With or without extension of the federal tax credit to encourage construction of wind generating facilities, wind generation has become more cost competitive due to spiraling natural gas prices. According to the American Wind Energy Association (AWEA), electricity from the 300 MW Stateline wind farm being developed along the Washington-Oregon border will cost less than 2.5 cents/kWh with the federal wind energy production tax credit (PTC), compared to as much as 20 cents/kWh being paid for natural gas-fired generation for the region. The wind tax credit can reduce the cost of wind-generated electricity by about 0.7 cents/kWh over the lifetime of a wind plant.
Following a wind generation building boom in the late 1980s that was fueled by tax credits to make wind-generating equipment, thousands of units were installed that made electricity at costs only slightly higher than electricity from fossil fuels at the time. But at the same time tax credits expired in the late 1980s, the price of electricity produced by natural gas dropped to about 3 cents/kWh from as much as 10 cents, trumping 5 cent wind generated electricity. In the 1990s Congress reinstated tax incentives, this time tied to wind energy production rather than to just making the machines. Recent increases in gas prices make wind competitive once more.
AWEA reports that previous industry records were set at large wind farms in Texas, Iowa and Minnesota, where energy is being generated at about 3 cents/kWh. According to AWEA, the cost of wind energy remains predictable over the life of the plant, and even the 6 to 8 cents per kWh cost at smaller wind farms in less windy locations compares favorably today to that of natural gas-generated power in certain markets. Under current law, the PTC is set to expire at the end of this year. Senate energy committee chairman Frank Murkowski’s omnibus energy bill would extend the PTC for ten years and Senator Harry Reid of Nevada has introduced a bill to make the PTC permanent.
Regardless of the PTC’s fate, more wind projects will be built. Among the latest announcements are new projects in Texas and Iowa. Enron Wind has announced a 135 MW wind power facility in Pecos County, Texas. Excel Energy’s Southwestern Public Service will build an 80 MW wind ranch in West Texas. And Zilkha Renewable Energy and Midwest Renewable Energy Corporation will build the Top of Iowa Wind Farm, an 80 MW plant in Worth County, Iowa.
Enron Power Marketing will purchase the Texas project’s electricity under a long-term agreement for resale into the Texas wholesale electricity market. It will be the first major wind facility that allows wholesale customers to purchase portions of the wind power production. Historically, customers interested in purchasing green power were required to commit to 100 percent of a project’s output over the 20-year life of the equipment.
Enron’s latest Texas project will consist of ninety 1.5 MW turbines manufactured by Enron Wind. Enron Wind’s manufacturing facilities in California, Germany and Spain produce turbines ranging from 750 kW to 2.0 MW. Enron Wind’s 1.5 MW Series turbine is the largest wind turbine manufactured in the U.S. The model employs a variable speed, constant frequency design and a custom-designed airfoil, resulting in enhanced reliability and durability due to reduced mechanical loads, higher energy capture and lower noise signature than conventional fixed speed turbines. Enron Wind has more than 4,500 wind turbines and 1,600 MW of capacity. The new Texas wind farm is expected to be completed late this year.
NEG Micon will supply the Top of Iowa project’s 89 wind turbines at a total cost of $54 million. The wind farm will sell the green energy under a long-term contract with Interstate Power Company, a subsidiary of Alliant Energy of Madison, Wisconsin. The project’s owner, Northern Iowa Windpower LLC, will retain the green credits from 50 percent of the wind farm’s output, and will sell these credits in Wisconsin, Iowa, Illinois and other Midwestern states.
Top of Iowa will be installed and operational by year-end. Zilkha Renewable Energy, formerly International Wind Corporation, of Houston, Texas, has developed and invested in approximately 150 MW of projects in the U.S., Central America and Europe and has an additional 200 MW currently under development. Zilkha Renewable Energy is providing construction finance capital for the project.
Southwestern Public Service will build the Llano Estacado Wind Ranchnear White Deer in West Texas. Llano Estacado will consist of eighty 1 MW turbines. Construction will start in July and project developer Cielo Wind Power hopes to be able to sell the power by November. Southwestern Public Service has contracted to purchase the entire output of the facility.