What Is Wind Energy?

What is wind energy? Wind energy, which is harvested from wind turbines, has been developed largely due to the Federal Production Tax Credit, which is a renewable energy subsity. Wind energy helped fuel...

Wind energy helped fuel the development of the American West. It has been used as a mechanical machine for as long as civilization has been around. It was developed into an electricity-producing machine in the 1940s and 50s, but it really started being developed in a large way in the 1960s and 70s. And then in the late 1970s, primarily as a result of the oil embargo, there was a big push to fund reliable energy research. That is when the American Wind Energy Association (AWEA) got started, and that is when the lot of the wind power was installed as well.

In the 1980s in California, because California had an investment tax credit that yielded a lot of development in California, wind energy gained a lot of attention. And, then in the late 1980s, the funding for research dried up, mostly because of political reasons. But also people were finding that the investment tax credit tended to create an incentive to build the wind farms, but not to build them so they could last. It was just a credit for the initial investment, but there was no incentive to drill machines that ran efficiently and held up under the pretty heavy winds in California. So, back to the drawing board.

A lot of developments have been made over these past 20 years in all aspects of the turbines. The blades are a lot stronger, they are a lot bigger. The towers are stronger and bigger. The electrical components inside are much stronger. A lot more sophisticated computer electronics go on inside wind turbines now. So all that has added up to greater efficiency in the infrastructure of wind energy, and as a result, the cost of wind electricity over the past 20 years has come down from an estimated 30 cents per kilowatt hour (kwh) to an estimated 5 cents per kwh or less with the federal production tax credit. And the federal subsidy is structured differently than the California subsidy in that it is a credit for actual electricity production, not just for the investment.

But in the recent history of wind power, we have seen a lot more wind power being installed in the past five years or so. There are three main drivers. One of the main drivers is that the cost has come down so dramatically that more utilities are looking at it more seriously in competition with the other more conventional field sources. That is aided by the federal subsidy, like I said, that right now is 1.9 cent per kwh. But the problem with that subsidy is that it has to be extended every two years, so it does not give wind plant developers much of a planning horizon and it leads to real up-and-down development cycle. It is expiring at the end of this year, so that is one of the main priorities of this association - to get a multi-year extension for that credit.

Another main driver is that 19 states have been passing what they call "renewable portfolio standards," and that has driven wind energy demand for a lot of reasons. One reason is because they see the environmental benefits of wind, but basically it is the state legislatures or regulators saying that they need to have a certain percentage of their electricity come from wind mills. There is also a third driver, which, I would say, is also a feature of the Texas Market as the green power market and that is the voluntary persistence of green power. A lot of individuals and companies are starting to recognize the hazards that can come with electricity production and they want to make their operations as carbon neutral or as pollution free as possible. The municipal utility in Austin, TX is really one of the more progressive utilities in terms of buying wind and offering it to their customers. Austin Energy is almost always one of the top one or two utility providers in terms of how much wind power is sold from utilities. The main reason is that they are doing so well is that a lot of municipal utilities, or any other utility that offers a green power program, usually take the wind power. And no matter what they are actually paying for it, they usually charge their average price plus a premium. But what Austin Energy was offered a 20-year contract from wind developers who said, "Because we do not have any fuel inputs, we can offer you this contract for 20 years." Austin turned around and said, "OK, we will offer wind energy to our customers at a 20-year fixed price." And a lot of customers, especially the big semiconductor chip manufacturers, said, "Oh, fixed price electricity prices! Nobody dare to offer us that!" And so they rushed in and bought big chunks of wind power primarily because it was a fixed price product. And there have been different levels of pricing as Austin Energy buys wind power at different times, but the people who bought it first have definitely seen times when the conventional price is higher than the wind price. So, they are saving money on that purchase, especially when the gas prices went up.

There is a program that the EPA runs called the Green Power Partnership and it is trying to encourage more of that. This is used to by Reliable Energy. A big chunk of their partners come from us because of a lot of Austin businesses, even small businesses and restaurants have stepped up to buy wind power. In fact, Austin has caused the development of at least two wind farms in West Texas because of their long-term commitment.

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