1 Wind Energy Stephen R. Lawrence Leeds School of Business University of Colorado Boulder, CO.

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Wind Energy

Stephen R. LawrenceLeeds School of Business

University of ColoradoBoulder, CO

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Adapted from a presentation by

Keith StocktonEnvironmental StudiesUniversity of Colorado

Boulder, CO

Acknowledgement

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Ancient Resource Meets 21st Century

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Wind Turbines

Power for a House or City

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Wind Energy Outline History and Context Advantages Design Siting Disadvantages Economics Project Development Policy Future

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History and Context

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Wind Energy History 1 A.D.

Hero of Alexandria uses a wind machine to power an organ ~ 400 A.D.

Wind driven Buddhist prayer wheels 1200 to 1850

Golden era of windmills in western Europe – 50,000 9,000 in Holland; 10,000 in England; 18,000 in Germany

1850’s Multiblade turbines for water pumping made and marketed in U.S.

1882 Thomas Edison commissions first commercial electric generating stations

in NYC and London 1900

Competition from alternative energy sources reduces windmill population to fewer than 10,000

1850 – 1930 Heyday of the small multiblade turbines in the US midwast

As many as 6,000,000 units installed 1936+

US Rural Electrification Administration extends the grid to most formerly isolated rural sites

Grid electricity rapidly displaces multiblade turbine uses

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Increasingly Significant Power Source

Wind could generate 6% of nation’s electricity by 2020.

Wind currently produces less than 1% of the nation’s power. Source: Energy Information Agency

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10Source: American Wind Energy Association

Manufacturing Market Share

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US Wind Energy Capacity

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Installed Wind Turbines

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Colorado Wind Energy ProjectsWind Energy Development Project or Area Owner Date

Online MW Power

Purchaser/User Turbines / Units

1. Ponnequin (EIU) (Phase I)

K/S Ponnequin WindSource & Energy Resources

Jan 1999 5.1 Xcel NEG Micon (7)

1. Ponnequin (Xcel) Project Info

Xcel Feb-June 1999

16.5 Xcel NEG Micon (22)

1. Ponnequin (Phase III)

New Century (Xcel)

2001 9.9 New Century (Xcel)

Vestas (15)

Peetz Table Wind Farm New Century (Xcel) 29.7 New Century

(Xcel) NEG Micon (33)

Colorado Green, Lamar (Prowers County)

Xcel Energy / GE Wind Wind Corp.

Dec 2003 162.0 Xcel GE Wind 1500 (108)

Prowers County (Lamar) Arkansas River Power Authority

2004 1.5 Arkansas River Power Authority

GE Wind 1500 (1)

Prowers County (Lamar) Lamar Utilities Board 2004 4.5 Lamar Utilities Board GE Wind 1500 (3)

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New Projects in Colorado

New Wind Projects in Colorado

Project Utility/Developer Location Status MW Capacity

On Line By/ Turbines

Spring Canyon Xcel Energy / Invenergy Near Peetz Construction to begin in June

60 2005 / GE Wind 1500kW (87)

Wray School District Wray School District RD-2

Wray 1.5 2005 / 1500kW (1)

NA Xcel Energy / Prairie Wind Energy

Near Lamar PPA Signed 69 2005 / 1500kW (46)

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Ponnequin – 30 MW

•Operate with wind speeds between 7-55 mph•Originally part of voluntary wind signup program•Total of 44 turbines•In 2001, 15 turbines added•1 MW serves ~300 customers•~1 million dollars each•750 KW of electricity each turbine•Construction began Dec ‘98•Date online – total June 1999•Hub height – 181 ft•Blade diameter – 159 ft•Land used for buffalo grazing

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Wind Power Advantages

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Advantages of Wind Power Environmental Economic Development Fuel Diversity & Conservation Cost Stability

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Environmental Benefits No air pollution No greenhouse gasses Does not pollute water with mercury No water needed for operations

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Pollution from Electric Power

Source: Northwest Foundation, 12/97

23%

28%

33%

34%

70%

0% 20% 40% 60% 80%

Toxic Heavy Metals

Particulate Matter

Nitrous Oxides

Carbon Dioxide

Sulfur Dioxide

Percentage of U.S. Emissions

Electric power is a primary source of industrial air pollution

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Economic Development Benefits Expanding Wind Power development

brings jobs to rural communities Increased tax revenue Purchase of goods & services

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Economic Development Example

Case Study: Lake Benton, MN

$2,000 per 750-kW turbine in revenue to farmers

Up to 150 construction, 28 ongoing O&M jobs

Added $700,000 to local tax base

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Fuel Diversity Benefits Domestic energy source Inexhaustible supply Small, dispersed design

reduces supply risk

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Cost Stability Benefits Flat-rate pricing

hedge against fuel price volatility risk Wind electricity is inflation-proof

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Wind Power Design

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Density = P/(RxT) P - pressure (Pa) R - specific gas constant (287 J/kgK) T - air temperature (K)

= 1/2 x air density x swept rotor area x (wind speed)3

A V3

Area = r2 Instantaneous Speed(not mean speed)

kg/m3 m2 m/s

Power in the Wind (W/m2)

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Wind Energy Natural Characteristics Wind Speed

Wind energy increases with the cube of the wind speed 10% increase in wind speed translates into 30% more

electricity 2X the wind speed translates into 8X the electricity

Height Wind energy increases with height to the 1/7 power 2X the height translates into 10.4% more electricity

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Wind Energy Natural Characteristics Air density

Wind energy increases proportionally with air density Humid climates have greater air density than dry climates Lower elevations have greater air density than higher

elevations Wind energy in Denver about 6% less than at sea level

Blade swept area Wind energy increases proportionally with swept area of the

blades Blades are shaped like airplane wings

10% increase in swept diameter translates into 21% greater swept area

Longest blades up to 413 feet in diameter Resulting in 600 foot total height

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Betz Limit Theoretical maximum energy extraction

from wind = 16/27 = 59.3% Undisturbed wind velocity reduced by 1/3 Albert Betz (1928)

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59.6

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This picture shows a Vestas V-80 2.0-MW wind turbine superimposed on a Boeing 747 JUMBO JET

How Big is a 2.0 MW Wind Turbine?

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0

500

1000

1500

2000

2500

KW

MPH

5040302010

Wind Turbine Power Curve

Vestas V80 2 MW Wind TurbineVestas V80 2 MW Wind Turbine

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2003 1.8 MW 350’2000

850 kW 265’

2006 5 MW 600’

Recent Capacity Enhancements

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1. Hub controller 11. Blade bearing2. Pitch cylinder 12. Blade3. Main shaft 13. Rotor lock system4. Oil cooler 14. Hydraulic unit5. Gearbox 15. Machine foundation6. Top Controller 16. Yaw gears7. Parking Break 17. Generator8. Service crane 18. Ultra-sonic sensors9. Transformer 19. Meteorological gauges10. Blade Hub

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1617

12

5

12

Nacelle Components

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Turbines Constantly Improving Larger turbines Specialized blade design Power electronics Computer modeling

produces more efficient design Manufacturing improvements

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Improving Reliability Drastic improvements since mid-80’s Manufacturers report availability data of

over 95%

1981 '83 '85 '90 '98

% A

vail

able

Year0

20

40

60

80

100

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Wind Project Siting

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Wind PowerClass

10 m (33 ft) 50 m (164 ft)

Speed m/s (mph)

Speed m/s (mph)

10 0

4.4 (9.8) 5.6 (12.5)2 5.1 (11.5) 6.4 (14.3)3 5.6 (12.5) 7.0 (15.7)4 6.0 (13.4) 7.5 (16.8)5 6.4 (14.3) 8.0 (17.9)6 7.0 (15.7) 8.8 (19.7)7 9.4 (21.1) 11.9 (26.6)

Wind speed is for standard sea-level conditions. To maintain the same power density, speed

increases 3%/1000 m (5%/5000 ft) elevation.

Wind Power Classes

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Siting a Wind Farm Winds

Minimum class 4 desired for utility-scale wind farm (>7 m/s at hub height)

Transmission Distance, voltage excess capacity

Permit approval Land-use compatibility Public acceptance Visual, noise, and bird impacts are biggest concern

Land area Economies of scale in construction Number of landowners

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Wind Disadvantages

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Market Barriers Siting

Avian Noise Aesthetics

Intermittent source of power Transmission constraints Operational characteristics different from

conventional fuel sources Financing

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Wind Energy and the Grid Pros

Small project size Short/flexible development time Dispatchability

Cons Generally remote location Grid connectivity -- lack of transmission capability Intermittent output

Only When the wind blows (night? Day?) Low capacity factor Predicting the wind -- we’re getting better

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Birds - A Serious Obstacle

Birds of Prey (hawks, owls, golden eagles) in jeopardy Altamont Pass – News Update – from Sept 22

shut down all the turbines for at least two months each winter eliminate the 100 most lethal turbines Replace all before permits expire in 13 years

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Wind – Characteristics & Consequences Remote location and low capacity factor

Higher transmission investment per unit output Small project size and quick development

time Planning mismatch with transmission investment

Intermittent output Higher system operating costs if systems and

protocols not designed properly

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Balancing Supply & Demand

Base Load – Coal

Gas/Hydro

Gas

3500

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3000

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Energy DeliveryLake Benton & Storm Lake Power

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Energy DeliveryLake Benton & Storm Lake Power

July 7, 2003

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Wind Economics

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Wind Farm Design Economics Key Design Parameters

Mean wind speed at hub height Capacity factor

Start with 100% Subtract time when wind speed less than optimum Subtract time due to scheduled maintenance Subtract time due to unscheduled maintenance Subtract production losses

Dirty blades, shut down due to high winds Typically 33% at a Class 4 wind site

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Wind Farm Financing Financing Terms

Interest rate LIBOR + 150 basis points

Loan term Up to 15 years

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Cost of Energy Components Cost (¢/kWh) =

(Capital Recovery Cost + O&M) / kWh/year Capital Recovery = Debt and Equity Cost O&M Cost = Turbine design, operating

environment kWh/year = Wind Resource

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$0.00

$0.10

$0.20

$0.30

$0.40

1980 1984 1988 1991 1995 2000 2005

38 cents/kWh

Costs Nosedive Wind’s Success

3.5-5.0 cents/kWh

Levelized cost at good wind sites in nominal dollars, not including tax credit

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Construction Cost Elements

Turbines, FOB USA49%

Construction22%

Towers (tubular steel)

10%

Interest During Construction

4%

Interconnect/Subsation

4%

Land Transportation

2%Development

Activity4%

Design & Engineering

2%

Financing & Legal Fees3%

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Wind Farm Cost Components

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Wind Farm Economics Capacity factor

Start with 100% Subtract time when wind speed < optimum Subtract time due to scheduled maintenance Subtract time due to unscheduled maintenance Subtract production losses

Dirty blades, shut down due to high winds Typically 33% at a Class 4 wind site

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Improved Capacity Factor Performance Improvements due to:

Better siting Larger turbines/energy capture Technology Advances Higher reliability

Capacity factors > 35% at good sites Examples (Year 2000)

Big Spring, Texas 37% CF in first 9 months

Springview, Nebraska 36% CF in first 9 months

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Wind Farm Economics Key parameter

Distance from grid interconnect ≈ $350,000/mile for overhead transmission lines

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Wind Farm Economics Example

200 MW wind farm Fixed costs - $1.23M/MW

Class 4 wind site 33% capacity factor

10 miles to grid 6%/15 year financing

100% financed 20 year project life

Determine Cost of Energy - COE

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Wind Farm Economics Total Capital Costs

$246M + (10 x $350K) = $249.5M Total Annual Energy Production

200 MW x 1000 x 365 x 24 x 0.33 = 578,160,000 kWh Total Energy Production

578,160,000 x 20 = 11,563,200,000 kWh Capital Costs/kWh

3.3¢/kWh Operating Costs/kWh

1.6¢/kWh Cost of Energy – New Facilities

Wind – 4.9¢/kWh Coal – 3.7¢/kWh Natural gas – 7.0¢/kWh

@ $12/MMBtu

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Wind Farm Development

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Wind Farm Development Key parameters

Wind resource Zoning/Public Approval/Land Lease Power purchase agreements Connectivity to the grid Financing Tax incentives

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Wind Farm Development Wind resource

Absolutely vital to determine finances Wind is the fuel

Requires historical wind data Daily and hourly detail

Install metrological towers Preferably at projected turbine hub height Multiple towers across proposed site

Multiyear data reduces financial risk Correlate long term offsite data to support short term

onsite data Local NWS metrological station

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Source: Garrad Hassan America, Inc.

Wind Energy Variability

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Wind Farm Development Zoning/Public Approval/Land Lease

Obtain local and state governmental approvals Often includes Environmental Impact Studies

Impact to wetlands, birds (especially raptors) NIMBY component

View sheds

Negotiate lease arrangements with ranchers, farmers, Native American tribes, etc.

Annual payments per turbine or production based

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Wind Farm Development Power Purchase Agreements (PPA)

Must have upfront financial commitment from utility 15 to 20 year time frames Utility agrees to purchase wind energy at a set rate

e.g. 4.3¢/kWh Financial stability/credit rating of utility important aspect

of obtaining wind farm financing PPA only as good as the creditworthiness of the uitility Utility goes bankrupt – you’re in trouble

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Wind Farm Development Connectivity to the grid

Obtain approvals to tie to the grid Obtain from grid operators – WAPA, BPA, California

ISO Power fluctuations stress the grid

Especially since the grid is operating near max capacity

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Wind Farm Development Financing

Once all components are settled… Wind resource Zoning/Public Approval/Land Lease Power Purchase Agreements (PPA) Connectivity to the grid Turbine procurement Construction costs

…Take the deal to get financed

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Source: Hogan & Hartson, LLP

Financing Revenue Components

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Closing the Deal Small developers utilize a “partnership

flip” Put the deal together Sell it to a large wind owner

e.g. Florida Power & Light, AEP, Shell Wind Energy, PPM – Scottish Power

Shell and PPM jointly own Lamar wind farm Large wind owner assumes ownership and

builds the wind farm

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Wind Policy

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Wind Farm Economics Federal government subsidizes wind farm

development in three ways 1.9 ¢/kWh production tax credit

33.5% subsidy 5 year depreciation schedule

29.8% subsidy Depreciation bonus

2.6% subsidy

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Tax Incentives Issues Small developers can’t fully use federal

tax credits or accelerated depreciation They don’t have a sufficient tax liability Example

A 200 MW wind farm can generate a $12.6M tax credit/year

Small developers don’t have sufficient access to credit to finance a $200M+ project

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Production Tax Credit 1.9¢/kWh Production Tax Credit

First 10 years for producing wind generated electricity Wind farm must be producing by 12/31/07 PTC has been on again/off again since 1992 Results in inconsistent wind farm development

PTC in place – aggressive development PTC lapses – little or no development

The PTC puts wind energy on par with coal and significantly less than natural gas When natural gas > $8.00/MMBtu

Current prices: $10 – $15/MMBtu

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Wind Power Policy Renewable Portfolio Standard

21 States have them Colorado’s Amendment 37

Passed by voters November 2004 3% of generation from 2007 - 2010 5% of generation from 2011 - 2014 10% of generation by 2015 and beyond

4% of renewable generation from solar PV 96% of renewable generation from wind, small

hydro and biomass Small utilities can opt out of program

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Renewable Energy Credits You subsidize wind energy when produced by

another utility CU pays $0.006/kWh to Community Energy

To power the UMC, Wardenburg and the Recreation Center Community Energy uses these funds to subsidize wind

energy at wind farms in Lamar and in the upper Midwest Although CU isn’t getting the electrons from these wind

farms, it is in effect buying wind energy The three new buildings (Business, Law, and Atlas) will

also be powered by wind energy

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Source: American Wind Energy Association

Inconsistent Policy Unstable Markets

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Future Trends

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Expectations for Future Growth

20,000 total turbines installed by 2010 6% of electricity supply by 2020

100,000 MW of wind power installed by 2020

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Future Cost Reductions Financing Strategies Manufacturing

Economy of Scale Better Sites and

“Tuning” Turbines for Site Conditions

Technology Improvements

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Future Tech Developments Application Specific Turbines

Offshore Limited land/resource areas Transportation or construction limitations Low wind resource Cold climates

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The Future of Wind - Offshore

•1.5 - 6 MW per turbine•60-120 m hub height•5 km from shore, 30 m deep ideal•Gravity foundation, pole, or tripod formation•Shaft can act as artificial reef•Drawbacks- T&D losses (underground cables lead to shore) and visual eye sore

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Wind Energy Storage Pumped hydroelectric

Georgetown facility – Completed 1967 Two reservoirs separated by 1000 vertical feet Pump water uphill at night or when wind energy production exceeds

demand Flow water downhill through hydroelectric turbines during the day or

when wind energy production is less than demand About 70 - 80% round trip efficiency Raises cost of wind energy by 25% Difficult to find, obtain government approval and build new facilities

Compressed Air Energy Storage Using wind power to compress air in underground storage caverns

Salt domes, empty natural gas reservoirs Costly, inefficient

Hydrogen storage Use wind power to electrolyze water into hydrogen Store hydrogen for use later in fuel cells 50% losses in energy from wind to hydrogen and hydrogen to electricity 25% round trip efficiency Raises cost of wind energy by 4X

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U.S. Wind Energy Challenges Best wind sites distant from

population centers major grid connections

Wind variability Can mitigate if forecasting improves

Non-firm power Debate on how much backup generation is required

NIMBY component Cape Wind project met with strong resistance by Cape

Cod residents Limited offshore sites

Sea floor drops off rapidly on east and west coasts North Sea essentially a large lake

Intermittent federal tax incentives

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Nantucket Project

130 turbines proposed for Nantucket Sound

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Hawaiian Wind Farm “Shock Absorber”

Install on 2.4 MW wind farm on Big Island of Hawaii Utilizes superconducting materials to store DC power “Suddenly” increased and decreased wind power output Likely to loose efficiency due to AC-DC-AC conversions

"Utility Scale Wind on Islands," Refocus, Jul/Aug 2003, http://www.re-focus.net

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Where Can Coloradans Buy Wind?

Clean and Green is a Boulder-based, national membership organization that supports current and future community-based wind farms around the country. Individuals and businesses can sign up for customized levels of wind

energy credits based on your unique needs. www.CleanAndGreen.us or call (303) 444-3355

Founded in 1999, Community Energy is one of the nation's leading wind developers and suppliers of renewable energy credits. Community Energy offers NewWind Energy credits from the 7.5 MW wind farm locat ed in Southeast Colorado owned jointly by Lamar Light & Power and Arkansas River Power Authority. Purchase NewWind Energy credits starting at $4 per month for 200 kWh. www.NewWindEnergy.com or call 1 (866) WIND-123

Based in Boulder, Renewable Choice Energy is a leading provider of wind energy credits from wind farms across the country. You can purchase wind credits starting at $5/month (250kWh). We’ve partnered with the local Whole Foods Market to offer a free $20 or $50 gift card for new wind customers. www.RenewableChoice.com or get info at Whole Foods Market in Boulder or call 1 (877) 810-867010-8670

Since 1997, Xcel Energy's Windsource® program has provided customers with a clean renewable energy option that helps protect Colorado’s environment. Xcel Energy’s Windsource program and is the largest wind green pricing program in the United States. Customers pay a slight premium for 100% clean, wind energy from Colorado wind farms. Windsource in Colorado is Green-e certified by the Center for Resource Solutions. Windsource costs $0.97 per 100 kWh block in addition to your regular energy charge. www.xcelenergy.com/windsource-co or call 1(800) 824-1688.

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