What a difference a year makes...

... Installations of wind energy by the end of 3rd quarter 2010 stood at 1,634 megawatts, down 72 percent from 2009, and the lowest level since 2006.

As we all welcomed the new year, wind proponents were quietly looking back and wondering how the breathtaking momentum coming into 2010 could turn to a mere whimper twelve months later.

You may recall that 2009 saw the largest increase in installed wind energy in the United States -- 10,000 megawatts -- bringing the total installed to just under 35,000 megawatts. Wind led the pack for three years straight as the fastest growing source of new electricity generating capacity. The 'green revolution' was underway, green jobs were all the rage, and renewable energy advocates felt their view of an America run on wind and renewables was more real than fantasy. The rapid expansion came about despite a stubborn global recession and some believed wind development might be immune to debt pressures other industries were reeling from. With the Obama administration committed to national polices that would spur further wind development, 2010 was expected to bring even greater expansion.

In December 2009 American Wind Energy Association's CEO, Denise Bode, was spilling over with confidence when she boasted "We're shovel ready, ready to rock and roll, and we can get to 20 percent [of US energy generation] easy, clearly by 2030."

As lead cheerleader for the wind industry, Ms. Bode's enthusiasm is understandable, but there comes a point when reality quiets even the most enthusiastic voices.

By June 2010, the industry was reporting that only 539 megawatts of new wind was installed, one-fifth the capacity added in the same period of 2009 (2,800 MW). By the end of 3rd quarter, total installations of wind energy stood at 1,634 megawatts, down 72 percent from 2009, and the lowest level since 2006 [1].

AWEA's latest press release omitted these number altogether and only proffered simplistic reasons for the decline ranging from Congress' failure to adopt long-term energy policies to coordinated anti-wind campaigns funded by the fossil fuel industry and led by the Wall Street Journal editorial page. But the factors contributing to wind's spectacular fall are much more complex as we address below.

Reality factor #1: The Copenhagen and Cancun non-events

With the Kyoto Protocol set to expire in 2012, the wind industry looked to the Copenhagen Climate Conference (December 2009) for a strong agreement that would commit the U.S. and the rest of the world to shifting away from fossil fuels and establishing a clear mandate for renewable energy. But the Conference was tainted by e-mails leaked from the University of East Anglia's Climate Research Unit that raised doubts as to the veracity of existing global warming data. Little was achieved in Copenhagen beyond assurances that participating countries would meet again. By the time the Cancun meetings convened in December 2010, expectations were purposely set low. World leaders again delayed the task of extending the Kyoto pact which created uncertainty in the global carbon markets and frightened investors about the future of renewables. This was one of the reasons for China's Huaneng Renewables Corp. yanking its $1.28 billion initial public offering.

Reality factor #2: Wind's high cost

AWEA attributed the explosive growth in 2009 to the American Reinvestment and Recovery Act (ARRA) and the Section 1603 investment tax credit (ITC). Under this new subsidy, developers could recover up to 30 percent of their capital costs from the government as direct cash outlays.

Projects that otherwise made no economic sense became viable with Section 1603 grant money. In other cases, applications were pushed up in order to take advantage of the grants before the program expire at the end of 2010. While the new subsidy helped move wind projects already in the 2008/2009 development pipeline, the drop in new wind capacity in 2010 proved how limited the benefit was. 

What really stopped wind in its tracks were low power prices brought on by a contacting economy and surplus natural gas supplies.

With natural gas selling at record lows and supplies expected to be abundant through this decade, developers were under pressure from investors to secure power purchase agreements with utilities. Most power-purchase agreements we've reviewed lock in the purchase price of wind for 15+ years at 2-3 times more than the wholesale price of traditional sources of generation. While above-market purchase agreements may have a stabilizing effect on energy prices for wind, they do so at an excessive price to ratepayers. Utilities were resistant to contract for higher-priced renewables unless required, or incented, by State law.

Come 2010, states were also unwilling to burden consumers with higher rates particularly during difficult economic times. Last June, Kentucky's Public Service Commission disapproved a power purchase agreement signed between Kentucky Power Company and FPL Illinois Wind, LLC involving a 20-year agreement to acquire 100 megawatts produced by FPL's Lee-DeKalb Wind Energy. The Commission cited two reasons for denying approval: 1) Cost - the 4.3 cent per kilowatt hour price was too expensive and 2) Supply - the state already had a sufficient supply of electric generation. Kentucky does not have a renewable energy standard thus no renewables obligation  to satisfy. If Kentucky had such a mandate, the Commission may have had little choice but to approve agreement and the price would likely have been at/near double the 4.3 cents.

It's no surprise why the wind industry is anxious for the federal government to adopt a national renewable standard. Such a policy would create a set-aside power market that pays a premium for wind energy regardless of need and eliminates competition from lower-cost, more reliable fuel options.

Looking to offshore wind development will not ease the cost question. In 2010 we learned the true cost of offshore wind development thanks to deliberations in Massachusetts and Rhode Island involving the power purchase agreements for Cape Wind and Deepwater Wind respectively. Both agreements were approved representing the most expensive electricity in the country at 18.7 cents per kilowatt hour (Cape Wind) and 24.4 cents a kilowatt hour (Deepwater Wind). As expected, both approvals were immediately appealed. 

Reality factor #3: The Great Transmission Debate

Generous state and federal subsidies are skewing the power market such that on-shore wind energy facilities can afford to be located in remote areas despite locational price penalties meant to discourage remote siting. As a result, rather than working to keep deployment of transmission to a minimum, renewable energy facilities are fueling the race to build thousands of miles of new transmission capacity where none was needed before. Wind-related power line construction is now proposed nationwide with costs forecasted well into the tens of billions of dollars. Texas, alone, has approved five-billion dollars to finance transmission to deliver West Texas wind to eastern parts of the state. New England is forecasting between $10 and $25 billion (depending on the plan) to deliver in-region wind to population centers around Boston and Southern Connecticut.

Wind development has already bumped into significant transmission constraints in Texas, the Pacific Northwest and New York. And the battles over siting and cost allocations are already raging in every region of the country including New England, California, Maryland, Texas and Montana.

The cumulative cost and scale of transmission development is far from understood by most regulators especially in areas of the country that have yet to deal with actual applications before them. Commissioner Jeff Davis of the Missouri Public Service Commission -- a state that is facing extensive transmission build out for wind -- published a piece in Transmission and Distribution Magazine that should be required reading for anyone looking at transmission in their State.

Reality factor #4: Aesthetics, the environment and quality of life

Opposition to wind energy proposals intensified in the last few years. By 2010 wind developers who approached communities felt the effects of the growing backlash. People who raised concerns about property values, health effects, the adverse impacts to wildlife etc. were responding to years of being marginalized and dismissed as NIMBY ("not in my backyard"). The clash over whether to produce ‘nonpolluting domestic energy' or protect our communities and the natural environment was more frequently seen as a false choice borne out of a pie-in-the-sky belief that wind (and solar) could reliably power a substantial segment of this country.

The degradation these enormous sprawling industrial complexes brought to our cultural and visual resources was better understood in 2010 than even two years before as more turbines were pushed through the approval process. Our colleagues in Texas describe West Texas as an alien landscape where one can drive for miles and miles (and miles) and see nothing but wind turbines. The nighttime experience is even more surreal with the blinking red lights.

Many of our readers know about the turbine noise problems in Maine (Mars Hill, Vinalhaven), Illinois (DeKalb County), Wisconsin (Fond du Lac County) and so many other communities across the U.S., Canada, and worldwide. In Oregon, Caithness Energy is not so quietly buying out landowners who worry their homes will become uninhabitable once the giant Shepherd's Flat project goes online. Despite efforts by the industry to discount and discredit Drs. Nina Pierpont and Michael Nissenbaum, their research has been found credible by many.

The impact of turbines on wildlife is also taking a toll on wind development even as the industry resists acknowledging a problem. Last summer, the U.S. Bureau of Land Management (BLM) suspended indefinitely the issuing of wind permits on public land over concerns the turbines would slaughter protected golden eagles.

In a civil suit filed in the District Court of Maryland, the judge found that the Beech Ridge wind energy facility (West Virginia) was in violation of the Endangered Species Act involving the listed Indiana Bat and ordered the developer cease construction on additional turbines until an incidental take permit could be issued. Direct testimony by the developer's own expert predicted more than 135,000 bats would be killed by the turbines, through a combination of direct impacts with the turbine blades and barotrauma. The settlement agreement filed with the court included a condition that the developer permanently abandon thirty-one turbines nearest the Indiana bat hibernacula (about 25% of the overall project). A second civil law suit raising similar issues was just filed against another project in neighboring Maryland.

Aesthetics and cultural concerns also pose an issue for wind. In December, a federal judge granted the request of the Quechan Indian tribe for a temporary restraining order halting construction on the first massive desert solar project authorized on public lands. If built, the project would be one of the largest solar power facilities in the world. The Court ruled that the BLM failed to adequately consult with the tribe regarding 459 cultural resources in the area. This order will have a chilling impact of other renewable energy proposals including wind development.

There are other stories we are tracking that cover conflicts between turbine development and military readiness and air navigation that will likely place more pressure on the industry in the next year.

Looking forward

Six years ago, wind energy development was a boutique industry and the impacts of its development isolated. As a percentage of overall generation -- about 1.5% -- wind is still a boutique industry. Surprisingly, it took just 36,700 megawatts of installed wind capacity to hit up against significant barriers to entry. And grand, yet untested, goals of supplying up to 20% of the U.S. power market will continue to raise concerns around cost and impacts. 

The "hurry up and get it done" mentality behind the renewables push in the United States coupled with the billions in taxpayer money made available to anyone who showed up has left no time for communities, businesses, or governments to consider the conflicts and consequences of their actions. And the wind industry has not helped its image by wrapping itself in the green cloak while doing little to address the harm the turbines cause.

In an editorial from a few years ago, we asked how many towers needed to be erected, how many view sheds and natural/cultural resources marred, how many dollars squandered and how many lives tainted by poor decisions before the process slowed to a point where we could evaluate the consequences.

Perhaps 2010 is a signal that we've reached that point -- or at least we hope so.

[1] Approximately 500 megawatts were completed by 4th quarter 2010.