Wind Energy

Wind Energy Stephen R. Lawrence Leeds School of Business University of Colorado Boulder, CO 1 Acknowledgement Adapted from a presentation by Keith Stockton Environmental Studies University of Colorado Boulder, CO 2 Ancient Resource Meets 21st Century 3 Wind Turbines Power for a House or City 4 Wind Energy Outline History and Context  Advantages  Design  Siting  Disadvantages  Economics  Project Development  Policy  Future  5 History and Context 6 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 1850’s    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 nation’s power. Source: Energy Information Agency Wind could generate 6% of nation’s electricity by 2020. 8 9 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 11 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 15 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 23 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) kg/m3 m/s 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 29 Wind Turbine Power Curve 2500 Vestas V80 2 MW Wind Turbine 2000 KW 1500 1000 500 0 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-80’s  Manufacturers report availability data of over 95%  100 % Available 80 60 40 20 0 1981 '83 '85 '90 '98 Year 34 Wind Project Siting 35 Wind Power Classes 10 m (33 ft) ft) 50 m (164 Wind Power Class 1 2 3 4 5 6 Speed m/s (mph) 0 4.4 (9.8) 5.1 (11.5) Speed m/s (mph) 0 5.6 (12.5) 6.4 (14.3) 5.6 (12.5) 6.0 (13.4) 6.4 (14.3) 7.0 (15.7) 9.4 (21.1) 7.0 (15.7) 7.5 (16.8) 8.0 (17.9) 8.8 (19.7) 11.9 (26.6) 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   Transmission  Permit approval    Land-use compatibility Public acceptance Visual, noise, and bird impacts are biggest concern Economies of scale in construction Number of landowners 39  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 -- we’re 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 43 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 47 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 49 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  Wind’s 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 Components Wind Farm Cost Component Costs 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 54 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 55 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 56 Springview, Nebraska  Wind Farm Economics  Key parameter  Distance from grid interconnect  ≈ $350,000/mile for overhead transmission lines 57 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      Total Annual Energy Production  Total Energy Production  Capital Costs/kWh  3.3¢/kWh 1.6¢/kWh Wind – 4.9¢/kWh Coal – 3.7¢/kWh Natural gas – 7.0¢/kWh  Operating Costs/kWh  Cost of Energy – New Facilities    @ $12/MMBtu 59 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 Correlate long term offsite data to support short term onsite data  Local NWS metrological station 62 Requires historical wind data  Install metrological towers    Multiyear data reduces financial risk  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 – you’re 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 69 Wind Policy 70 Wind Farm Economics  Federal government subsidizes wind farm development in three ways    1.9 ¢/kWh production tax credit  33.5% subsidy 5 year depreciation schedule  29.8% subsidy 2.6% subsidy Depreciation bonus  71 Tax Incentives Issues  Small developers can’t fully use federal tax credits or accelerated depreciation   They don’t have a sufficient tax liability Example  A 200 MW wind farm can generate a $12.6M tax credit/year  Small developers don’t have sufficient access to credit to finance a $200M+ project 72 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 73 Wind Power Policy  Renewable Portfolio Standard   21 States have them Colorado’s 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 74 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 isn’t 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 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  NIMBY component  Limited offshore sites   Intermittent federal tax incentives 83 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 85 "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). We’ve 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 Colorado’s environment. Xcel Energy’s 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. 86 Oceanic Energy Next Week 87