Wind Energy

Stephen R. Lawrence
Leeds School of Business University of Colorado Boulder, CO

Acknowledgement

Adapted from a presentation by

Keith Stockton
Environmental Studies University of Colorado Boulder, CO
2

Ancient Resource Meets 21st Century

Wind Turbines

Power for a House or City

Wind Energy Outline

History and Context Advantages Design Siting Disadvantages Economics Project Development Policy Future

History and Context

Wind Energy History

1 A.D.

~ 400 A.D.

Hero of Alexandria uses a wind machine to power an organ Wind driven Buddhist prayer wheels Golden era of windmills in western Europe 50,000 9,000 in Holland; 10,000 in England; 18,000 in Germany Multiblade turbines for water pumping made and marketed in U.S. Thomas Edison commissions first commercial electric generating stations in NYC and London Competition from alternative energy sources reduces windmill population to fewer than 10,000 Heyday of the small multiblade turbines in the US midwast

1200 to 1850 1850s

1882

1900

1850 1930

1936+

As many as 6,000,000 units installed

US Rural Electrification Administration extends the grid to most formerly isolated rural sites
Grid electricity rapidly displaces multiblade turbine uses
7

Increasingly Significant Power Source

coal petroleum natural gas nuclear hydro other renewables wind
coal petroleum natural gas nuclear hydro other renewables wind

Wind currently produces less than 1% of the nations power.

Source: Energy Information Agency

Wind could generate 6% of nations electricity by 2020.

Manufacturing Market Share

Source: American Wind Energy Association

10

US Wind Energy Capacity U.S. Wind Energy Capacity

10000 8000 6000 MW 4000 2000 0 2000 2001 2002 2003 2004 2005

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Installed Wind Turbines

12

Colorado Wind Energy Projects

Wind Energy Development
Project or Area
1. Ponnequin (EIU) (Phase I) 1. Ponnequin (Xcel) Project Info 1. Ponnequin (Phase III) Peetz Table Wind Farm Colorado Green, Lamar (Prowers County) Prowers County (Lamar) Prowers County (Lamar)

Owner
K/S Ponnequin WindSource & Energy Resources Xcel

Date Online
Jan 1999

MW
5.1

Power Purchaser/User
Xcel

Turbines / Units
NEG Micon (7) NEG Micon (22) Vestas (15) NEG Micon (33) GE Wind 1500 (108) GE Wind 1500 (1) GE Wind 1500 (3)
13

Feb-June 1999 2001

16.5

Xcel

New Century (Xcel) New Century (Xcel) Xcel Energy / GE Wind Wind Corp. Arkansas River Power Authority Lamar Utilities Board

9.9 29.7

New Century (Xcel) New Century (Xcel)

Dec 2003 2004 2004

162.0 Xcel 1.5 4.5 Arkansas River Power Authority Lamar Utilities Board

New Projects in Colorado

New Wind Projects in Colorado
Project
Spring Canyon Wray School District NA

Utility/Developer
Xcel Energy / Invenergy Wray School District RD2 Xcel Energy / Prairie Wind Energy

Location
Near Peetz Wray Near Lamar

Status
Construction to begin in June

MW Capacity
60 1.5

On Line By/ Turbines

2005 / GE Wind 1500kW (87) 2005 / 1500kW (1) 2005 / 1500kW (46)

PPA Signed

69

14

Ponnequin 30 MW
Operate with wind speeds between 7-55 mph Originally part of voluntary wind signup program Total of 44 turbines In 2001, 15 turbines added 1 MW serves ~300 customers ~1 million dollars each 750 KW of electricity each turbine Construction began Dec 98 Date online total June 1999 Hub height 181 ft Blade diameter 159 ft Land used for buffalo grazing
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Wind Power Advantages

16

Advantages of Wind Power

Environmental Economic Development Fuel Diversity & Conservation Cost Stability

17

Environmental Benefits
No air pollution No greenhouse gasses Does not pollute water with mercury No water needed for operations

18

Pollution from Electric Power

Sulfur Dioxide Carbon Dioxide Nitrous Oxides Particulate Matter Toxic Heavy Metals 0% 20% 34% 33% 28% 23% 40% 60% 80% 70%

Percentage of U.S. Emissions

Source: Northwest Foundation, 12/97

Electric power is a primary source of industrial air pollution

19

Economic Development Benefits

Expanding Wind Power development brings jobs to rural communities Increased tax revenue Purchase of goods & services

20

Economic Development Example

Case Study: Lake Benton, MN
$2,000 per 750-kW turbine in revenue to farmers

Up to 150 construction, 28 ongoing O&M jobs

Added $700,000 to local tax base

21

Fuel Diversity Benefits

Domestic energy source Inexhaustible supply Small, dispersed design

reduces supply risk

22

Cost Stability Benefits

Flat-rate pricing

hedge against fuel price volatility risk

Wind electricity is inflation-proof

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Wind Power Design

24

Power in the Wind (W/m2)

= 1/2 x air density x swept rotor area x (wind speed)3 A V3

Density = P/(RxT)
P - pressure (Pa) R - specific gas constant (287 J/kgK) T - air temperature (K)

Area = r2 m2

Instantaneous Speed (not mean speed) m/s

kg/m3

25

Wind Energy Natural Characteristics

Wind Speed

Wind energy increases with the cube of the wind speed 10% increase in wind speed translates into 30% more electricity 2X the wind speed translates into 8X the electricity

Height

Wind energy increases with height to the 1/7 power 2X the height translates into 10.4% more electricity

26

Wind Energy Natural Characteristics

Air density

Wind energy increases proportionally with air density Humid climates have greater air density than dry climates Lower elevations have greater air density than higher elevations Wind energy in Denver about 6% less than at sea level

Blade swept area

Wind energy increases proportionally with swept area of the blades

Blades are shaped like airplane wings

10% increase in swept diameter translates into 21% greater swept area Longest blades up to 413 feet in diameter

Resulting in 600 foot total height

27

Betz Limit
Theoretical maximum energy extraction from wind = 16/27 = 59.3% Undisturbed wind velocity reduced by 1/3 Albert Betz (1928)

28

How Big is a 2.0 MW Wind Turbine?

This picture shows a Vestas V-80 2.0-MW wind turbine superimposed on a Boeing 747 JUMBO JET

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Wind Turbine Power Curve

2500

Vestas V80 2 MW Wind Turbine

2000

KW

1500

1000

500

10

20

30 MPH

40

50
30

Recent Capacity Enhancements

2006 5 MW 600

2000 850 kW 265

2003 1.8 MW 350

31

Nacelle Components
5

10

16 17
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Hub controller Pitch cylinder Main shaft Oil cooler Gearbox Top Controller Parking Break Service crane Transformer Blade Hub

12 12
11. Blade bearing 12. Blade 13. Rotor lock system 14. Hydraulic unit 15. Machine foundation 16. Yaw gears 17. Generator 18. Ultra-sonic sensors 19. Meteorological gauges

32

Turbines Constantly Improving

Larger turbines Specialized blade design Power electronics Computer modeling

produces more efficient design

Manufacturing improvements

33

Improving Reliability
Drastic improvements since mid-80s Manufacturers report availability data of over 95%

100
% Available 80 60 40 20 0 1981 '83 '85 '90 '98 Year
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Wind Project Siting

35

Wind Power Classes

10 m (33 ft) Wind Power Class 1 2 3 4 5 Speed m/s (mph) 0 4.4 (9.8) ft) 50 m (164 Speed m/s (mph) 0 5.6 (12.5)

5.1 (11.5)
5.6 (12.5) 6.0 (13.4) 6.4 (14.3) 7.0 (15.7) 9.4 (21.1)

6.4 (14.3)
7.0 (15.7) 7.5 (16.8) 8.0 (17.9) 8.8 (19.7) 11.9 (26.6)

6
7

Wind speed is for standard sea-level conditions. To maintain the same power density, speed increases 3%/1000 m (5%/5000 ft) elevation.
36

37

38

Siting a Wind Farm

Winds

Minimum class 4 desired for utility-scale wind farm (>7 m/s at hub height)
Distance, voltage excess capacity Land-use compatibility Public acceptance Visual, noise, and bird impacts are biggest concern Economies of scale in construction Number of landowners
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Transmission

Permit approval

Land area

Wind Disadvantages

40

Market Barriers

Siting

Avian Noise Aesthetics

Intermittent source of power Transmission constraints Operational characteristics different from conventional fuel sources Financing

41

Wind Energy and the Grid

Pros

Small project size Short/flexible development time Dispatchability

Generally remote location Grid connectivity -- lack of transmission capability Intermittent output

Cons

Only When the wind blows (night? Day?)

Low capacity factor Predicting the wind -- were getting better

42

Birds - A Serious Obstacle

Birds of Prey (hawks, owls, golden eagles) in jeopardy Altamont Pass News Update from Sept 22

shut down all the turbines for at least two months each winter eliminate the 100 most lethal turbines Replace all before permits expire in 13 years
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Wind Characteristics & Consequences

Remote location and low capacity factor

Higher

transmission investment per unit output

Small project size and quick development time

Planning

mismatch with transmission investment

Intermittent output
Higher

system operating costs if systems and protocols not designed properly

44

Balancing Supply & Demand

4500

Gas
4000

Gas/Hydro
3500

Base Load Coal

3000

45

Energy Delivery
Lake Benton II Storm Lake

Lake Benton & Storm Lake Power February 24, 2002

200000

Combined

180000

160000

140000

120000

(kW)

100000

80000

60000

40000

20000

0
10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 0:00 1:00 2:00 3:00 4:00 5:00 6:00 7:00 8:00 9:00

(HH:MM)

46

Energy Delivery
Lake Benton II Storm Lake

Lake Benton & Storm Lake Power July 7, 2003

180000

Combined

160000

140000

120000

100000

(kW)
80000 60000 40000 20000 0

10:00

11:00

12:00

13:00

14:00

15:00

16:00

17:00

18:00

19:00

20:00

21:00

22:00

(HH:MM)

23:00

0:00

1:00

2:00

3:00

4:00

5:00

6:00

7:00

8:00

9:00

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Wind Economics

48

Wind Farm Design Economics

Key Design Parameters

Mean wind speed at hub height Capacity factor

Start with 100% Subtract time when wind speed less than optimum Subtract time due to scheduled maintenance Subtract time due to unscheduled maintenance Subtract production losses
Dirty blades, shut down due to high winds

Typically 33% at a Class 4 wind site

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Wind Farm Financing

Financing

LIBOR

Terms

Interest rate
+ 150 basis points

Loan term
Up

to 15 years

50

Cost of Energy Components

Cost (/kWh) = (Capital Recovery Cost + O&M) / kWh/year

Capital Recovery = Debt and Equity Cost O&M Cost = Turbine design, operating environment kWh/year = Wind Resource

51

Costs Nosedive Winds Success

38 cents/kWh
$0.40 $0.30 $0.20 $0.10 $0.00 1980

3.5-5.0 cents/kWh
1984 1988 1991 1995 2000 2005

Levelized cost at good wind sites in nominal dollars, not including tax credit

52

Construction Cost Elements

Financing & Legal Fees 3% Development Activity 4% Interconnect/ Subsation 4% Interest During Construction 4% Towers (tubular steel) 10% Construction 22% Design & Engineering 2% Land Transportation 2%

Turbines, FOB USA 49%

53

Wind Farm Component Costs Wind Farm Cost Components

100%

80% Balance of System 60% Transportation Foundations Tower 40% Control System Drive Train Nacelle 20% Blades and Rotor

0% 750 kW 1500 kW 3000 kW

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Wind Farm Economics

Capacity factor

Start with 100% Subtract time when wind speed < optimum Subtract time due to scheduled maintenance Subtract time due to unscheduled maintenance Subtract production losses

Dirty blades, shut down due to high winds

Typically 33% at a Class 4 wind site

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Improved Capacity Factor

Performance Improvements due to:

Better siting Larger turbines/energy capture Technology Advances Higher reliability

Capacity factors > 35% at good sites Examples (Year 2000)

Big Spring, Texas

37% CF in first 9 months 36% CF in first 9 months

Springview, Nebraska

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Wind Farm Economics

Key parameter

Distance from grid interconnect

$350,000/mile for overhead transmission lines

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Wind Farm Economics

Example

200 MW wind farm

Fixed costs - $1.23M/MW 33% capacity factor

Class 4 wind site

10 miles to grid 6%/15 year financing

100% financed

20 year project life

Determine Cost of Energy - COE

58

Wind Farm Economics

Total Capital Costs

$246M + (10 x $350K) = $249.5M 200 MW x 1000 x 365 x 24 x 0.33 = 578,160,000 kWh 578,160,000 x 20 = 11,563,200,000 kWh 3.3/kWh 1.6/kWh Wind 4.9/kWh Coal 3.7/kWh Natural gas 7.0/kWh

Total Annual Energy Production

Total Energy Production

Capital Costs/kWh

Operating Costs/kWh

Cost of Energy New Facilities

@ $12/MMBtu
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Wind Farm Development

60

Wind Farm Development

Key parameters

Wind resource Zoning/Public Approval/Land Lease Power purchase agreements Connectivity to the grid Financing Tax incentives

61

Wind Farm Development

Wind resource

Absolutely vital to determine finances

Wind is the fuel Daily and hourly detail Preferably at projected turbine hub height Multiple towers across proposed site

Requires historical wind data

Install metrological towers

Multiyear data reduces financial risk

Correlate long term offsite data to support short term onsite data
Local NWS metrological station
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Wind Energy Variability

63

Source: Garrad Hassan America, Inc.

Wind Farm Development

Zoning/Public Approval/Land Lease

Obtain local and state governmental approvals

Often includes Environmental Impact Studies

Impact to wetlands, birds (especially raptors)

NIMBY component
View sheds

Negotiate lease arrangements with ranchers, farmers, Native American tribes, etc.

Annual payments per turbine or production based

64

Wind Farm Development

Power Purchase Agreements (PPA)

Must have upfront financial commitment from utility 15 to 20 year time frames Utility agrees to purchase wind energy at a set rate

e.g. 4.3/kWh

Financial stability/credit rating of utility important aspect of obtaining wind farm financing

PPA only as good as the creditworthiness of the uitility Utility goes bankrupt youre in trouble

65

Wind Farm Development

Connectivity to the grid

Obtain approvals to tie to the grid

Obtain from grid operators WAPA, BPA, California ISO Especially since the grid is operating near max capacity

Power fluctuations stress the grid

66

Wind Farm Development

Financing

Once all components are settled

Wind resource Zoning/Public Approval/Land Lease Power Purchase Agreements (PPA) Connectivity to the grid Turbine procurement Construction costs

Take the deal to get financed

67

Financing Revenue Components

68

Source: Hogan & Hartson, LLP

Closing the Deal

Small developers utilize a partnership flip

Put the deal together Sell it to a large wind owner

e.g. Florida Power & Light, AEP, Shell Wind Energy, PPM Scottish Power Shell and PPM jointly own Lamar wind farm

Large wind owner assumes ownership and builds the wind farm

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Wind Policy

70

Wind Farm Economics

Federal government subsidizes wind farm development in three ways

1.9 /kWh production tax credit

33.5% subsidy 29.8% subsidy 2.6% subsidy

5 year depreciation schedule

Depreciation bonus

71

Tax Incentives Issues

Small developers cant fully use federal tax credits or accelerated depreciation

They dont have a sufficient tax liability Example

A 200 MW wind farm can generate a $12.6M tax credit/year

Small developers dont have sufficient access to credit to finance a $200M+ project
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Production Tax Credit

1.9/kWh Production Tax Credit

First 10 years for producing wind generated electricity Wind farm must be producing by 12/31/07 PTC has been on again/off again since 1992 Results in inconsistent wind farm development

PTC in place aggressive development PTC lapses little or no development

The PTC puts wind energy on par with coal and significantly less than natural gas

When natural gas > $8.00/MMBtu

Current prices: $10 $15/MMBtu

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Wind Power Policy

Renewable Portfolio Standard

21 States have them Colorados Amendment 37

Passed by voters November 2004 3% of generation from 2007 - 2010 5% of generation from 2011 - 2014 10% of generation by 2015 and beyond

4% of renewable generation from solar PV 96% of renewable generation from wind, small hydro and biomass Small utilities can opt out of program
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Renewable Energy Credits

You subsidize wind energy when produced by another utility

CU pays $0.006/kWh to Community Energy

To power the UMC, Wardenburg and the Recreation Center

Community Energy uses these funds to subsidize wind energy at wind farms in Lamar and in the upper Midwest Although CU isnt getting the electrons from these wind farms, it is in effect buying wind energy The three new buildings (Business, Law, and Atlas) will also be powered by wind energy

75

Inconsistent Policy Unstable Markets

76

Source: American Wind Energy Association

Future Trends

77

Expectations for Future Growth

20,000 total turbines installed by 2010 6% of electricity supply by 2020

100,000 MW of wind power installed by 2020

78

Future Cost Reductions

Financing Strategies

Manufacturing Economy of Scale

Better Sites and Tuning Turbines for Site Conditions Technology Improvements

79

Future Tech Developments

Application Specific Turbines

Offshore Limited land/resource areas Transportation or construction limitations Low wind resource Cold climates

80

The Future of Wind - Offshore

1.5 - 6 MW per turbine 60-120 m hub height 5 km from shore, 30 m deep ideal Gravity foundation, pole, or tripod formation Shaft can act as artificial reef Drawbacks- T&D losses (underground cables lead to shore) and visual eye sore

81

Wind Energy Storage

Pumped hydroelectric

Compressed Air Energy Storage

Georgetown facility Completed 1967 Two reservoirs separated by 1000 vertical feet Pump water uphill at night or when wind energy production exceeds demand Flow water downhill through hydroelectric turbines during the day or when wind energy production is less than demand About 70 - 80% round trip efficiency Raises cost of wind energy by 25% Difficult to find, obtain government approval and build new facilities Using wind power to compress air in underground storage caverns Costly, inefficient
Salt domes, empty natural gas reservoirs

Hydrogen storage

Use wind power to electrolyze water into hydrogen Store hydrogen for use later in fuel cells 50% losses in energy from wind to hydrogen and hydrogen to electricity 25% round trip efficiency Raises cost of wind energy by 4X 82

U.S. Wind Energy Challenges

Best wind sites distant from

Wind variability

population centers major grid connections

Non-firm power

Can mitigate if forecasting improves

NIMBY component

Debate on how much backup generation is required

Cape Wind project met with strong resistance by Cape Cod residents Sea floor drops off rapidly on east and west coasts

Limited offshore sites

Intermittent federal tax incentives

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North Sea essentially a large lake

Nantucket Project

130 turbines proposed for Nantucket Sound

84

Hawaiian Wind Farm Shock Absorber

Install on 2.4 MW wind farm on Big Island of Hawaii Utilizes superconducting materials to store DC power Suddenly increased and decreased wind power output Likely to loose efficiency due to AC-DC-AC conversions
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"Utility Scale Wind on Islands," Refocus, Jul/Aug 2003, http://www.re-focus.net

Where Can Coloradans Buy Wind?

Clean and Green is a Boulder-based, national membership organization that supports current and future community-based wind farms around the country. Individuals and businesses can sign up for customized levels of wind energy credits based on your unique needs. www.CleanAndGreen.us or call (303) 444-3355 Founded in 1999, Community Energy is one of the nation's leading wind developers and suppliers of renewable energy credits. Community Energy offers NewWind Energy credits from the 7.5 MW wind farm located in Southeast Colorado owned jointly by Lamar Light & Power and Arkansas River Power Authority. Purchase NewWind Energy credits starting at $4 per month for 200 kWh. www.NewWindEnergy.com or call 1 (866) WIND-123

Based in Boulder, Renewable Choice Energy is a leading provider of wind energy credits from wind farms across the country. You can purchase wind credits starting at $5/month (250kWh). Weve partnered with the local Whole Foods Market to offer a free $20 or $50 gift card for new wind customers. www.RenewableChoice.com or get info at Whole Foods Market in Boulder or call 1 (877) 810-867010-8670

Since 1997, Xcel Energy's Windsource program has provided customers with a clean renewable energy option that helps protect Colorados environment. Xcel Energys Windsource program and is the largest wind green pricing program in the United States. Customers pay a slight premium for 100% clean, wind energy from Colorado wind farms. Windsource in Colorado is Green-e certified by the Center for Resource Solutions. Windsource costs $0.97 per 100 kWh block in addition to your regular energy charge. www.xcelenergy.com/windsource-co or call 1(800) 824-1688.
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