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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.

Fortnightly Magazine - May 2005

that investor-owned utilities are prevented from earning a return on windpower investments commensurate with the risks and costs of developing the resource.

"If an independent developer builds a project that is financed largely on the credit of his contract with us, he benefits from returns under a framework that isn't available to us," says Sparby of Xcel Energy. "The impact is there are fewer potential investors to develop wind, with the playing field being tilted away from utilities."

This problem is not unique to windpower, but it is exacerbated by the unique challenges that wind presents to a utility.

"The best a utility purchasing windpower under long-term contract can hope for is to break even," Wiser says. "Not only do utilities have the fundamental desire to build rather than buy, but wind also represents a maturing technology with which many utilities don't have a lot of experience. Is it any surprise they are resistant?"

Wiser suggests the power industry must address this dilemma before utilities can be expected to truly embrace windpower. "We have to figure out how to provide an incentive for utilities, not just a stick," he says. "We are in the very early phases of considering that."

Specifically, two states, Colorado and Hawaii, have included language in their RPS laws that direct the state PUC to establish a profit-making incentive for utilities. Such regulatory initiatives are nascent and untested, but they represent first steps toward engaging utilities in the wind-development effort rather than dictating the effort to them. With utilities on board, windpower would stand a better chance of becoming a flagship power-generation technology.

However, until such policies become an established part of the ratemaking process, the destiny of windpower will remain largely in the hands of a fractured U.S. Congress and exemplified by a patchwork of disparate state policies.

If political will fails, windpower likely will continue the on-again, off-again growth pattern it has exhibited in the past several years, and its contributions will remain marginal. But if lawmakers can form a consensus long enough to set forth a clear vision for renewables in America, the windpower industry might finally overcome the boom-bust cycle and emerge as a vital and vibrant utility resource.

Wind, Wires & Coal

Many of America's strongest and steadiest winds blow in places like North Dakota, Montana, and Wyoming, far from load centers that need the power. This is a major problem, because securing transmission capacity to remote areas can cost more than the wind farms themselves.

"It's not a problem if you have windpower in the service territory of the utility using the output," says Bill Pascoe, president of Pascoe Energy Consulting in Butte, Mont., a former senior vice president with Montana Power, and chairman of the Western Electricity Coordinating Committee (WECC). But in the West, where no RTO yet exists, transmitting windpower likely means crossing several utility territories, with pancaked rates for each.

Furthermore, even in the windiest areas the wind is intermittent, which inflates the cost of transmission service. If a wind farm requires firm-transmission rights, then it will pay