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Recent Improvements to Wind Energy Systems
Large-scale, grid-connected wind energy installations used for generating electricity have made enormous strides over the last 15 years. By the end of 1996, the U.S. hosted approximately 1,750 megawatts (MW) of wind energy generating capacity; this compared with more than 4,500 MW of capacity operated in Europe, India, and other locations. Capital cost, reliability, and energy conversion efficiency have increased to the point where these renewable energy systems can compete economically under many circumstances with conventional generation technologies such as nuclear and modern coal-fired plants.
The installed capital costs of wind-driven generating systems decreased from more than $2,500 per kilowatt (kW) in the early 1980s, to $1,000 per kW or less for large scale installations in the mid-1990s. The costs of unscheduled and preventive maintenance also decreased in the same time period, from more than 5 cents to less than 1 cent per kilowatt-hour (kWh). These improvements have reduced the levelized cost of wind energy systems from more than 15 cents to less than 5 cents per kWh — not including the federal 1.5-cent/kWh tax credit now available. Design and manufacturing advances, the further results of ongoing research and development programs, and the realization of large production volumes promise to reduce these costs still further — to the range of 2.5 to 3.5 cents per kWh over the next ten years.3
Meanwhile, improvements in rotor aerodynamics and turbine operating modes along with increases in turbine size have boosted the efficiency of wind energy systems in converting energy. Under good wind conditions, modern wind energy systems typically achieve capacity factors of 28 percent or more.
Wind Energy in the United States
Most of the installed wind-energy generating capacity in the United States is located in three regions of California: Altamont Pass (about 60 miles east of San Francisco), San Gorgonio Pass (east of Los Angeles near Palm Springs), and Tehachapi Pass (between Bakersfield and Mojave to the northeast of Los Angeles). Much of this capacity was installed during the 1980s, and almost all was planned, financed, installed and operated by independent power producers (IPPs), entities not affiliated with utilities. Entrepreneurs installed most of the California capacity in response to federal and California state legislation that provided a market4 and favorable tax incentives that attracted private capital.5
California’s wind industry development also occurred in an era of unusually high energy prices coupled with expectations of higher prices still to come.6
More recent installations tend to be smaller projects. For example, in 1996 the Sacramento Municipal Utility District (SMUD) completed installation of 5 MW of new wind-driven generating capacity. In general, most of the capacity has been installed as the result of either partially subsidized demonstration programs, or of mandated installations:
A few notable exceptions to demonstrations or mandated installations include:
Together the wind-energy capacity owned by utilities or their related, non-regulated affiliates now totals about 400 MW, or about 23 percent of the total 1,750 MW of United States wind-driven generating capacity. While these utility installations are significant, they are small in comparison to the available wind resources in the United States, particularly in the Great Plains.
Development of wind energy generating capacity can assist utilities and other energy generators in complying with existing regulations and rulings regarding the pollution, emissions, or hazardous materials associated with operating fossil-fuel and nuclear power plants. Similarly, investments in wind energy can mitigate the risk of future taxes or other levies (e.g., a carbon tax) on the pollution, emissions, or hazardous materials associated with conventional generation sources — all measures which may confront energy producers in coming years.
Depending on the configuration of a given utility’s transmission and distribution system, customer demands and avail-able wind resource, wind energy also can provide substantial and quantifiable economic benefits to ratepayers and owners by deferring the need for additional investment to meet demand growth. For example, use of wind-driven generators may defer the need for line and service extension or the reconductoring of existing lines. In certain situations, these installations also may provide voltage support at the end of weak lines. In addition, wind energy can help mitigate fuel price risk and provide supply diversity.
Finally, and perhaps most compelling, wind energy enables utilities and other energy suppliers to tap the emerging market for green power — energy generated from renewable, non-polluting sources. It is important to note that green power need not be generated within a given service or market territory. One of the hallmarks of current efforts to restructure the nation’s electric system through the substitution of market principles for state regulation is the increased access to and use of transmission systems by all energy suppliers and users.
Barriers to Industry Acceptance of Wind Energy
Despite continuing improvements in the cost and performance of wind turbines, the huge untapped wind resources that exist in many states, and the recognized environmental benefits of wind energy, most utilities have yet to incorporate wind energy systems into their generation mix. There are several reasons for this.
Conservative management culture: Electric utility managers generally take a conservative stance toward new technology, perhaps reflecting their desire to protect a complex system providing an important public service.7 Structural and reliability problems encountered in the early 1980s with first-generation wind energy machines helped turn this institutional conservatism into skepticism. Technological advances, positive operating experience and a new generation of innovation-friendly management have altered this situation, but the initial impressions may linger.
Intermittency: The power output of a windfarm depends on the strength and time characteristics of the wind resource. For this reason, wind-powered generating plants behave differently from conventional power sources. Utilities are beginning to develop the experience to understand and manage the variable, yet predictable, nature of wind power systems in the same way they understand and manage unplanned outages and load changes of transmission lines and conventional power plants.
With some exceptions, the intermittent nature of the wind resource means that wind energy facilities cannot at present supply all of our electricity needs. There is a general perception among utility managers that wind power can provide 10 to 15 percent of available capacity in a given region with no significant modifications to the existing utility system. Surprisingly, we have found little or no hard analysis to justify this rough figure. In the absence of further research, it should not be taken as a ceiling on wind power penetration. In any case, the levels of wind-powered generating capacity considered in this study fall well below this range.
Surplus generating capacity: Most regions of the United States enjoy more than enough low-cost generating capacity (i.e., baseload plants) to meet anticipated demand over the next several years. During this period, the energy produced by new wind turbines would be worth only as much as the fuel, such as coal or natural gas, needed by an existing power plant. In other words, the existence of surplus generating capacity decreases the value of all proposed capacity, includ ing wind. Yet energy prices do change, sometimes due to events beyond our control. Planned or unexpected load growth or power plant shutdowns may sop up the existing excess of baseload capacity, increasing the value of wind energy capacity substantially, and making it more attractive on a pure cost basis.
High capital costs: Wind-powered generators have high capital costs in comparison with some conventional generating technologies, notably gas-fired combustion turbines. However, operating costs are low, and there are no fuel costs (and therefore no fuel-cost risks) associated with wind-driven generators. In addition, capital costs for wind-energy installations are expected to continue to decline. Adding to the favorable picture, financing options now becoming available will help reduce the levelized cost of wind energy.
Restructuring: The United States electricity market changed dramatically in the 1990s, and it continues to evolve. The emergence of non-regulated, independent power producers (IPPs) and power marketing organizations has presented utilities with unexpected and unaccustomed competition. This has occurred in an era of low fuel prices and rapid development of relatively small, point-of-load generating systems that enjoy low capital and operating costs. The premier examples are gas-fired combustion turbine systems. In addition, some utilities are burdened with costly nuclear and aging fossil-fueled generation facilities. As a consequence of these factors, most utilities have not yet integrated or been inclined to consider meaningful amounts of a new, intermittent generation technology such as wind energy.
However, as part of their strategic redefinition, many utilities and other energy suppliers may begin to incorporate renewable energy generation options into their portfolios. This strategic shift will be driven under the increasingly attractive economics of wind and other renewable energy sources by emerging green market forces, and under an increasingly demanding regulatory environment.
Few economies of scale so far: While the U.S. hosts some 16,000 wind turbines today, most were installed prior to 1990 and half of those came from Europe, principally Denmark. The size of the United States turbine market has not been adequate to support domestic innovations in manufacturing and processes that would result in reduced wind turbine manufacturing costs. Thus the potential economic impact of improved manufacturing methods and material processes has yet to be realized.
Environmental impacts: Early wind enthusiasts hoped that the new technology would levy zero environmental cost. These hopes proved over-optimistic; early installations had unexpected problems concerning noise, land erosion, visual clutter and — a lingering problem — bird kills. Improved management practices and technology have largely addressed these problems. In particular, the National Wind Coordinating Committee has made progress toward resolving the technical and political issues surrounding avian mortality from windfarms.8 Nevertheless, siting a new wind project can be a slow process.
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