State mandates for renewable energy mean wind power is here to stay. And lower natural gas prices could even help.
The wind industry, despite a 2010 slowdown after several years of rapid growth, is not dying. It's growing through a fitful adolescence.
Last week's news that India-based turbine manufacturer Suzlon will indefinitely shutter its Pipestone facility in the heart of southwestern Minnesota's wind alley came as a shock to many. But not to Peter Mastic, a 25-year veteran of the energy industry who is president of Minneapolis-based National Wind.
"This industry is not for the faint of heart," said Mastic, whose company has a dozen wind projects in planning and development. "Our partners and we typically will risk $3 million to $5 million in pre-construction costs over a two- to seven-year development period. And only then do you talk to utilities about power purchase agreements."
U.S. natural gas prices have dropped below $4 per thousand cubic feet at the wellhead compared with more than $11 in 2008. The New York Times on Monday reported abandonment of several wind projects in the East in favor of coal and natural gas generating stations.
But Minnesota-based utilities such as Xcel Energy and Great River Energy are counting on the wind industry, conservation and other alternative sources to help them meet state mandates in the Midwest to generate up to 25 percent of their energy from renewables.
This is a big deal in Minnesota, which already produces nearly 10 percent of its electricity from wind, compared with about 2 percent nationally. Minnesota is one of 28 states that has adopted a standard of generating 25 percent of electricity from renewable resources by 2025.
Xcel, a national leader, is on target to hit 30 percent from renewables in Minnesota by 2020. Xcel several years ago began a significant investment in a cleaner, more efficient future. It is the biggest buyer of wind-generated electricity in the country and should achieve its renewable and carbon-dioxide reduction goals well ahead of schedule.
Frank Praeger, Xcel's vice president of environmental affairs, said in an interview Tuesday the utility believes natural gas prices will be cheaper in the long term than previously projected because new gas drilling techniques have allowed more gas to be tapped from unconventional fields such as shale-rock seams that couldn't be reached a decade ago. Gas also is cleaner-burning then coal.
Praeger said lower natural gas prices can be a positive for wind generation. That's because natural gas-fired plants are the most flexible to operate. That can help balance generating capacity with the intermittent nature of wind.
"Wind is a good, stable energy source and very cost-effective, especially when you consider the risk of future national caps or regulation of carbon dioxide," Praeger said. "Wind doesn't have carbon dioxide emissions. We're big believers. Natural gas is so flexible, much more flexible than coal and nuclear.''
Minnesotans pay about 10 cents per kilowatt hour for electricity. Wind is subsidized at about 2 cents per kilowatt hour for 10 years on new projects through a federal tax credit. However, the federal subsidies for oil, gas and coal dwarf the start-up subsidies for the renewable industry, according to studies by the Government Accountability Office and Energy Information Agency.
"Xcel has saved its Minnesota and Colorado customers millions on their electric bills, thanks to wind. They get it,'' said Liz Salerno, research director at the American Wind Energy Association. "The fundamentals of wind don't change. But the wind production tax credit blinks on and off almost every year or two. That wreaks havoc. We need long-term rules and a more diversified energy mix and we need cleaner energy."
The next Congress and President Obama should divine a long-term energy policy designed to increase fossil fuel efficiency as well as a national renewable output matched by long-term reductions in carbon dioxide emissions. It's the truly conservative course. The Edison Electric Institute, General Electric, Duke Power -- even the Defense Department -- all say we need to get there for economic, national security and environmental reasons.
At the local level, a 75-megawatt wind farm generates $150 million in local spending, hundreds of construction and related jobs and annual royalty payments to farmers of $8,000 to $10,000 per turbine. And some of that income flows to owners under the community-based wind farm model used by outfits such as National Wind and Juhl Wind of Pipestone.
There's no reason why wind power and other renewables can't generate 25 percent or more of the juice in the gusty Upper Midwest by 2025.
"The health impacts of coal aren't priced in, but they are well established," Mastic said. "And the cost of new wind projects is competitive with coal and gas. Wind is completely viable."
Neal St. Anthony • 612-673-7144 • firstname.lastname@example.org