This section describes a model for developing wind power in the United States during the ten-year period from 1997 through 2006. The model projects some important economic, energy-supply, and environmental impacts of adding 10,000 MW of new wind energy generating capacity to the 1,750 MW of existing capacity at the end of 1996. The model is designed not only to calculate the economic and other costs and benefits associated with the addition of this capacity, but also to analyze the feasibility of incorporating this additional capacity into the existing generating mix.

Methodology

This study uses a spreadsheet analysis and makes use of a number of general, technical and economic assumptions to arrive at its conclusions. These assumptions reflect our understanding of the wind power industry. For comparison, we provide in the footnotes the current estimates and projections of wind technology performance and cost published in the Renewable Energy Technology Characterizations, an authoritative source released jointly in 1997 by the Electric Power Research Institute and the U.S. Department of Energy.

We conduct our spreadsheet analysis in three steps. First, the model calculates the land use and wind resource requirements of the added wind capacity, and then compares these require-ments to available land and documented wind resources. This step confirms that existing resources would suffice to achieve the 10,000-MW target. Second, the model calculates the costs associated with installing new wind turbines (i.e., capital costs) and maintaining existing turbines during each year. Third, the model calculates the annual electrical energy production and sales revenue that would arise from the installations.

Our Assumptions

Assumptions Used in the Model
General assumptions	Technical assumptions	Economic assumptions
Amount of capacity added Installation schedule	Wind technology deployed Capacity factor Array and electrical losses Land use requirements	Capital costs Operating costs Wholesale energy prices Land lease rates Escalation rate

Wind capacity installed: The choice of 10,000 MW of added wind capacity reflects two estimated levels: that generally considered necessary to achieve economies of manufacturing volume, and that readily achievable with the anticipated manufacturing base. The chosen value also equates to 1.3% of the United States’ total utility and non-utility generation capacity in 1997 of 783,125 MW,⁹ safely below the perceived 10 to 15 percent limitation on wind capacity discussed above.

Installation schedule: The model assumes an installation schedule beginning with the addition of 100 MW of new wind turbine capacity during 1997 and culminating in the addition of 2,000 MW during the year 2006. The cumulative total capacity added over the ten-year study period is 10,000 MW. Including the 1,750 MW of capacity in place at the end of 1996, the total capacity at the end of 2006 is 11,750 MW. The lower line in Figure 1 graphically portrays the capacity added each year, while the upper line shows the cumulative total capacity, including the 1,750 MW existing at the end of 1996. The y-axes show the installed capacity in terms of megawatts and the number of 750-kW wind turbines added.

The accelerating pace of installations assumed in the profiles is important for two reasons. First, it will require time to organize and implement those actions needed for the installation of 10,000 MW of new wind-driven generating capacity over ten years. They cannot be negotiated and put in place overnight. Second, a certain amount of time is required for ramping up wind turbine manufacturing capacity and for installation. Thus the assumed installation schedule begins at a level consistent with recent rates of installation and then increases to a level of 2,000 MW per year by 2006.

We find the installation schedule, commencing with 100 MW installed in 1997, readily achievable, given the industry’s past performance. Windfarm developers installed between 40 and 50 MW in the U.S. during 1995. Four-hundred and seventy MW went on line during 1985, the final year of the energy and investment tax credits, and a peak year for installations. Of this amount, one manufacturer alone installed slightly less than 100 MW, comprising almost a thousand wind turbines.

Wind technology deployed: Our model assumes the use of 750-kW wind turbines having a rotor diameter of 50 meters and a hub height of 50 meters. As shown in Figure 1, 13,333 new, 750-kW wind turbines can supply the 10,000 MW under consideration here.

Our specification of 750-kW turbines may be conservative. In Europe, high land costs and growing site restrictions are driving turbine sizes upward. According to Greenpeace International, all large Danish turbine manufacturers now offer machines with a capacity of one megawatt or more; the largest, from Vestas Wind Systems A/S, is rated at 1.65 MW. At the end of 1997, more than 130 megawatt-scale machines were operating in Europe.¹⁰ The use of megawatt-scale machines might lower the cost of the wind energy generated, for example, by reducing land-use requirements. On the other hand, as American land prices are much lower than those driving European developers toward larger turbines, turbine sizes here may cease their recent rise somewhere below a megawatt.

Capital and maintenance costs: As shown in Figure 2 and Figure 3, we assume that the installed cost of wind-driven generating capacity will decrease from $1,000 to $600 per kW,¹¹ while the cost of unscheduled and preventive maintenance (U & PM) decreases from 0.55 to 0.31 cents per kWh.¹²

The model for the costs of unscheduled and preventive maintenance assumes a two- or three-person crew with a truck, plus management and support. This led to a blended crew size of 4 persons (including management and support). A blended hourly direct labor rate of $22 with a direct labor markup factor of 3 led to a burdened hourly rate of $66. It was further assumed that the mean time to dispatch the crew, get to the wind turbine and make the repair was 6 hours. It was further assumed that each visit required parts and expendables costing $750, plus a General and Administrative expense of 25 percent for a marked-up cost of $938. As with energy production (see below), we assumed that only half of the wind turbines contributed to maintenance costs during their year of installation.

Capacity factor: We assume a 28 percent annual capacity factor for all new wind turbine installations,¹³ resulting in gross energy production of 1.84 million kWh per year for each 750- kW wind turbine, or 24.5 billion kWh per year for all the wind turbines. The assumed capacity factor may be conservative when applied to wind energy development in some areas. Planned windfarms in the upper Midwest, where wind resources are strong and consistent, are expected to achieve capacity factors of 30 percent or more.¹⁴

Windfarm losses: We assume total losses of 12 percent, resulting in the net generation of 21.6 billion kWh per year for the completed 10,000 MW of added capacity. The composite loss figure reflects three distinct categories:

• The model assumes that, due to malfunction, not all the wind turbines operate all the time. “Availability” defines the operational fraction at a given moment. We assume availability values of about 98 percent, or availability losses of about 2 percent.¹⁵

• There are electrical losses associated with the transfer of the electric power from the location of each wind turbine to the point of central interconnection with the balance of the utility system. While the magnitude of the electrical losses depends on the details of the power collection network and the interconnection, these losses may reduce the gross energy by 2 to 4 percent.¹⁶

• In a windfarm, energy production by turbines located downwind of the front row of turbines is reduced. This can arise from diminished energy content of the wind flow and the effects of turbulence generated by the front-row turbines. Such “array loss” depends strongly on the array’s size and spacing of the individual turbines, the topography of the land, and the directional characteristics of the wind. Large installations can suffer array losses of 10 to 25 percent. As a consequence of the square and linear array configurations assumed for the Plains installations, together with an admixture of small clusters (having reduced wake interference and array losses), we have assumed a value between 7 percent to 8 percent.¹⁷

Wholesale wind-generated electricity prices: Revenues derived from wind-generated electricity production are calculated assuming a wholesale wind electricity price of 4 cents per kWh. Prices were not assumed to change over the study period. These prices do not account for the 1.5-cent/kWh production tax credit that is available through the federal government.

Land use: For estimating land use requirements, the model assumes a windfarm array resulting in the commitment of 30 acres per wind turbine.¹⁸ This corresponds to flat terrain with an omnidirectional wind regime and wind turbine spacing of 350 meters.

System capacity constraints: Finally, we compare the assumed amount of added wind-powered generating capacity with the existing amount of conventional generation capacity to determine if the added capacity will be within the perceived 10 to 15 percent limitation on total system capacity described earlier. If the 10,000 MW is apportioned over the 12 windiest Great Plains states, the added wind-generated capacity would provide less than 5 percent of the 1996 electric energy consumption of these states, and less than 1 percent of the energy consumption for all 50 states.

Results

Land and wind resources availability: The first question to be considered when modeling a significant expansion of wind-driven generating capacity is whether sufficient land and wind resources exist to support the development of new windfarms. If comprised of units rated at 750 kW, the 10,000 MW of generating capacity would require 13,333 wind turbines. At 30 acres per wind turbine, the total land required would be 400,000 acres. This is equal to 625 square miles (1,619 square kilometers) or, if all of the wind turbines were concentrated in a single hypothetical square array, an area 25 miles (40 kilometers) on a side. Although wind turbine spacing, in order to avoid excessive energy loss and harmful turbulence, corresponds to land allocation of 30 acres per turbine, the turbines themselves and associated roads generally occupy less than 5% of this area. Consequently, wind development interferes with farming and grazing only minimally.

Table 1 shows the available windy area in each of the 12 states with the greatest wind resources, based on the authoritative survey of U.S. wind resources.¹⁹ These 12 states are in the Great Plains and Midwest. The first column shows that each of these states harbors far more windy land area available than the 1,619 square kilometers needed to supply the entire national total of 10,000 MW. Further, the table shows that 27,702 of the 750-kW wind turbines considered here could supply 10 percent of the combined electricity demand of the 12 states (285 billion kWh). This is approximately double the 13,333 wind turbines assumed to be installed in this study.

The table also shows the land area associated with such an installation. Ten percent of the 1993 electricity demand could be met by developing just 0.35 percent of the adequately windy land area in the 12 states having the highest wind resources, or by developing just 1.81 percent of the adequately windy land in all 48 states. In each of the 12 states listed, the land area required to produce 10 percent of electricity demand with wind power is well under one percent of the total land area, and never more than two percent of the available windy land area. These estimates indicate that:

• The wind resource potential exceeds by significant margins the electrical energy usage in the United States;

• Adequate, available windy land exists;

• Only a small fraction of the available windy land (1.81 percent) would be required to supply 10 percent of the nation’s electrical energy supply, and;

• An even smaller fraction (approximately 0.87 percent) would be required to supply the 10,000 MW of new wind energy generating capacity postulated in this study.

Capital costs: The direct economic impact resulting from installing 10,000 MW of added wind-driven generating capacity includes both immediate and continuing components. Table 2 shows that over the ten-year period from 1997 through 2006, the cumulative installed capital cost of this capacity translates to $7.1 billion of economic activity in the manufacturing, construction, and electrical equipment sectors. (Note, however, that some of the capacity could represent equipment manufactured overseas.) This level of activity is associated only with the manufacture and installation of the added capacity, and not, for example, operating or servicing it.

Maintenance costs: There is, in addition, a continuing stream of economic activity associated with the operations and maintenance of these facilities. This stream, shown in Table 3, gradually increases in value to $89 million per year by 2007. Economic activity associated with maintenance of windfarms would continue throughout the 30-year life of the wind-energy-generating facilities.

Energy Production and Revenues: The values of energy production and revenue resulting from the added capacity appear in Table 4. We derived the energy generation values by assuming that all of the wind turbines installed during previous years contributed fully and that only half of the turbines installed during the current year contributed fully. Assuming that the equipment and wind regime yield a 28 percent capacity factor, the added capacity at completion would generate 21.6 billion kWh of electricity annually. At four cents per kWh, this would result in wind-electricity production revenues of $863 million per year continuing over the remaining portions of the 30-year equipment lifetime.

Land-use payments: The owners of the land on which the wind turbines are installed would receive a portion of this revenue in payment for the additional use of the land for wind turbines. At 2 percent of the energy production revenue, the land use easement payments would be $17 million per year. Assuming that 400,000 acres are in service, this equates to an average annual payment of $42.50 per acre.²⁰

Environmental impacts: Calculating the clean air benefits of wind energy development precisely represents an extremely complex task; it requires matching wind regimes to local energy demand in order to figure the resources (e.g., a nuclear facility, a coal plant, etc.) displaced by the wind facility over time. Nevertheless, while these benefits are hard to calculate exactly, they are clearly large. The state of Texas, for example, emits more CO₂ than all but six foreign nations. Calculating very roughly on a per-kWh basis, we estimate that the added capacity of 10,000 MW would displace annually 15 million tons of CO₂, 140,000 tons of SO₂, and 56,000 tons of NO_X.²¹ These represent pollutants that would otherwise have been generated from fossil fuel-fired power plants. In addition, there would be no radioactive or hazardous emissions associated with this renewable energy generating capacity. Finally, in some plausible policy scenarios, owners of low-NO_X or low-CO₂ generating facilities could earn credits that they could then sell to polluters on the open market.

Discussion

The following conclusions follow from this analysis:

• Wind resources in the United States more than suffice to power the 10,000 MW of new wind-energy generating capacity assumed in this study.

• A commitment to installing 10,000 MW of new wind-driven energy generating equipment over 10 years would result in the generation of nearly $8 billion in new economic activity. This could support the creation of thousands of new jobs, some or most of which would occur in the United States.

• Citizens, local and state governments, electric utilities, and other energy providers would receive other benefits not quantified in this study, such as cleaner air, higher tax revenues, and, in some cases, improved voltage support at the end of weak transmission and distribution lines.

• Finally, the added wind-energy generating capacity would produce approximately 21 billion kWh annually without the pollution associated with fossil-fueled power plants.

Of course, these conclusions are sensitive to the assumptions made in the analysis. As we noted before, the analysis in this study was kept as simple as possible in order to keep the analysis general and the methodology clear. In particular, three issues merit further discussion and analysis in future iterations of this study: transmission costs, stable wholesale energy prices, and wind energy import and export markets.

Transmission costs: This study does not consider the potential effects of transmission charges on the overall cost of generating electricity through the use of wind energy. In areas where available wind resources are located a great distance from population or load centers, the cost of building new transmission lines, or of wheeling the energy across existing lines, may be significant. These costs will tend to be higher when the transmission distances are longer. In Texas, for example, the major wind resources are located in the northern and far western parts of the state, while the major load centers of Dallas, San Antonio, Houston and Austin are located in the central, southern and eastern sections. If transmission costs were included in this analysis, they would have two effects. First, if new transmission lines were needed, the installed capital cost of the wind-driven energy generating facilities would increase. Second, if wheeling charges were incurred in delivering wind-generated energy to end users, the cost of that energy would increase in order to compensate for the extra delivery charge.

It should be noted that transmission costs are not unique to wind-generated energy. Any new generating facility, whether powered by fossil fuels, nuclear energy, or some other renewable energy source, must interconnect with the transmission system. Depending on the proximity of the generating unit to end users and on the capital cost of the interconnection, the transmission costs can vary significantly from one facility to another.

Moreover, the question of transmission charges concerns not so much cost contributions as prices, which vary according to regulatory practice. The principal reason for not considering transmission in this report is that it remains unclear how transmission will be priced in the emerging restructured electric system, and what relationship those prices will bear to the actual cost of transmission. Nevertheless, for purposes of illustration, we do consider in the Texas case study that follows the cost of transmission, given current regulations; our analysis yields transmission prices that add 10 to 15% to the cost of wind power. We stress, however, that actual prices will depend on decisions taken at the federal and individual state level in coming years, and may vary substantially from region to region.

Stable wholesale energy prices: Another of this study’s assumptions, that of a constant wholesale wind-electricity price of 4 cents per kWh throughout the 10-year study period, may not be realistic, given the increasing market orientation of the electric utility industry. While it is possible that utilities may still desire to enter into fixed-price contracts for wind-generated power for a variety of reasons, the trends toward more competitive electricity supply markets make this possibility less likely in the next ten years. Rather, wind energy may be required to compete with other power supply options in competitive spot markets. To the extent that wind energy resources are coincident with peak demand periods, wind power may actually be bought and sold in spot markets at rates higher than that assumed in this study. At other times, however, it may be sold for less. In any case, the assumed 4 cents per kWh wholesale market price can be interpreted as an average price, recognizing that market conditions may change rapidly in the future.

Wind equipment import and export markets: Finally, this model does not consider the level of economic activity in import markets that could follow from production of 10,000 MW of new wind energy generating capacity. To provide some perspective on the import volumes possible, Danish sales of wind equipment to the United States during the period of 1981 through 1990 totaled more than $4 billion. Of the 1,400 MW of wind capacity installed in the United States through 1990, about half was of Danish manufacture. This was comprised principally of wind turbine nacelles and blades. Many of the towers were fabricated domestically. At $600/kW for the imported nacelles and blades, this equaled a total export market of $4.2 billion for Denmark.

Some of the equipment needed to generate the 10,000 MW we have described will likely come from foreign firms. However, the manufacturing volumes required may revive dormant interest among U.S. firms, and it will certainly require the deployment by foreign firms of domestic production facilities. Hence, a large fraction of the manufacturing jobs and all of the construction, operation and maintenance jobs will be in the U.S.

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