Tax credit extension puts wind industry back to work; 2005 expected to break capacity installation records

WASHINGTON, D.C., Nov. 18, 2004 — With the extension of the federal wind energy production tax credit in September, capacity installations in 2005 look likely to beat all previous records, the American Wind Energy Association (AWEA) said in its quarterly U.S. market outlook. The previous high for new wind power capacity installations in one year was 1,696 megawatts (MW) in 2001. Most industry participants agree that 2005 will be a better year, with some predicting installations to exceed 2,500 MW.

“Conditions are right for next year to be a record-breaking year,” said AWEA Executive Director Randall Swisher. “We will see what the U.S. industry can do at a full-speed run for the next fourteen months. As natural gas prices continue to demonstrate volatility, and coal prices are increasing as well, wind power looks more attractive as a way to diversify a utility’s supply portfolio.”

The slow-down in installations in 2004 that resulted from the expiration of the production tax credit (PTC) means that many projects that have been in the development pipeline are now ready to move forward quickly. Wind power project developers and wind turbine and component manufacturers are now racing to lock up supply contracts for the coming year.

At the same time, rising and volatile natural gas prices make wind energy attractive in terms of the long-term stable energy price that the technology can offer. Once a plant is built, it requires no fuel and produces no harmful emissions. According to the Energy Information Administration, in the best wind resource areas such as the plains states and the upper Midwest, wind energy is the lowest-cost new electricity resource (with the PTC in place) when natural gas prices rise above about $3.50 per thousand cubic feet. On the New York Mercantile Exchange, natural gas prices topped $7 per thousand cubic feet in October, and most experts expect it to continue in the range of $5 for the foreseeable future.

The more wind energy capacity is installed, the more it will help to reduce the current natural gas supply shortage in the U.S., according to AWEA. The increasing use of natural gas to power electric generating plants is preventing the nation from building up its storage levels during the summer. But in many areas of the country where wind farms are generating electricity, they are directly helping to conserve vital natural gas supplies.

“We estimate that the wind farms already in place, and those that will be installed by the end of 2005, will be saving over 0.5 billion cubic feet (Bcf) of natural gas per day in 2006,” said Swisher. “Using conservative growth estimates of 3,000 MW installed every two years for the next four years, the U.S. could top 15,000 MW of installed wind power capacity by the end of 2009, which would save nearly 0.9 Bcf/day by the end of this decade.”

Estimated natural gas saved by wind generation

Assumptions for graph:
* 30% capacity factor for new wind installations
* Approximately 10 cubic feet of natural gas required to generate 1 kWh of electricity
* 80% of wind generation replaces natural gas-fired electricity

Because the tax credit was extended relatively late in the year, AWEA expects the U.S. to install approximately 480 MW of new capacity in 2004, well above its previous estimate of 350 MW but far below previous strong years such as 2001 (1,696 MW) and 2003 (1,687 MW). The full list of expected installations throughout the year is attached.

If installed wind power capacity were to consistently expand at a rate of 18% per year, AWEA said, six percent of the nation’s electricity could be generated by wind power by the year 2020, resulting in over $100 billion of investment, in addition to saving millions of cubic feet of natural gas. AWEA is continuing to pursue policies – such as a long-term PTC extension and federal and state renewables portfolio standards (RPS) – that will move the wind industry beyond the boom-and-bust cycles that have resulted from short-term PTC extensions in the past.

AWEA [ www.awea.org ]

AWEA, formed in 1974, is the national trade association of the U.S. wind energy industry. The association’s membership includes turbine manufacturers, wind project developers, utilities, academicians, and interested individuals.

Wind Energy Projects To Be Completed in 2004

State
Project Name
Location
Installed Capacity (in MW)
Project Developer
Power Purchaser
Turbine Manufacturer
Number of Turbines

Alaska

Kotzebue Wind Project
Kotzebue
0.1
Kotzebue Electric Association
Kotzebue Electric Association
AOC
2

California

Altamont (repower)
Altamont Pass
20
FPL Energy
PGE
Vestas
31

Tehachapi
Tehachapi
4.5
Coram Energy, LLC
Southern California Edison
GE Wind
3

SMUD II
Solano County
4.62
Sacramento Municipal Utility District (SMUD)
SMUD
Vestas
7

Karen Avenue III
San Gorgonio
4.5
Whitewater Energy Corp.
GE Wind
3

Colorado

Prowers County
1.5
Arkansas River Power Authority
Arkansas River Power Authority
GE Wind
1

Prowers County
4.5
Lamar Utilities Board
Lamar Utilities Board
GE Wind
3

Idaho

Fossil Gulch
Gore Hill Bench, west of Great Falls
10.5
United Materials /Exergy Development
Idaho Power
GE Wind
7

Illinois

Manlius
Manlius
1.65
Engineers Architects Professional Corp.
Bureau Valley High School
Vestas
1

Crescent Ridge
Bureau County
54.5
Illinois Wind Energy/Eurus
ComEd
Vestas
33

Iowa

Intrepid
Buena Vista, Sac Counties
159
Clipper Wind/GE
MidAmerican
GE Wind
106

Neppel wind power project
Armstrong
1.5
Alliant Energy
Vestas
1

Minnesota

Carleton College
Northfield
1.65
Carleton College/Xcel Energy
Vestas
1

Northfield School District
Northfield
1.65
Northfield School District
1

SMMPA
Fairmont, Redwood Falls, and Wells
6.6
SMMPA
Vestas
4

Maiden Winds Power Project
West Pipestone
8.25
Dan Juhl/Edison Capital
Xcel Energy
Vestas
5

Minn Wind III-IX
Near Luverne
11.55
Xcel Energy
Vestas
7

JJN Wind Farm
Buffalo Ridge
1.5
JJN Wind Farm
JJN Wind Farm
Vestas
1

New Mexico

Caprock Wind Ranch
Quay County
60
Cielo Wind Power
Xcel Energy
Mitsubishi
60

Ohio

AMP-Ohio/ Green Mountain Energy Wind Farm
Bowling Green
3.6
American Municipal Power – Ohio
American Municipal Power – Ohio
Vestas
2

Tennessee

Buffalo Mountain wind farm
near Oak Ridge
27
Invenergy
TVA
Vestas
15

Texas

Sweetwater Phase II
near Sweetwater
91.5
DKRW, Babcock & Brown, and Catamount Energy Corp
GE Wind
61

Total installed capacity
480

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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