Wind industry looks to Washington for updraft

The American Wind Energy Association is holding its annual conference in Chicago this week but many of its attendees' thoughts are in Washington, D.C.

Wind industry executives said on a media conference call on Wednesday that a national renewable electricity standard (RES) that would require power generation from wind, solar, geothermal, and biomass is necessary to significantly expand the U.S. wind industry.

On Tuesday, governors from industrial-heavy Midwestern states--Michigan, Iowa, Wisconsin, Illinois, Ohio--and the chairman of the Federal Energy Regulatory Commission spoke on another media conference call and also called for a national RES, which they said would bring several economic benefits.

Wind power has grown rapidly around the world over the past four years and supplies enough electricity for 7 million average U.S. homes. But wind still contributes a tiny percentage of the total power generation in the U.S. Installed capacity of wind power, which was 8,500 megawatts last year, is expected to slow this year, in large part because of the recession.

But the bigger concern is whether the U.S. industry can dig roots in the U.S. and grow over the long term, said industry executives. The U.S. Department of Energy last year published a study that found that the U.S. could get 20 percent of its electricity from wind by 2030. That target is doable but only with a long-term policy, executives said on Wednesday.

"Investors are nervous because they have seen the stop-go nature of government policies," said retired general and former presidential candidate Wesley Clark who is now on the boards of wind energy companies and an investment bank. "We know that a RES is necessary. The question is: is it sufficient. But it's too early to say because we don't know what's in it."

Many states have renewable energy mandates, but the House and Senate are both considering bills that would establish a national standard. The House bill calls for utilities to get 6 percent of its electricity from wind, solar, biomass, or geothermal by 2012 and 25 percent by 2025.

The RES would serve to bulk up demand for wind energy and lead to an influx of investment in the U.S., which would touch an entire supply chain of companies because wind turbine manufacturers and developers prefer to source components locally.

"We want to be the state that goes from the rust belt to the green belt," said Michigan Gov. Jennifer Granholm on Tuesday's panel. "We have 700 auto suppliers that could be doing wind components...We have companies making light-weight composite materials for autos--they could be doing the same in wind."

Stronger demand for wind energy would also drive technical innovation and greater efficiency in manufacturing, said Victor Abate, vice president for renewables at GE Energy on Wednesday Investments in research and development ultimately leads to lower cost of delivered electricity, added Ditlev Engel, president and CEO of Danish wind company Vestas Wind Systems, during the same panel.

"Basically nothing has been spent on R&D and yet we have been able to get to the level where we are," said Engel, adding that the lack of long-term policy has kept Vestas from making larger investments in the U.S. "The key question is how much further can we bring costs down."

Engel noted that wind is one renewable energy source that does not use water, an advantage it has over other renewable energy sources.

Feasible?
In addition to a national mandate, wind executives and government officials said that getting a substantial portion of electricity from wind will require more transmission lines and an extension to the tax credit for wind developers

"We simply cannot believe we can incrementally continue to develop new renewable energy without building up our entire grid into a strong grid," FERC Chairman Join Wellinghoff said on Tuesday.

The recovery plan passed earlier this year forestalled a dramatic slowdown in wind with loan guarantees and an extension to the tax incentives for wind farm developers. But those incentives will expire at the end of next year. "There's a lot of waiting and seeing what's going to happen," Clark said.

Detractors of renewable energy subsidies argue that these policies are only necessary because renewable energy is more expensive. Another political barrier to getting a national RES passed is that different regions of the U.S., notably the southeast U.S., do not have good wind and solar resources.

On the question of cost, Michael Polsky, CEO of wind energy developer Invenergy, said on Wednesday that installing new wind capacity is less than building a new coal or nuclear power plant. "When compared to nuclear and coal, wind is one of the least costly sources of energy especially if you consider the environmental benefits," said Polsky. "It's very, very competitive."

Natural gas power plants do deliver cheaper electricity but gas prices are lower because of the recession and are likely to go up, he said. Wind also helps achieve national goals of lowering imports of fossil fuels, lowering carbon emissions, and economic development, executives said.

Although the Southeastern United States does not have the same excellent wind resources as the Western U.S., those states can meet renewable energy targets with biomass, said Don Furman, the president of AWEA and a senior vice president at Iberdrola Renewables.