Will It Prevail?
By Lisa Cohn
After some heady times in the 1980's, the US windpower market crashed when the Reagan Revolution killed subsidies for renewable energy. Since then, the joke has been that windpower has a great future - and it always will. But after some lean years, windpower is back. Last year, US utilities contracted for nearly 500 MW of new capacity, about as much as market pacesetter Germany installed in each of the last three years (table).
Newcomer Enron Wind Power Corp, Tehachapi, Calif, in its typical "take-no-prisoners" style, grabbed the lion's share of the business, winning bids for what are now the world's three largest windpower projects: 100- and 107-MW contracts with Northern States Power Co (NSP), Minneapolis, Minn, and a 112.5-MW deal with Des Moines (Iowa)-based MidAmerican Energy Co.
Parent Enron Corp, which created Enron Wind earlier last year by acquiring two turbine manufacturers-America's Zond Corp and Germany's Tacke Wintechnik GmbH- claims that it can now provide windpower cheaply enough to compete with fossil-fuel-fired sources. Enron Wind's 107-MW contract with NSP calls for levelized price of 3.5˘/kWh-prompting competitors to complain that Enron is "stealing" market share by "dumping"-selling product below the cost to make it.
Boon or bane?
Enron's whirlwind entry into the renewable-energy market is applauded by those who believe that the recently fallow field of US windpower desperately needed seeding by someone-be it the government of the private sector-with deep pockets. But there are others who fear that Enron Wind's overly sanguine promises of 3 to 4˘kWh electricity will wither, dealing another psychological blow to an industry still reeling from the bankruptcy of its shooting star, Kenetech Corp.
"Kenetech used to be the 800-lb gorilla of the windpower industry," says Donald Bain, renewable resource policy analyst for Oregon Office of Energy. "For years, it promised 5˘kWh electricity while building its first prototype. But the turbine didn't work, and the cost to fix it under warranty drove Kenetech into bankruptcy. This legacy still stings the industry."
Another industry observer who wished to remain anonymous worries that Enron's strategy of forcing the price of windpower down-instead of waiting for the natural effect of the cost/experience learning curve-won't lead to sustainable technological innovation. "Developers are assassinating one other" to make 3˘/kWh bids," he says. "When there are big boys out there leveraging cash to buy market share, that's neither competition nor technological innovation."
Naturally, Enron Wind Chairman and CEO Kenneth C Karas views the market differently: "The focus on Kenetech irritates me. Don't forget-there were plenty of European [windpower specialists] who went bankrupt in the 1980's. I really think much of the criticism of Enron comes from Europeans who see an opportunity to denigrate an American competitor," he says. To refute charges of dumping, Karas explains that competing aggressively on price is the nature of the beast, adding that Enron Wind has been underbid by rivals quoting prices as low as 3˘/kWh.
Randall Swisher, executive director of American Wind Energy Assn (AWEA), Washington, DC, says that 3 to 4˘/kWh delivered windpower is indeed practical today, under certain conditions-when the wind is strong and steady, and transmission lines already exist near the site.
Swisher also explains that technological innovation is solely responsible for what amounts to a 90% drop in windpower costs over the last 15 years. Turbine blades of glass-reinforced plastic or wood epoxy ca now be as long as 131 ft, vs just 43 ft in the 1980s. Rotor diameters have reached 171 ft. Together, these two parameters permit larger turbines, leading to greater economies of scale.
In the early 1980s, the average wind turbine produced 50 kW, notes Swisher. Now, it produces between 500 and 750 kW. That translates to about eight times the output-but at just three times the cost, he estimates.
Building bigger, lighter blades more cheaply is not the only route to cost reduction, adds Susan Hock, wind energy technology manager of the federally funded National Wind Technology Center, Denver, Colo. Saying that the center's goal is to slash the cost of windpower to 2.5˘/kWh by 2002, she believes that variable speed will be the feature that makes wind turbines prime-time players in the coming generation-technology wars.
Twisting in the wind
In fact, Enron Wind is banking on large-propellered, variable-speed machines to fulfill its promises of low prices, explains Karas. The 750-kW Zond Z variable-speed unit the company now markets not only experiences less mechanical stress from wind gusts, but converts the energy in those gusts to rotational energy. In practice, the turbine's controller responds to windy conditions by speeding up the rotor so it can absorb and store more energy until the drive train is ready to accept it.
However, competitors claim that Enron is counting its chickens before they hatch. Greg Jaunich, president of Northern Alternative Energy Inc (AEI), Minneapolis, Minn, points out that "there are no 750-kW Zond turbines installed in the US-or anywhere else, for that matter-today." Enron's Karas concedes that while only 120 Zond machines are in the field, his competitors should at least give Enron Wind a chance to demonstrate the technology. He notes that the 750-kW turbine has been approved by certifyng agent Germanisher Lloyd to withstand a hurrican-force load of 131 mpg every 50 years-as well as wind gusts of 100 mph once a year.
Shaping the market
Whether Enron Wind's big deals end up helping or hurting the US windpower market remains to be seen. Still, some Enron critics-as well as some of its supporters-would rather see a US government agency like Dept of Energy shape the future of such and important renewable-energy submarket, rather than leave the job to market forces. They suggest that the US take a cue from Germany and Demark, which provide financial incentives for windpower because generating it doesn't produce greenhouse gases. Thanks to those incentives, Germany is projected to have pulled ahead of the US in total installed windpower capacity (table).
Without federal or state incentives or subsidies for windpower and its air-quality benefits, many energy companies view the market as too risky. But although it remains dearer than thermal generation, windpower could be an early driver of "green" electricity marketing-the sale of environmentally benign energy at premium prices, notes Hock (box). In fact, explains Hock, the cause-and-effect relationship could work equally well in reverse, with green marketing jump-starting the windpower market.
Meanwhile, Enron charges forward, boasting that is is the only US company committed enough to windpower to build a merchant plant-a new 39-MW facility in Southern California for which it has no contracted power buyers. Enron officials say that because windpower is clean energy, end users will be willing to pay more for it.
"Enron is really the big kid on the block; a lot is riding on how they develop the resource," says Bill Grant, director of the Midwest office of the Izaak Walton League, an environmental group. Grant says that if Enron succeeds, the company could make windpower a competitive resource. But if it fails, that could spell disaster for smaller developers and flatten the market once again.
- Lisa Cohn is a freelance business writer based in Portland, Ore.