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Woes for Wind Power by Gail Kinsey Hill The Oregonian, July 27, 2006

Wind farm development surges in Oregon and nationally,
but rising costs and technical issues pose problems

A surge in wind farm development promises to break records regionally and nationally this year, but it likely won't come without growing pains. The frenzied expansion could soon collide with practical considerations, at least in the Northwest.

Power resource planners in the Northwest say several factors could buffet the region's wind farm boom. Rising construction costs, strained transmission lines and a limited ability to blend wind's fickle nature with more controllable generation, such as hydro-power, are among the biggest concerns.

"Wind is a complex variable," said Jeff King, a senior analyst for the Northwest Power and Conservation Council, a regional organization created by Congress to balance power production and wildlife protection in the Columbia Basin. "It's only very roughly predictable."

The rising concerns highlight the rapid-fire pace of wind farm development, which has surprised even the most optimistic of regional planners. The questions also hint at the challenges facing a relatively new industry quickly joining the mainstream of electricity generation.

Big-name developers and several Northwest utilities are involved in large-scale wind power projects throughout the rural reaches of the Columbia River Gorge, long known for its breezy conditions. Already wind facilities in Oregon and Washington cover thousands of acres and, all told, boast a generating capacity in excess of 700 megawatts. Another 500 or more could come online by year-end, a jump in capacity of about 70 percent.

One megawatt of wind capacity is equal to the amount of electricity used by 250 to 300 average Oregon homes a year.

Similar red-hot construction scenarios are playing out throughout the country, particularly in windy spots in Texas and California, the top two states for wind-power. In the first half of this year, Texas overtook California as the most prolific wind power producer, according to the American Wind Energy Association, an industry trade group.

Washington and Oregon stand in the seventh and eighth spots, respectively, in the AWEA rankings. The group forecasts the industry will bring more than 3,000 megawatts of additional wind capacity online by year's end, well above last year's record of 2,431 megawatts.

Despite the growth, wind power remains a small percentage of overall electricity capacity -- roughly 3 percent in the Northwest.

Rising costs of fuel for traditional generation, such as natural gas-fired plants, are driving the interest in renewable energy, especially wind. So, too, is a federal production tax credit for wind resource development. The subsidy was extended by Congress last year and is set to expire at the end of 2007.

The jump in demand for wind power is one of the reasons construction costs have climbed dramatically in the past couple of years. Most significantly, the huge turbines that turn the wind's power into electricity have been ordered in such quantities that they now fetch premium prices -- or cannot be bought at all. A review of wind power costs by the Northwest Power and Conservation Council's King found turbines ordered today likely won't be available for delivery until 2008.

"Turbine manufactures are sold out," King said.

Some of the largest turbine manufacturers are located abroad, so the falling dollar also has pushed up prices, King said.

Costs for cement, copper, steel and resin -- all used in the manufacture and installation of wind turbines and related equipment -- also have jumped in the past two to three years, resource planners and wind developers note.

Two years ago, the power council estimated the cost of power from new power projects to be between $42 and $53 a megawatt hour. An updated report, completed earlier this month, put estimates in the range of $45 to as much as $100 a megawatt hour.

These projections, known as "levelized" costs, take into account capital investments and operating expenses, as well as federal subsidies.

Here's another way to look at it. Not long ago, a large wind farm represented a capital investment of roughly $1 million a megawatt. Now, it's between $1.3 million and $1.7 million. That means the cost of a 100-megawatt wind farm would cost as much as $170 million, up from $100 million.

"Everyone's seeing it, across the board, in all types of markets," said Ty Daul, managing director of wind development in the West for PPM Energy, a Portland-based company and one of the largest wind developers in the country.

PPM Energy is keenly aware of the higher price tags, Daul said. Even so, the company has no plans to pull back on thousands of megawatts of wind farm development in the works. Also, it has stockpiled enough turbines to see it through its next phase of development.

Even so, other obstacles could stand between new projects and the ultimate delivery of wind-power electricity to customers.

A potentially "very big issue," said King, is the blending of wind's ups and downs with other generation so that a smooth flow of electricity enters the transmission grid on its way to customers.

"The conventional wisdom has been that our huge hydro system should provide enough flexibility to accommodate wind," King said. "But we might have less integration capability than we think. . . . That's something we have to try to figure out."

No problems have yet arisen, he said, but another 1,000 megawatts of new wind capacity is expected to become available in the next couple of years, and that's where the questions lie.

The federal Bonneville Power Administration, whose 31 hydroelectric dams and one nuclear plant generate about 40 percent of the electricity consumed in the Northwest, acknowledges that additional management plans are necessary. The Portland-based agency has teamed with the planning council and with developers, utilities and other interested parties to assess the situation in detail. The group's first meeting is set for Aug. 24.

"The best way to deal with questions about wind integration is to sit smart people down and figure it out," said Elliot Mainzer, a manager in BPA's transmission division.