When FERC opened wholesale power markets to competition a decade ago in Order No. 888, it codified a system for awarding grid access known as the pro forma Open-Access Transmission Tariff (OATT),...
Windpower: Beyond Boom and Bust
Windpower is caught in a vicious cycle of Washington politics. Escaping the cycle will require visionary leadership in Congress and the utility industry.
Windpower has come a long way in the past decade. Ten years ago, utility planners were hesitant about adding windpower to their systems. They weren't convinced wind machines were ready for prime-time utility applications, given their high cost, low efficiency, and poor reliability.
Today, utility perspectives on windpower have changed dramatically. "People used to say, 'The machines don't work.' They don't say that anymore," says Robert Kahn, a wind energy consultant based in Mercer Island, Wash. "Now they say, 'The power is intermittent.' And that's a stage-two question."
Technology development has made wind turbines more efficient and durable, and large-scale manufacturing has driven costs down. Consequently, in the right conditions a kilowatt-hour of windpower can compete favorably against a kilowatt-hour of fossil generation. Moreover, turbine performance is supported by such blue-chip manufacturers as General Electric, Mitsubishi, and Siemens-which is especially helpful for utility executives facing skeptical directors and commissioners.
Given these advances, policymakers today view windpower more favorably than they have in the past. More than 20 states have adopted renewable portfolio standards (RPS) that set targets for wind and other renewable resources, and the Federal Energy Regulatory Commission (FERC) recently proposed new transmission rules to help wind farms access transmission resources cost-effectively.
"There's a lot of political and regulatory goodwill behind wind right now," says Mike O'Sullivan, senior vice president of development for FPL Energy in Juno Beach, Fla. "It has a lot of supporters across both sides of the aisle in Congress, and at the same time many states are grabbing onto windpower as a public-policy initiative."
Where regulators go, utilities generally follow. And indeed some utilities are investing in windpower-through unregulated affiliates, and in some cases directly via their own franchises. Most notably, Puget Sound Energy (PSE) is investing $200 million to build a 150-MW wind farm in the state of Washington, and has issued a letter of intent to acquire another 230-MW project.
Such developments, combined with a slew of independent projects and transactions announced recently, indicate the windpower "buzz" is growing in the U.S. power industry. This buzz is amplified by rising concerns over fuel prices and energy security vulnerabilities, as well as recent trends toward restrictions on greenhouse gases.
Even Wall Street hears the buzz; investment bank Goldman Sachs agreed in March to acquire wind developer Zilkha Renewable Energy for undisclosed terms. "There is a widespread consensus among those at the firm who focus on the energy sector that wind is one renewable source whose time has come," says Neil Auerbach, managing director with Goldman Sachs in New York. "We think there is an opportunity here, and a profitable one at that."
However, the growing volume of the windpower buzz belies the paltry role windpower actually plays in the U.S. power market, and its sluggish growth compared to Europe and other parts of the world. Smaller countries dwarf the United States in terms of both installed capacity and rate of new