30
Aug
2005
If you hear the phrase "underutilized asset," your eyes probably start to glaze over. But if that underutilized asset is the wind, and if using it more means it costs less to power your home, you might want to pay attention. Because there is no doubt that among underutilized assets, wind is plentiful, it's easy to harness, and it's not going anywhere.
Wind energy is enjoying a renaissance in the United States and in Iowa. The rising price of natural gas has made utilities and consumers look for alternative ways to generate electricity. And they're turning to wind.
Other groups are getting involved, also. Earlier this month, the Iowa Farm Bureau announced a partnership with John Deere Credit - a division of Deere & Company - to assist farmers in evaluating their properties for wind-energy potential and providing financing for turbines that turn breeze into electricity.
The goal is to provide more income for farmers, and also to give them an ownership stake in an up-and-coming energy source. Iowa farmers' newest crop could be one that cannot even be seen.
Of course, most people are grumbling about the high cost of gasoline and not paying much attention to their electric bills. That will change in a few months. MidAmerican Energy projected earlier this month that natural-gas costs will jump 58 percent by winter, and those costs are likely to be passed on to consumers. And natural-gas prices have already tripled over the past decade.
These trends underscore the volatile nature of prices for fossil fuels, and the advantages of reducing our reliance on them.
When the Wind Blows ...
Don Laughlin has had a windmill up for four years. He's retired and owns four acres of land in Springdale, Iowa, near Iowa City. Ten months out of the year, the turbine - mounted on a 100-foot-tall free-standing tower - "supplies all of our electricity," he said.
Laughlin is also a board member for the Iowa Renewable Energy Association, and his explanation of wind energy is succinct: "You cut back on fuel when the wind blows."
In other words, it's unlikely wind power will ever be the exclusive source of a person's, state's, or country's electricity; while the wind is reliable, it's intermittent and can only be counted on about half the time. The real value of wind power is as a supplement to conventional power-generation techniques using coal, natural gas, or nuclear energy. Those technologies will always need to be part of any wind-power system, but consumption of those resources can be reduced dramatically.
Among renewable technologies, wind energy has several selling points: It's relatively inexpensive, it has a short incubation period from conception to operation, cost recovery is relatively quick, it can be integrated into existing electricity grids easily, and it's clean. It's estimated that North Dakota alone could harness enough wind energy to meet one-third of the United States' electricity demand.
According to the American Wind Energy Association, the United States' installed wind-energy capacity has grown from 1,848 megawatts at the end of 1998 to 6,740 megawatts at the end of 2004 - an increase of more than 250 percent.
According to Christine Real de Azua, a spokesperson for the American Wind Energy Association, infrastructure with a power capacity of 2,500 megawatts is being built nationwide in 2005 alone - a total-capacity increase of more than 37 percent.
And while solar energy is growing more quickly in terms of percentage gains, worldwide installed solar-energy-generating capacity is barely 10 percent of wind-energy capacity; in other words, wind energy has penetrated much more deeply than solar.
Iowa and Illinois are well-positioned to capitalize on any wind-energy boom. Iowa has the 10th-most wind-energy potential (a little less than half of North Dakota's), while Illinois has the 16th (with about 5 percent of North Dakota's potential).
But even though Illinois has a relatively small potential, it's barely been explored. "These figures are measured in billions of kilowatt hours," Real de Azua said.
Iowa has certainly become a leader in the field of wind energy, neck-and-neck with Minnesota in terms of installed wind-power capacity, trailing only California and Texas.
But investment in wind power isn't a natural. Legislation in each of those states was a key spur to that investment.
That's because wind energy, at this point, is "expensive" in Laughlin's view, ranging from $1 to $3 per installed watt capacity.
According to the Iowa Energy Center's Wind Energy Manual (http://www.energy.iastate.edu/renewable/wind/wem/wem-13_econ.html), wind-energy systems become more economically viable the larger they are. A residential five-kilowatt system might take as long as 30 years to pay for itself, while a commercial 50-kilowatt system might take 20 years.
The most common way to offset that is to create a market for renewable energy. Basically, excess energy generated by wind turbines can be fed into the electricity grids, and state governments create incentives for utilities to buy it.
Most common is a "renewable energy portfolio standard" - a tool that mandates that a certain percentage of the state's electricity be drawn from renewable sources. The four top wind-energy-producing states each have a renewable-energy-portfolio standard: California (2,096 megawatts of wind-power capacity at the end of 2004), Texas (1,293 megawatts), Iowa (632 megawatts), and Minnesota (615 megawatts).
If you overlay a map of renewable energy portfolio standards with one showing wind-power-generation capacity, the correlation is obvious.
Also helpful has been the federal production tax credit, which rewards investment in renewable sources of energy. The energy bill that President George W. Bush signed earlier this month extended the credit through 2007.
Real de Azua said that uncertainty over the future of the credit had brought development to a standstill. "Contracts were put on hold," she said. She said that the credit has been allowed to expire three times over the past six years. The guarantee that the credit will exist for more than two additional years will likely allow wind-energy development to continue.
"For wind to compete, it needs some sort of support," she noted, adding that the federal incentive helps level the playing field with fossil fuels and nuclear energy. The Union of Concerned Scientists on its Web site (http://www.ucsusa.org/clean_energy/renewable_energy/page.cfm?pageID=46#11) says: "Federal subsidies for renewable energy have been and continue to be much less than government subsidies for the fossil fuel and nuclear power industries. A study by the Renewable Energy Policy Project showed that between 1943 and 1999, the nuclear industry received over $145 billion in federal subsidies, versus $4.4 billion for solar energy and $1.3 billion for wind energy. Another study by the nonpartisan Congressional Joint Committee on Taxation projected that the oil and gas industries would receive an estimated $11 billion in tax breaks and loopholes that subsidize exploration and production activities between 1999 and 2003."
Wind power "is very much unused," Laughlin said, and could explode "if we had the political will to do it." He said that unless the state and federal governments push renewable energy, utility companies will fall back on what they know: coal- and natural-gas-fired plants. "There's too much vested interest in coal and gas," he said.
Building Ownership
With its vast open spaces, Iowa is particularly well-suited to "wind farms," but it is less ideal in terms of their economic viability. The northwest corner of the state has "Class 4" winds, while most of the remainder has "Class 3" winds. "Class 5" winds and above are presently considered "very good" or better for utility-scale wind-power ventures, according to the Texas State Energy Conservation Office, while Class 4 is "good" and Class 3 is marginal. That means that most investment in Iowa's large-scale wind-power generation is going to take place in the northwest corner of the state. Western Illinois has a small pocket of Class-3 winds, while the rest of the state is Class 2 and Class 1.
The Iowa Farm Bureau-Deere Credit initiative comes not from utilities but from farmers themselves, said Dennis Harding, business development administrator for the farm bureau. "A lot of our members have been calling, wanting to know about wind opportunities," he said.
While many farmers already have wind turbines on their properties, utility companies often lease the land and own the turbines. The arrangement between the farm bureau and Deere will give the farmers an ownership stake - and therefore the opportunity to make more money. Harding added that farmers have long been interested in alternatives to fossil fuels, such as ethanol and biodiesel, and wind is an extension of that interest.
One attraction of wind energy is that it doesn't divert much land from food production. Farmers can grow crops right to the edge of the turbine's towers, and their footprints aren't very large.
Harding explained that farmers with a turbine on their property are generally paid in the neighborhood of $4,000 a year in rental. In the Iowa Farm Bureau program, farmers provide some information about their property, and the bureau and Deere Credit evaluate it. If Deere Credit decides to finance wind turbines, the farmer gradually builds equity. (Although Deere & Company does do some engineering work related to wind power, it does not manufacture wind turbines; only its finance division is taking an active role in the project.)
Under this arrangement, the farmers would pay management fees to oversee the turbines, and after a decade, they'd have a majority ownership share in them. "That's probably a better way to make a little more money," Harding said. Farmers who don't want the added risk can choose the leasing arrangement, he added.
These projects won't be the massive, utility-sized sites, such as 257-turbine wind farm in northwest Iowa. (MidAmerican Energy purchases 60 percent of the electricity it produces.) More likely, Harding said, they'll have between five and 10 turbines.
Volatility
It's not uncommon for interest in alternatives to fossil fuels to spike along with oil and natural-gas prices. The first wave of wind-power construction happened in the 1980s, but it died down in the '90s, when natural gas was particularly cheap.
So what happens if the bottom falls out of natural-gas prices? Will the burst of activity in the wind-energy field die down to a faint breeze? Real de Azua acknowledged that fuel prices have a lot to do with the current boom.
But wind energy will always have advantages over coal and natural gas, particularly its cleanliness. And the prices of fossil fuels will always be volatile - something that will never be true with a resource whose only cost is in capturing it, a cost that's declining.
Wind energy is enjoying a renaissance in the United States and in Iowa. The rising price of natural gas has made utilities and consumers look for alternative ways to generate electricity. And they're turning to wind.
Other groups are getting involved, also. Earlier this month, the Iowa Farm Bureau announced a partnership with John Deere Credit - a division of Deere & Company - to assist farmers in evaluating their properties for wind-energy potential and providing financing for turbines that turn breeze into electricity.
The goal is to provide more income for farmers, and also to give them an ownership stake in an up-and-coming energy source. Iowa farmers' newest crop could be one that cannot even be seen.
Of course, most people are grumbling about the high cost of gasoline and not paying much attention to their electric bills. That will change in a few months. MidAmerican Energy projected earlier this month that natural-gas costs will jump 58 percent by winter, and those costs are likely to be passed on to consumers. And natural-gas prices have already tripled over the past decade.
These trends underscore the volatile nature of prices for fossil fuels, and the advantages of reducing our reliance on them.
When the Wind Blows ...
Don Laughlin has had a windmill up for four years. He's retired and owns four acres of land in Springdale, Iowa, near Iowa City. Ten months out of the year, the turbine - mounted on a 100-foot-tall free-standing tower - "supplies all of our electricity," he said.
Laughlin is also a board member for the Iowa Renewable Energy Association, and his explanation of wind energy is succinct: "You cut back on fuel when the wind blows."
In other words, it's unlikely wind power will ever be the exclusive source of a person's, state's, or country's electricity; while the wind is reliable, it's intermittent and can only be counted on about half the time. The real value of wind power is as a supplement to conventional power-generation techniques using coal, natural gas, or nuclear energy. Those technologies will always need to be part of any wind-power system, but consumption of those resources can be reduced dramatically.
Among renewable technologies, wind energy has several selling points: It's relatively inexpensive, it has a short incubation period from conception to operation, cost recovery is relatively quick, it can be integrated into existing electricity grids easily, and it's clean. It's estimated that North Dakota alone could harness enough wind energy to meet one-third of the United States' electricity demand.
According to the American Wind Energy Association, the United States' installed wind-energy capacity has grown from 1,848 megawatts at the end of 1998 to 6,740 megawatts at the end of 2004 - an increase of more than 250 percent.
According to Christine Real de Azua, a spokesperson for the American Wind Energy Association, infrastructure with a power capacity of 2,500 megawatts is being built nationwide in 2005 alone - a total-capacity increase of more than 37 percent.
And while solar energy is growing more quickly in terms of percentage gains, worldwide installed solar-energy-generating capacity is barely 10 percent of wind-energy capacity; in other words, wind energy has penetrated much more deeply than solar.
Iowa and Illinois are well-positioned to capitalize on any wind-energy boom. Iowa has the 10th-most wind-energy potential (a little less than half of North Dakota's), while Illinois has the 16th (with about 5 percent of North Dakota's potential).
But even though Illinois has a relatively small potential, it's barely been explored. "These figures are measured in billions of kilowatt hours," Real de Azua said.
Iowa has certainly become a leader in the field of wind energy, neck-and-neck with Minnesota in terms of installed wind-power capacity, trailing only California and Texas.
But investment in wind power isn't a natural. Legislation in each of those states was a key spur to that investment.
That's because wind energy, at this point, is "expensive" in Laughlin's view, ranging from $1 to $3 per installed watt capacity.
According to the Iowa Energy Center's Wind Energy Manual (http://www.energy.iastate.edu/renewable/wind/wem/wem-13_econ.html), wind-energy systems become more economically viable the larger they are. A residential five-kilowatt system might take as long as 30 years to pay for itself, while a commercial 50-kilowatt system might take 20 years.
The most common way to offset that is to create a market for renewable energy. Basically, excess energy generated by wind turbines can be fed into the electricity grids, and state governments create incentives for utilities to buy it.
Most common is a "renewable energy portfolio standard" - a tool that mandates that a certain percentage of the state's electricity be drawn from renewable sources. The four top wind-energy-producing states each have a renewable-energy-portfolio standard: California (2,096 megawatts of wind-power capacity at the end of 2004), Texas (1,293 megawatts), Iowa (632 megawatts), and Minnesota (615 megawatts).
If you overlay a map of renewable energy portfolio standards with one showing wind-power-generation capacity, the correlation is obvious.
Also helpful has been the federal production tax credit, which rewards investment in renewable sources of energy. The energy bill that President George W. Bush signed earlier this month extended the credit through 2007.
Real de Azua said that uncertainty over the future of the credit had brought development to a standstill. "Contracts were put on hold," she said. She said that the credit has been allowed to expire three times over the past six years. The guarantee that the credit will exist for more than two additional years will likely allow wind-energy development to continue.
"For wind to compete, it needs some sort of support," she noted, adding that the federal incentive helps level the playing field with fossil fuels and nuclear energy. The Union of Concerned Scientists on its Web site (http://www.ucsusa.org/clean_energy/renewable_energy/page.cfm?pageID=46#11) says: "Federal subsidies for renewable energy have been and continue to be much less than government subsidies for the fossil fuel and nuclear power industries. A study by the Renewable Energy Policy Project showed that between 1943 and 1999, the nuclear industry received over $145 billion in federal subsidies, versus $4.4 billion for solar energy and $1.3 billion for wind energy. Another study by the nonpartisan Congressional Joint Committee on Taxation projected that the oil and gas industries would receive an estimated $11 billion in tax breaks and loopholes that subsidize exploration and production activities between 1999 and 2003."
Wind power "is very much unused," Laughlin said, and could explode "if we had the political will to do it." He said that unless the state and federal governments push renewable energy, utility companies will fall back on what they know: coal- and natural-gas-fired plants. "There's too much vested interest in coal and gas," he said.
Building Ownership
With its vast open spaces, Iowa is particularly well-suited to "wind farms," but it is less ideal in terms of their economic viability. The northwest corner of the state has "Class 4" winds, while most of the remainder has "Class 3" winds. "Class 5" winds and above are presently considered "very good" or better for utility-scale wind-power ventures, according to the Texas State Energy Conservation Office, while Class 4 is "good" and Class 3 is marginal. That means that most investment in Iowa's large-scale wind-power generation is going to take place in the northwest corner of the state. Western Illinois has a small pocket of Class-3 winds, while the rest of the state is Class 2 and Class 1.
The Iowa Farm Bureau-Deere Credit initiative comes not from utilities but from farmers themselves, said Dennis Harding, business development administrator for the farm bureau. "A lot of our members have been calling, wanting to know about wind opportunities," he said.
While many farmers already have wind turbines on their properties, utility companies often lease the land and own the turbines. The arrangement between the farm bureau and Deere will give the farmers an ownership stake - and therefore the opportunity to make more money. Harding added that farmers have long been interested in alternatives to fossil fuels, such as ethanol and biodiesel, and wind is an extension of that interest.
One attraction of wind energy is that it doesn't divert much land from food production. Farmers can grow crops right to the edge of the turbine's towers, and their footprints aren't very large.
Harding explained that farmers with a turbine on their property are generally paid in the neighborhood of $4,000 a year in rental. In the Iowa Farm Bureau program, farmers provide some information about their property, and the bureau and Deere Credit evaluate it. If Deere Credit decides to finance wind turbines, the farmer gradually builds equity. (Although Deere & Company does do some engineering work related to wind power, it does not manufacture wind turbines; only its finance division is taking an active role in the project.)
Under this arrangement, the farmers would pay management fees to oversee the turbines, and after a decade, they'd have a majority ownership share in them. "That's probably a better way to make a little more money," Harding said. Farmers who don't want the added risk can choose the leasing arrangement, he added.
These projects won't be the massive, utility-sized sites, such as 257-turbine wind farm in northwest Iowa. (MidAmerican Energy purchases 60 percent of the electricity it produces.) More likely, Harding said, they'll have between five and 10 turbines.
Volatility
It's not uncommon for interest in alternatives to fossil fuels to spike along with oil and natural-gas prices. The first wave of wind-power construction happened in the 1980s, but it died down in the '90s, when natural gas was particularly cheap.
So what happens if the bottom falls out of natural-gas prices? Will the burst of activity in the wind-energy field die down to a faint breeze? Real de Azua acknowledged that fuel prices have a lot to do with the current boom.
But wind energy will always have advantages over coal and natural gas, particularly its cleanliness. And the prices of fossil fuels will always be volatile - something that will never be true with a resource whose only cost is in capturing it, a cost that's declining.
