Lisa Linowes2010 Mid-America Regulatory Conference

Consumer Forum

June 6 - 9, 2010Kansas City, Missouri

Wind Energy: An Assessment

Energy market goals

• Meeting peak demand energy needs

• Efficient, reliable, cost-effective generation

• Greenhouse emission reductions

• Stable, secure, sustained fuel sources (nix foreign oil)

• Environmentally sensitive siting of generation

June 9, 2010 2

Joint Coordinated System Plan

Eastern Interconnection Planning Collaborative

The System Planning

June 9, 2010 3

The Tools

• State Renewable Portfolio StandardState requires a % of electric energy sales be generated by renewable

technologies (29 states and DC mandatory)

• Federal Production Tax Credit (since 1992)Per KWh tax credit for electricity generated by qualified resources

• Stimulus Bill: Federal loan guaranteesUS Department of Energy guaranteed loans to finance renewable energy

projects, electric transmission projects, etc. No performance requirement.

June 9, 2010 4

Where is this “policy” headed?

June 9, 2010 5

Industrial wind represents more than 90% of the proposed generating capacity of all renewable energy projects.

Image: Elk River 150mw facility, Butler County Kansas

June 9, 2010 6

The Vision

June 9, 2010 7

... And what this would look like.

305,000 MW of installed wind geographically distributed 19,000 miles of new 765 kV transmission lines $60+ billion in transmission & infrastructure costs (2007 dollars, assumes $2.6 million per mile 765 kV line cost)

Wind power development capital costs in the trillions Profit motive married to fast-tracking of approvals

Fine print: costs are ballpark estimates created without the benefit of detailed engineering. Sources: American Electric Power: Interstate Transmission Vision for Wind Integration (2007)

DOE 20% wind power by 2030 (2008)

June 9, 2010 8

Compared to today

• US Total installed: 34,000 mw

State MegawattsTexas 9,506

Iowa 3,670

California 2,723

Oregon 1,920

Washington 1,908

Illinois 1,848

Total 21,575

June 9, 2010 9

Crash course in wind• Energy resource with limited capacity value

• Intermittent, non-dispatchable, unpredictable Production ‘out of sync’ with load (and peak)

• Locationally constrained, land intensive

• May displace fossil fuel but cannot replace it

• Runs counter to Standard Market Design principles

• Environmental/societal costs not well understood

• Free, but very expensive! High contract price; costs spread over fewer hours of generation.

June 9, 2010 10

What DOE says about wind

• Wind is an energy resource, not a capacity resource.

• The capacity value of wind has been shown to range from approximately 5% to 40% of rated capacity.

• Because wind is not a capacity resource, it does not require 100% backup when the wind is not blowing.

• Wind power cannot replace the need for many “capacity resources” …If wind has some capacity value for reliability planning purposes, that should be viewed as a bonus, but not a necessity.

Source: June 2008 DOE report “20 percent wind power by 2030”

June 9, 2010 11

Stetson wind April 8, 2009

June 9, 2010 12

Stetson wind April 25, 2009

June 9, 2010 13

Stetson wind May 31, 2009

June 9, 2010 14

Period from July 14, 2008 to July 18, 2008

Benton County Wind (130.5 mw) Hourly Gen… …mapped to PJM Hourly Load

http://www.pjm.org/markets-and-operations/energy/real-time/loadhryr.aspx http://www.ferc.gov/docs-filing/eqr/data/spreadsheet.asp

MWHCapacity Factor

June 9, 2010 15

Benton County Wind (130.5 mw) Hourly Gen… …mapped to PJM Hourly LoadMWH

Capacity Factor

http://www.pjm.org/markets-and-operations/energy/real-time/loadhryr.aspx http://www.ferc.gov/docs-filing/eqr/data/spreadsheet.asp

June 9, 2010 16

RPS & the REC market

• Twenty-nine states plus DC

• Establish set-aside market for renewables(Qualified renewables vary by State and subject are to change)

• Single-price system rewards energy not capacity

• Discourages competition leading to higher prices (Economic development)

• Arbitrary percentages, limited analysis (ex: IL)

June 9, 2010 17

Valuing a REC

• A single metric:

1 MWh of energy equals 1 REC

• Based on a single assumption:

1 MWh of renewable energybacks out 1 MWh fossil

June 9, 2010 18

RECs, a binary market

• As compliance is met, REC prices sink

• Ex: – MA alternative compliance payment: $61/MWh– Current market value for same: $18/MWh– Future REC values: under $25 through to 2016

Source: Chicago Climate Futures Exchange

June 9, 2010 19

Case study: Cape Wind

• 130 turbines, 468 mw installed (3.6 mw each)• Anticipated average CF: 39% (~182 mw)• Terms of negotiated PPA just released:- Wholesale, bundle energy price: $207 MWh

- REC component: $67 MWh

- Energy component: $140 MWh

- 3.5% yearly escalatorComparable renewables pricing: $80 MWh

Conventional pricing: $50 MWh or less

June 9, 2010 20

Thank You

Lisa Linowes

www.windaction.org603-838-6588