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New Energy Economics: Wind Industry Update

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Cole Gustafson, NDSU Biofuels Economist Cole Gustafson, NDSU Biofuels Economist
Any developer of a wind energy project must find and secure a buyer who is willing to purchase the electricity that is produced.

By Cole Gustafson, Biofuels Economist

NDSU Extension Service

This week, I attended the American Wind Energy Association annual meeting in Dallas. This is the largest trade show for the industry. I was invited to attend and summarize the eight-state wind energy education program being developed for http://www.eXtension.org.

The mood at this year’s event was far more positive than last year. In a future article, I will describe the new financial strategies being used to fund wind energy development projects. Interestingly, while the collapse of Wall Street lending and finance was the impediment to wind energy expansion last year, now it is just three letters – PPA.

PPA is an industry acronym for power purchase agreement. Any developer of a wind energy project must find and secure a buyer who is willing to purchase the electricity that is produced. These buyers usually are electric power utilities that are seeking more renewable energy. Since wind energy is a long-term investment, a PPA usually spans many years so investors can be assured of a payback.

Recently, several forces have combined to lower the value of a PPA. First, prices of competing fuel sources, most importantly natural gas, have fallen considerably. This has forced a reduction in the value of wind energy. Second, the slow economy has lowered the demand for electricity in general. Third, the wind industry still faces great political and regulatory risk as climate legislation, passage of a national renewable energy standard and a continuation of favorable 2009 stimulus programs are uncertain. Finally, transmission constraints and curtailment still cast a shadow over long-term growth.

Nevertheless, the wind industry released a number of intriguing performance statistics:

  • The first utility-scale wind project was in October 1941 in Grandpa’s Knob, Vt. The turbine was 1.25 megawatt.
  • The wind industry employs 85,000 people.
  • Wind energy production in the next 15 years will equal all of the oil in Saudi Arabia.
  • Wind energy will reduce carbon emissions equivalent to 10.5 million cars.
  • Basin Electric has more wind energy in its system than any other utility.
  • On average, there are 8,000 components in a wind tower.
  • 100,000 small wind turbines exist nationwide.
  • Enough U.S. wind energy is produced to power 9.7 million homes.

In the next column, I will describe how important stimulus monies are to financing wind energy projects and what the future holds.


NDSU Agriculture Communication

Source:Cole Gustafson, (701) 231-7096, cole.gustafson@ndsu.edu
Editor:Rich Mattern, (701) 231-6136, richard.mattern@ndsu.edu
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