Wind Energy Economics

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Wind Energy Economics Environmental Issues

• Bruce Bailey, President
• AWS Truewind, LLC
• 255 Fuller Road
• Albany, NY 12203
• bbailey_at_awstruewind.com

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Four Drivers of Wind Energy Economics
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Capital Cost
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Total Capital Costs

• Installed Cost of Wind Plant 1.3-1.8
  million/MW
• Turbine Tower ( 67 of Total Cost)
• Installation
• Balance of Plant
• Financing
• Legal
• Permitting
• Site Acquisition

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Initial Cost Elements
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Annual Operating Costs

• Project Specific Costs
• Operations and Maintenance
• Local Taxes
• Insurance
• Land Use Rights
• Power delivery costs
• Interconnect
• Transmission

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Wind Energy Market
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Typical Revenue Stream

• Power Sale .025 - .045 / KWh Levelized
• Production Tax Credit .018 / KWh
• Green Credit Sale New Market, Values Vary
• Accelerated Depreciation 5-Year MACRS 50
  Bonus Depreciation (2004)
• Internal Rates of Return 8 - 10 (after
  tax)

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Values Associated With The Economics Of Wind Power

• Energy Sale
• Tax Credit
• Green Credit / Emissions Credit
• Cash
• Regulatory compliance value
• Unpriced Values
• Hedge value
• Fuel costs increase risk cost
• Pollution / CO2 tax risk
• Fuel diversity value

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20 Years of Wind Technology Growth
Bottom Line 1981-1999 49x the power, 11x
the cost 1999-2004 2.6x the power,
1.8x the cost
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Key Incentives For Large Wind

• Federal Production Tax Credit
• 0.018/kWh, increases with inflation
• Available for first 10 yrs of operation
• Expires December 2007
• On off nature of PTCs has led to a cyclical
  industry
• A long-term extension would provide the stable
  financial environment needed to promote
  industrys continued growth.
• Green Credits
• Also known as renewable energy credits
• Applicable in some RPS programs
• Value typically 0.015-0.04/kWh

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Costs of Energy from Different Energy Technologies
Conventional Options Costs dont include
externalities
Sources BTM Consult, WindPower Monthly, GE Wind
Energy Biomass Direct fueled
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Large vs Small Scale Economics

• Large Turbines
• 1,500 / kW
• High Voltage Delivery
• Value of Power

3-7 /kWh

• Small Turbines
• 4 6,000 / kW
• Low Voltage Delivery
• Value of Power

12-22 /kWh
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Other Economic Benefits

• Wind power operating costs are relatively fixed.
• Wind power fixed prices help keep other prices
  lower during electric price increases
• Supplemental income to landowners, frequently
  farmers, in the form of lease payments
• Keeps energy dollars in state currently 50
  percent of power generated in state comes from
  fossil fuels purchased out of state

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Job Growth From Wind Power

• Temporary (construction) and full-time (operation
  and maintenance) positions come from wind farms
• For every 10 - 20 turbines installed, one
  operation-and-maintenance job is created
• In addition to direct jobs created, projects also
  support job creation within the community through
  the provision of goods and services (ex. lodging,
  meals, supplies, etc.)
• Phase I of the Maple Ridge project (120 turbines)
  created 400 construction jobs. When entirely
  finished in 2006 with 195 turbines, the project
  will create 10 - 15 full-time jobs

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Economic Development

• Wind farms bring economic development to
  communities through Payments in Lieu of Taxes
  (PILOTs)
• In Madison County for instance
• 150,000 per year is paid to the Town of Fenner
• 60,000 per year is paid to Town of Madison and
  school district
• Other business developments receive property tax
  breaks from (IDAs) and other governmental
  entities
• utility plants,
• manufacturing facilities, and
• non-profit organizations

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Environmental Issues
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Permitting

• Permitting Done Under Various Regulatory
  Frameworks
• Local zoning ordinances (78 of NY municipalities
  use zoning)
• State Environmental Quality Review Act (SEQR)
• Permitting Considerations
• Public health safety
• Siting installation
• Setbacks from residences, roads property lines
• Nuisance impacts e.g. sound, EMI
• Environmental impacts e.g. avian, soil erosion
• Visual impacts
• Pre-Application Meetings with Municipal
  Officials, the Community, State/Federal Agencies

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Agency Involvement in Proposed Prattsburgh Wind
Plant Environmental Review Process

• NYS Dept. of Environmental Conservation
• NYS Dept. of Agriculture Markets
• NYS Public Service Commission
• NYS Office of Parks, Recreation Historic Pres.
• U.S. Fish Wildlife Service
• USDA Animal Plant Health Inspection Service
• U.S. Army Corp of Engineers
• Federal Aviation Administration

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Main Opposition Issues

• Aesthetics (visual)
• Bird/Bat Kills
• Noise
• Property Values
• FAA Lighting
• Ice Throws
• EMF
• Insignificant Energy Source
• Too Expensive
• No Local Benefits
• NIMBY

Beautiful? Ugly? Kinetic Art? Or just New and
Different?
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Aesthetics

• Beauty is in eye of beholder
• Some see kinetic art
• Some see industrial giants
• Turbines generally viewed from significant
  distance
• Layout of wind farm can mitigate viewshed impact

A 1.5 megawatt turbine such as that pictured left
stands 328 feet tall.
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Sources of Bird Impacts
For every 10,000 birds killed by human
activities, wind turbines account for only one
death.
Data source Erickson et al., 2002, Summary of
Anthropogenic Causes of Bird Mortality.
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Noise

• Technology improvements have enabled wind
  turbines to operate very quietly
• You can have a normal conversation at the bottom
  of a turbine while it is operating
• At a distance of about 1,000 ft. turbines are
  barely audible background noise is generally
  louder than the wind turbine
• Turbine setbacks from residences to minimize
  noise is standard wind industry practice

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Property Values

• Studies have shown that wind projects do not
  negatively impact property values of lands within
  the viewshed.
• Renewable Energy Policy Project (REPP) study,
  May, 2003
• The statistical analysis of all property sales
  in the view shed and the comparable community
  provides no evidence that wind development has
  harmed property values within the view shed.
  There is no valid empirical support for claims
  that wind development will harm property values.
• Phoenix Economic Development Group study,
  October, 2002
• Views of wind turbines will not negatively
  impact property values. Based on a nation-wide
  survey conducted of tax assessors in areas with
  wind power projects, we found no evidence
  supporting the claim that views of wind farms
  decrease property values.

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Other Issues

• Shadow Flicker
• Sun low in sky sunbeam interrupted by rotating
  turbine blade
• Seasonally dependent
• Ice Shedding
• Small pieces of ice may be thrown larger pieces
  typically drop within blade length from tower
  not thrown
• Worldwideno case of injury known
• Minimizing Impacts
• Noise, shadow flicker and ice shedding issues can
  all be minimized by proper setbacks and turbine
  siting.

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Strategies To Address Barriers

• Early Community Outreach
• Public Education
• Tours to Existing Projects
• Biological Studies Before After Projects Built
• Testimonials
• Regulatory Planning
• Public Relations Savvy
• Political Advocacy
• Supportive Govt Policies
• Coalitions with Enviros

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Grid Interconnection

• Interconnection provides access to the
  transmission grid
• System Reliability Impact Study required in NY
  State
• Assess impact of project on reliability of
  existing power system
• Evaluate alternative to eliminate adverse
  impacts, if any
• Assess impact of project on transmission transfer
  limits
• thermal, voltage, stability
• www.nyiso.com

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The Effects of Integrating Wind Power on
Transmission System Planning, Reliability, and
Operations of theNew York State Power System
By GE Energy On Behalf Of NYSERDA NYISO

• Based on the results of this study, it is
  expected that the NYS Bulk Power System can
  reliably accommodate at least 10 penetration,
  3,300 MW, of wind generation with only minor
  adjustments to its existing planning, operation,
  and reliability practices. This conclusion is
  subject to several assumptions incorporated in
  the development of the study scenario 

• Individual wind farms installed in NY State would
  require approval per the existing NYISO
  procedures, including SRIS.
• Ratings of wind farms would need to be within the
  capacity of local transmission facilities, or
  subject to local constraints.
• Wind farms would include state-of-the-art
  technology, with reactive power, voltage
  regulation, and LVRT capabilities consistent with
  the recommendations in this report.

http//www.nyserda.org/publications/wind_integrati
on_report.pdf
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Conclusions

• Green energy policies marketing are
  accelerating wind development
• Wind is a low cost renewable energy source and is
  expected to supply the majority of the States
  new RPS requirements
• Although large majority of public favors wind
  energy, expansion is triggering some NIMBY
  opposition
• Wind projects must be responsibly sited
• Many issues are legitimate, but most barriers
  resolvable
• Experience elsewhere has shown that communities
  embrace wind projects after the fact projects
  that are pioneers can take longer to permit