The wind sector is suffering from its own success. In the last decade the industry has expanded from a handful of wind farm developers to a plethora. These companies have left hardly a stone unturned – or rather a breeze unmeasured – in their quest for prime, onshore wind power sites.
The Maine Opportunity The state of Maine is in a lucky position. Poised at the northern -most point of the power hungry US Northeast, the state has a ready market for the power it generates. While Maine has large, wind and desolate swaths of land ideal for wind power, its neighbors to the south – particularly Connecticut, Massachusetts and Rhode Island – have little room for wind farms. These heavily populated states need wind energy, or at least the renewable energy credits the projects generate. The three states have aggressive state mandates to add a growing percentage of renewables to their power portfolios each year. While Maine appears to have ready buyers, like so many other states, it is mired in controversy over who will build and pay for the transmission lines to get its wind power to market. First Wind, an independent wind developer based in Boston, skirted the controversy by building its own 38 mile (60 km), 115 kV transmission line to interconnect the Stetson Wind project. Its willingness to develop transmission differentiates First Wind from similar developers, according to Navigant's Stanberry. In pursuing this course, First Wind took on a host of additional projects risks associated with permitting and community support. The risks have apparently paid off. The first 57 MW phase of Stetson Wind began operating in January 2009 and a 26 MW expansion in April 2010. Harvard University is purchasing half of the power generated by the second phase, along with renewable energy credits.
As a result, it is no longer easy to find large pieces of land in advanced markets with all the right ingredients for a wind project: strong and steady winds, a welcoming community and easy access to transmission. Developers find themselves jostling for position, with four of five companies sometimes vying for the same sweet spot.
'When I talk to developers, this is their biggest issue of concern at the moment. The best spots are taken', said Joanne Howard, vice consul (Energy) at UK Trade & Investment with the British Consulate-General in Houston, Texas.
With the prime wind sites gone – or disappearing quickly – where does the wind industry go from here?
So far developers in fast-growing markets have been able to overcome the problem by pursuing short-term innovations to improve lesser sites or capture niche markets. In some cases, they are realigning their development queue and focusing on projects in untapped countries. In short, they are rethinking their approach. As Javier Mateache, CEO of Gestamp Wind North America puts it: 'The answer is not blowing in the wind, but in our brains and hands.'
In the US, a lack of transmission continues to be a primary restraint to the growth of onshore wind farms. The US has land aplenty with strong wind, but it remains undeveloped for lack of a way to get the power to market. Transmission lines cost roughly US$1 million per mile to build in the US. Given that prime wind sites are often far from where the wind power is needed, the price tag is hefty and the federal government has yet to resolve who will pay the bill. Wind developers shy away from proposing wind farms where no transmission yet exists and utilities don't want to put money into building transmission unless they know a generator stands ready to use the lines. Wind industry insiders call this the transmission chicken and egg dilemma.
'Transmission is the chink in the armour. That is where the frontier mentality still exists that everybody has to figure out their own way to get to market. It is causing great expense for generators and developers', said Andrew Spielman, a partner in law firm Hogan & Hartson, which has secured land use approvals for 725 MW of wind energy and an accompanying 80-mile (128 km)private transmission line in eastern Colorado.
Another problem is that landowners have become increasingly savvy about the value of their property. Farmers are driving harder bargains with wind developers for purchase or lease of their land. A decade ago 'nobody knew what a fair price was, but as long it was not a dollar less than the guy down the road, they thought it was fair. Now with the internet and more awareness of what these terms and conditions are, it has leveled the playing field', said Jim Tynion, a partner with the law firm Foley & Lardner, where he is chair of the Energy Industry Team.
In the US, companies also must make their way through a myriad of siting rules, a daunting endeavor when they build their own transmission lines, especially if the lines go through multiple jurisdictions. This leaves international developers particularly perplexed, according to the UK consulate's Howard: 'There are 20,000 jurisdictions in the US and none of them are equal.'
Looking for New Markets
While it can take a year to build a wind farm, transmission lines are likely to require at least five years – and sometimes decades if they run into public opposition. So some international companies are tending to look outside the US now for easier development opportunities – at least until the US finishes building key transmission projects. Richard Walker, the principal of Sustainable Energy Strategies, sees that happening now in wind-rich Texas, where transmission lines are being developed in specially designated wind corridors known as competitive renewable energy zones.
'Iberdrola, EON, they can satisfy their demand for new projects by going somewhere else. They are just biding their time and making sure all of their ducks are in a row in the wind corridor, waiting until those transmission lines get built', said Walker, who has assisted in developing 1.4 GW of wind energy in Oklahoma and Texas.
In the UK, where large swathes of open land are already scarce, the wind industry faces fierce not-in-my-backyard opposition, according to Michelle Thomas, who heads clean energy and sustainability for international law firm Eversheds. A new UK consenting regime offers the promise of making siting easier; it takes the decision away from local authorities and instead turns it over to a centralized body that considers the energy security and economic benefits offered by a wind farm. The new regime opens the door for additional wind projects over 50 MW.
'But good wind sites are in limited supply now in the UK', Thomas said. 'It is a difficult market, so many of our clients are looking to Eastern Europe', she added. In particular they are cultivating projects in Bulgaria, Poland and Hungary, as well as Estonia, Greece, Turkey and Morocco, Thomas observed.
The flight of developers from the UK is bad news for the nation, according to Thomas: 'We are in a pretty dire position here. We have huge renewable energy targets and carbon targets for 2020.'
Other mature markets, like Spain, Germany or Denmark 'will remain on a cruise speed linked to the growth of new electric demand and the need to replace old carbon based generation with state of the art WTGs', added Mateache, saying: 'The older wind farms nowadays look very ancient with low capacity factors and availability rates.' He sees potential for new development in countries like Argentina and Mexico and the Black Sea area of Europe, if they achieve the kind of economic and regulatory stability that Brazil, China and India did in recent years. Mateache also points out that while it may appear the best sites are secured in the US, not all proposed projects will be built. When a project is canceled or withdrawn from the interconnection queue, other developers may have an opportunity to swoop in and secure the land. More than 300 GW of unbuilt projects are awaiting interconnection approval in the US. Most of them will not achieve approval before deadlines expire on their land options. 'Landowners do not sign endless or eternal agreements, so if you do not obtain your interconnection agreement or power purchase agreement before the option deadline, you lose your rights and the land owner will be free to either renew the agreement or negotiate with other developers', Mateache said. To illustrate just how few proposed projects ever achieve operation, ISO New England, the grid operator in the US Northeast, recently reported the cancellation of 60% of all energy generation projects proposed since 1997.
Below: First Wind's Stetson wind project in Maine features its own transmission line
Building Smaller Wind Farms
In addition, developers in some mature markets are scaling down on the size of projects, fitting them onto land parcels they may have previously ignored. 'Projects are also getting smaller, especially in places like New England, where they are smaller to begin with. There are just not the large plots of land there that would allow 100 to 200 turbine sites', said Bruce Hamilton, a director in Navigant Consulting's Energy Practice.
Hamilton sees growing use of 'infill' development at existing wind farms – the installation of turbines in land left open when the project was initially developed. In some cases, the developer is unable to initially negotiate rights to a parcel in the midst of the wind farm. Then after building a phase or two of the project, the landowner relents. Iberdrola offers a good example of infilling with its Klondike Wind Power Projects on the US West Coast, he said. The 400 MW project was built in multiple stages on private farmland that spans thousands of acres in central Oregon.
Other developers are opting to take on the transmission issue head on. Rather than waiting for utilities to build lines, as is customary in the US, they are doing it themselves. Such companies are hiring permitting experts who understand the complexities of siting transmission. 'You think of First Wind. They've done some projects in very remote locations in Maine and run transmission for those projects long distances', said Matthew Stanberry, managing consultant at Navigant Consulting (see box panel on page 48).
Sometimes, a below par site overcomes its geographic deficits through good economics. 'Part of the equation is that even if the wind site is not strong, if you can get a good price for your power, you can make the project work', said Edward Zaelke, a partner in the Los Angeles law office of Chadbourne & Parke and a past president of the American Wind Energy Association.
Most US wind power projects seek long-term power purchase contracts with a buyer, often a utility and sometimes a wholesale power marketer. In parts of the nation where power prices are high, these contracts can be lucrative. If the state has a renewable portfolio standard – a requirement that a percentage of energy sold by a utility or retail supplier come from green resources – generators may increase their revenue by bundling their renewable energy credits into these contracts. Or they may sell them separately to a third party that needs them to meet a portfolio standard.
In some high-price areas, generators will even forego a long-term contract and sell their power on a merchant basis into wholesale power markets. In such cases they are likely to seek areas where nodal, or location marginal pricing (LMP) exists. This form of pricing, found in US organized markets, isolates the true cost of power at each node on a grid, the spot where a generator injects power. The price takes into account transmission congestion and in some cases line losses. Pricing is favourable in areas where transmission congestion is high.
Nodal markets now exist in large swathes of the US, including the PJM Interconnection, Midwest ISO, New England, New York, and California. Texas is in the process of creating a nodal market. LMP is especially important in those markets where prices vary significantly across nodes due to congestion and line losses, according to ICF Consulting, which recently completely a report: 'Investment Decisions for Baseload Power Plants', on behalf of the National Energy Technology Laboratory.
Developers will continue to target sites with the best wind resources and access to premium power markets. But if the currently Balkanized renewable energy credit markets coalesce into larger, more-liquid regional markets, siting near premium power markets will be less important, according to ICF.
Indeed, Zaelke points out that a national renewable portfolio standard – now under consideration by Congress – would encourage utilities to build transmission to more prime wind sites. This is because the standard would require that utilities either secure enough renewable energy (or accompanying renewable energy credits, or pay a penalty. 'If the law was designed correctly the penalties would be high enough that utilities that currently don't have wind, or have wind and need to move it to market, would invest in transmission because it would pay for itself', he said.
Technology to the Rescue
And finally, better technology can make less desirable sites more desirable. 'I think what has happened to keep the market moving is development of machines with turbines that work well in low [wind] speed areas', Zaelke said. These changes include building higher towers and larger and reconfigured blades.
Measuring wind speeds at higher altitudes can be difficult, which is one reason wind installations are not taller, according to Lee Alnes, director of business development for Second Wind, a Massachusetts company that provides advanced measurement systems for wind energy. Traditionally, developers put a data logger or other measuring devices on a tower to record wind speeds. In the US, if the tower is higher than 60 metres, the developer must secure a permit from the Federal Aviation Administration, install blinking lights and make other accommodations for planes. 'It gets really expensive to measure with a tower at 100 metres high,' Alnes said.
Above: The wind profiler is designed to support wind development
Second Wind offers an alternative called the Triton Wind Profiler, a sodar device perched no higher than six feet high and capable of measuring wind speeds 200 feet (70 metres) above.
Alnes sees a growing shift toward taller towers. But taller towers, too, can come with new restrictions, such as more stringent permit requirements from transportation departments because of the difficulty moving them along roads. One solution increasingly pursued is to use concrete, rather than steel towers. The concrete can be mixed and the towers built onsite.
Indeed, Tynion with Foley & Lardner, takes a contrarian view and argues that the best sites really aren't gone, when you consider the technology strides of recent years. 'In the last five to six years wind resource analysis has become much more sophisticated and what was thought to be a secondary or tertiary wind quality site is not anymore. These sites are commercially viable because of new technology', he said.
Whatever the case, the wind power market has found ways to continue to thrive, despite a preponderance of companies vying for the best remaining sites. And many governments are determined to keep the growth going, particularly since it is seen as a jobs builder.
In fact, the US wind energy industry broke all of its previous records by installing over 10,000 MW of new generation in 2009. Worldwide, the wind industry installed 24% more capacity in 2009 than in 2008, with most of the surge in China and the US, according to Emerging Energy Research.
'Although you are seeing maybe more competition and fewer sites available, more competition is reflective of more people in the business. From an employment standpoint, the sector is still in a very strong position of growth', said Navigant's Stanberry.
So, while it may be getting harder to develop, development has not slowed. Innovation appears to be overcoming land limits, until new transmission lines open up additional wind power frontiers.
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