A no-holds-barred interview with the electric industry’s chief architect of wholesale electric market design.
Walking the Walk
Eco-Developer Pat Wood III explains how competitive markets are good for green business.
which is the easiest U.S. market to be a retailer in.
In addition to U.S. wind projects, we also have Canadian projects under development. As chairman of the Airtricity North American Advisory Board, I help oversee this growing business and work on the strategic direction of the company. There is a great team on the ground here, in Chicago, Austin, Albany, Toronto, and now California, and the Irish home office is very active in Europe, moving aggressively into offshore wind development now.
Fortnightly: Is it possible for wind to generate 20 percent of the nation’s power in the future as some AWEA conference presenters posited?
Wood: Yes, it is possible for wind and other renewables together to make that target. Sen. [Jeff] Bingaman’s bill sets the target at 15 percent by 2020. This is very achievable. But for the wind piece of it, we are going to need more transmission. With the right transmission grid … there is so much capital that is dying to invest in this business. It is the transmission siting and cost recovery that are the big issues to address here. And, as to wind operations, the utilities who have experience with it show that they can integrate significant amounts of wind. If you build it, they’ll make it work on the grid.
Fortnightly: What is the endgame of the production tax credit (PTC)?
Wood: The PTC has done a good job in jumpstarting this young technology. But it does lead to some distorted outcomes in the market. I think we need to go ahead and get to the endgame so that we do this at the lowest overall cost. In thinking about this on a continuum, the left part of the line is a PTC where you are giving a tax benefit directly to companies. In the middle you have an RPS where you place a purchasing obligation on retailers and utilities. And at the other end of the line is a carbon tax or carbon-trading regime where the whole economy is incented to find the most efficient way to get to a low-carbon-emissions world. I think it is better to have the government state an enforceable, broad social goal, and let people work out how to get there.
Fortnightly: When does the government back off the PTC? When do the subsidies end?
Wood: Natural gas is a good example. Remember all that “tight” gas that is in the San Juan formation and elsewhere? In the 1980s, Congress did a 10-year production tax credit for producing that harder-to-get gas. The program worked to get that gas produced, and then it went away. I think this should be the same for wind. If Congress wants to extend it a few more years and then say that’s it, that would be fine with me. But the idea of doing both [the PTC and the national RPS], as some in Congress advocate, is kind of like belt and suspenders.
If we are going to 15 or 20 percent [renewables] by 2020, there’s not enough money in the federal budget to