Energy in the U.S. - Why Wind? Financing Wind Power: The Future of Energy Institute for Professional and Executive Development Scottsdale, Arizona May.

Energy in the U.S. - Why Wind?

Financing Wind Power:

The Future of Energy

Institute for Professional and Executive Development

Scottsdale, Arizona

May 7, 2008

Overview

• Market Progress

• Market Drivers

Market Progress – Installed Wind Capacity

U.S.: 1999 – 2,500 MW

2007 – 16,800 MW

5,244 MW installed in 2007

Source: NREL, AWEA, Global Wind Energy Council

Market Progress – Installed Wind Capacity

Worldwide: 1999 – 13,600 MW

2007 – 94,123 MW

20,076 MW installed in 2007

Source: Global Wind Energy Council

Market Progress - $

2007 Value of Global Wind Capacity additions:

$37 Billion

Source: Global Wind Energy Council

Market Progress – U.S. Projections

• Projections vary:

- Many consider 45,000 MW of installed capacity by 2015 to be realistic

- Other estimates project up to 100,000 MW by 2015

• Dollar investment projected to range from $81 Billion to $180 Billion over that range

Drivers for Growth of Wind Capacity

• Technology advances

• Cost competitiveness

• Fossil fuel cost increases

• Environmental issues/climate change

• Renewable Portfolio Standards (RPSs)

Drivers for Growth of Wind Capacity - 2

• Production tax credit

• Economic development

• Energy demand growth

• Energy Security

Technology Advances

• Larger wind turbines developed and proven

1995: 500 kW

2007: 2.5 - 3 MW

• With larger turbines, greater efficiency

- Improved materials

- Improved gearboxes

- Larger blades

- Less overall land area needed to produce more MW

Technology Advances - 2

• Greater efficiency results in lower cost of generation

1990: average cost of 7.5 to 11 cents/kWh

2006: average cost of 4 to 6 cents/kWh for new capacity

Cost Competitiveness

• Wind vs. other sources of generation ($/MWh)

Coal 25 – 45

Natural gas 50 – 55

Oil 100

Solar 200 – 500

Wind 40 – 70 (depending on wind resource)

Cost Competitiveness

• Natural gas prices doubled from 2000 - 2005

Environmental Considerations/Climate Change

• No emissions from wind

• Clean Air Act requirements tightly regulate emissions from fossil fuel-fired plants – S02, PM, NOx, Mercury

• Climate change policies are developing, focusing on carbon emissions – Cal., RGGI, Kyoto Protocol

• Wind uses no fossil fuel – therefore no impacts from fuel cycle

• No water intake or discharge – at the same time that CWA requirements are tightening for fossil plants

RPSs

• RPS is a policy which either requires or encourages that utilities supply a stated percentage of their power from renewable resources

States with RPSs

Source: NREL

RPSs

• 25 States and DC have RPSs in one form or another

• Percentage goals vary from 2% (Iowa) to 40% (Maine) with varying target years

• Some have fixed requirements, others are aspirational

• Three states, Illinois, Virginia and Vermont, have non-binding goals

• National RPS is under consideration in Congress

RPSs/Renewable Energy Credits

• RPSs stimulate the development of markets for RECs

• A REC is a credit equal to a unit of production of renewable energy (e.g., a MWh)

• RECS may be used to satisfy RPS requirements, instead of actual generation

RPSs/Renewable Energy Credits - 2• RECs have economic value that can approach the

avoided cost of generation

• Prices for RECS vary geographically, and there is not yet an active market in many areas

- in some places, e.g., MA and CT, can be in the $40 – 50/MW range

• REC sales can provide a revenue stream to support wind energy projects

Production Tax Credit

• Federal income tax credit for production of energy by wind and other renewable resources

• Currently 1.9 cents/kWh, for 10 years

• Provides significant economic support for wind energy projects

• Much more about PTC later

• Short term renewals have produced stop/start development cycles

Economic Development

• Revenue source for host communities

• Revenue source for landowners, especially rural

• Spin-off local revenues from construction

• Construction jobs

• A few good local jobs during operation

Energy Demand Growth

• Electric energy demand in the US continues to increase

• Most projections are for continued increase

• New generation is needed to meet increased demand

- although wind is not a base load resource, it contributes to meeting load

Energy Security

• Foreign oil

• Foreign policy

Wind uses no oil

Why Wind?

It’s the $, stupid

For more information contact:

Ruth E. Leistensnider, Esq.Nixon Peabody LLP

Omni PlazaAlbany, New York 12207

518-427-2655

[email protected]

www.nixonpeabody.com