will have a good idea whether American wind developers have truly put California’s bitter legacy of broken promises behind them. If the fields of new turbines work as advertised, it will bode well for the new millennium. If they do not, the US wind industry may not get another chance.
Fewer Players than in 1985
In the early 1980s there were dozens of developers scrambling for sites in California. They had an equal number of Danish, Dutch, German, and American manufacturers of wind turbines to choose from.
The 1999 stampede is fueled by both the impending demise of the federal tax credit and by utility restructuring. Utility companies do not know what the United States’ market for electricity will look like in a few years, but they are certain it will not be the same as today. For that reason, utilities across the country are “hedging their bets” against a future market for “green” electricity by investing in renewable energy projects. Wind energy is the biggest recipient of this trend.
One result has been the increasing domination of the US wind development by the subsidiaries of two large players: Enron, the giant natural gas company, and Florida Power & Light, a large electric utility. At one time Enron’s subsidiary, Enron Wind, then Zond, was a partner with FPL’s subsidiary in several wind projects. Not surprisingly, the two former partners are now feuding in court.
There are also fewer suppliers of turbines on the US market today than in 1985. Enron Wind will sell the biggest share, followed by NEG-Micon, but both Vestas and Mitsubishi will or have delivered sizable amounts. (Vestas has some 120 MW of projects underway, Mitsubishi has installed 42 MW and more may be coming.) Germany’s Tacke, an Enron subsidiary, is relegated to the European market so that it will not compete with Zond’s Z-series turbines. Enercon is prohibited from the US market because its turbines infringe on patents held by Enron Wind. Bonus has chosen to set out this wind rush in Europe where there’s plenty of work to keep them busy. NedWind never really penetrated the US market after a 20 turbine project in the San Gorgonio Pass. Nordex has a presence, but big projects have eluded it for no readily apparent reason.
There are a few independent developers remaining in the United States. Dan Juhl, a principal in Woodstock Wind Farms, is one. Another is Northern Alternative Energy’s Greg Jaunich. Both are located in Minnesota and both have struggled for years to bring their projects to fruition in the face of the extremely low prices paid for wind-generated electricity by Northern States Power, the regional utility.
Juhl’s US$12.8 million, 10.2 MW Woodstock project will be installed on Buffalo Ridge in the first quarter of the year. He is installing Danish turbines. “I used (Vestas’) V44s because I know they work,” Juhl says. “I have no interest in doing R&D (research and development) for someone else,” an oblique reference to the sole US wind turbine manufacturer.
Jaunich’s NAE is installing 23 MW from two projects. They too are on Buffalo Ridge. He is also using Danish turbines. The combined cost for the projects range from US$1,350 to US$1,425/kW. This is only modestly higher than the cost of Juhl’s Woodstock project at US$1250/kW.
All three projects are significantly more expensive than the US$1,000/kW touted by the wind industry’s trade association and the US Department of Energy. The installed costs of these projects, the only that are publicly available in the United States on current projects, are similar to the US$1,650 paid by Green Mountain Power for the 6 MW Zond project in 1996.
Juhl is still pushing “the European model” of distributed wind development as seen in Denmark and Germany. He believes that wind turbines can offer a new crop to cash starved Midwestern farmers. Farmers in Minnesota, Iowa and the Dakotas have been devastated by the recent collapse of prices for wheat and pork. The $10,000-$20,000 earnings from one medium-sized wind turbine “would significantly contribute to the cash flow of a small farmer” in the Upper Midwest, says Juhl.
Small independent developers, such as Juhl and Jaunich, hope to carve niches for themselves in the specialized markets of the Upper Midwest. For example, after the federal tax credits expire there will remain small financial incentives in Minnesota for projects less than 2 MW. These are projects so small, two to four turbines each, that the big companies will likely overlook them.
Other U.S. Projects Underway
Proud Texans are determined not to be left behind in the Midwestern stampede. The Lone Star state will install 110 MW from two projects during the 1998-1999 period. Texas Utilities is adding four Vestas V66s to its 35 MW Big Spring project for the prestige of installing some of the first commercial megawatt-class turbines in North America. Bragging is a time-honored Texas tradition.
The Big Spring project is just one of a series of non-Enron contracts that are moving toward completion. Besides operating 6 MW of Enron Wind’s turbines in West Texas, CS&W will also purchase power from a 75 MW project currently being constructed near McCamey, Texas by Foras using 100 NEG-Micon turbines.
The former Kenetech project in Texas is now operated by LG&E, a subsidiary of Louisiana Gas & Electric Co. The much hyped KVS 33 machines are delivering only 85 percent of the electricity that Kenetech originally projected from the 35 MW project. The troublesome turbines “were not as productive as we thought they would be,” says Cindy Berry, a renewable resource planner with the Lower Colorado River Authority, the purchaser of power from the project in the Delaware Mountains of West Texas. In something of an understatement, Berry says Kenetech “was overly optimistic.” The LCRA is a state-owned company that sells wholesale power to municipal and cooperative utilities in central Texas. LCRA will purchase power from a 30 MW expansion of the west Texas project by British wind company National Windpower.
There are also two small green power projects in Wyoming and Colorado. SeaWest broke ground last year on its 42 MW project with Tomen on Foote Rim near Rawlings, Wyoming. The project for Pacifcorp in Portland, Oregon was completed at the end of last year and is going through acceptance tests on the new Mitsubishi turbines.
The often discussed repowering of California’s aging wind turbines has finally become a reality. The largest project is FPL Energy’s repowering of the former FloWind site in the Tehachapi Pass. FPL cleared Cameron Ridge of FloWind’s remaining Darrieus turbines and has installed 80 of NEG-Micon’s 750 kW turbines. FPL also bought Cannon Energy’s site on the same ridge where it will be installing another 30 NEG-Micon turbines. The FloWind project is the largest repowering in California to date.
NEG-Micon installed 14 turbines in California last year as part of small repowerings for SeaWest and Oak Creek. But it was just the beginning says the Danish company. NEG-Micon’s joint venture with Florida Power & Light, and a subsidiary of Nichimen Corp. bought 164 MW of Kenetech properties in the Altamont Pass for $38 million. The consortium plans to remove 750 Kenetech wind turbines and replace them with 100 of NEG Micon’s 750 kW machines. Similarly, SeaWest removed almost 400 turbines from the San Gorgonio Pass late last year and will install 65 of NEG-Micon turbines in their place.
US Market Share Shrinks
Despite all the frenzied activity, the US role in the world’s wind market continues to shrink. In 1985 the United States accounted for 95 percent of the world’s wind generating capacity. As late as 1990 the United States still claimed 75 percent of the world’s wind turbines. But during the 1990s the US position dramatically changed.
Rapid growth in several countries, especially in Germany, outstripped that in the United States. Last year the growth in the US market was easily overwhelmed by the 800 MW installed in Germany. As a result, the US share of total world wind development fell to 20 percent in 1998.
Nor does the US have the most installed wind capacity of any country. Germany, a nation with one-fourth the population and only 5 percent of the land area of the lower 48 states, surpassed the United States in early 1997. Today there is nearly 2,000 MW of operating wind turbines in the United States. There is nearly 3,000 MW operating in Germany.
Future of Subsidies Bleak
The US wind industry has lobbied hard to extend the tax subsidies, now worth US$0.016/kilowatt-hour. Faced with powerful opposition to “corporate welfare,” the American Wind Energy Association dropped its demands for a full extension. Instead they sought to extend the credits only one-year in hopes that the election in 2000 will bring a new Congress and a new president. But even this was unsuccessful.
With an increasingly conservative Congress distracted by the Clinton impeachment proceedings, prospects for extension of the credit are grim, regardless of rosy reports from AWEA and Enron Wind lobbyists. If the tax credits are not extended, the boom both in California and in the Midwest will collapse as it did in 1985.
Jaime Steve, AWEA’s lobbyist, says that it is too late for any extension to go into effect before the current subsidy expires. Even if lobbyists are successful there will be a delay in constructing new projects. The lull could well extend to 2001 when the powerful chairman of House Ways & Means Committee, Bill Archer, retires. Archer opposes extending the tax credits.
The best near term hope is in Minnesota where a small band of environmentalists have demanded that the state order Northern States Power to build another 400 MW of wind plants. John Dunlop, AWEA’s Great Plains representative, credits the 1998-1999 boom in Minnesota and Iowa as the “culmination of decades of effort by renewable energy advocates” in the Upper Midwest.
Bill Grant, the leader of the effort, is unapologetic by his demand that the state “mandate” another 400 MW. “Wind was a good deal (for the state) four years ago,” when the first 400 MW were mandated. “It is an even better deal today, ” says Grant, the director of the Izaak Walton League’s Midwest Office.
Grant and the other activists are persuasive. In January the Minnesota Public Utilities Commission rejected NSP’s arguments and ordered the utility to consider another 400 MW of wind sometime in the first decade of the next millennium. Minnesota’s decision alone will not save the US wind industry but it may prevent the boom of 99 from becoming the bust of 2000.