You're probably a fan of wind power. It provides a limitless supply of clean energy. The turbines are manufactured primarily in the rust belt, creating much-ballyhooed green jobs for unemployed factory workers. Wind farms generate profits for local utilities, alternative energy companies, farmers, and ranchers, not to mention manufacturers like General Electric. What's not to like?
Well, there's this: The US is building generating capacity in places that don't need the electricity. Most wind farms are located in rural areas, where there's plenty of land and a pragmatic attitude that welcomes wind turbines as a new "cash crop." Indeed, Texas and Iowa recently surpassed California as the top wind energy states. But the transmission infrastructure to carry that power to cities is missing. Wind farms rely on big tax breaks to be competitive, and right now that money is being wasted. When more people catch wind of that fact, this promising form of alt energy could be labeled a boondoggle for farm states, as corn ethanol has been.
For evidence of how ass-backward things have become, consider the curious phenomenon of negative electricity prices. These are just what they sound like: Because of the peculiarities of the energy market, producers of electricity sometimes pay grid operators to take the power they make. In sparsely populated west Texas, where the wind business is booming, the wholesale price of electricity was negative for about 1,100 hours—more than a month—in 2008 and more than 700 hours in 2009.
How could this happen? Well, currently, only about half of the cash flow generated by a typical wind farm comes from selling electricity; the rest comes out of government coffers. And government subsidies keep the turbines spinning relentlessly whether they are needed or not. Along with a federal production tax credit of about $20 per megawatt-hour based on after-tax income, state-based renewable energy credits provide $5 to $50 per megawatt-hour to generators, according to analysts at the Lawrence Berkeley National Laboratory.
Recent policy changes should improve things somewhat. The 2009 federal stimulus package doesn't tie tax credits to production levels, and new pricing systems rolling out in Texas mean we probably won't see the kind of negative prices we saw in 2008, when they dropped as low as -$30 per megawatt-hour. But these reforms are Band-Aid solutions. We need to fundamentally change our approach to encouraging wind power.
Ideally, we should be building wind turbines closer to population centers. But land there is costly, and suburbanites aren't nearly as eager as farmers to lease their backyards for noisy windmills and hulking transmission towers. Most proposals for wind farms in residential areas have been met with outraged not-in-my-backyard-ism. A physician even penned a report on "wind turbine syndrome," suggesting that the ceaseless drone causes migraines, nausea, insomnia, and vertigo.
If it's not feasible to move turbines closer to cities, the only alternative is to build a network of high-capacity, long-distance transmission lines to move the electricity. But constructing transmission lines and figuring out who should pay for them is a regulatory morass. Typically, costs are passed along to utility companies through an arcane bureaucratic process involving local, state, and federal authorities. "You can build a wind plant in a year or two, but it can take more than five years to build transmission lines," says Michael Goggin, a policy analyst at the American Wind Energy Association.
To make wind power work, then, the government needs to do more than just subsidize turbines. We need to give the federal government more power to overrule local objections and buy rights of way to get high-capacity transmission lines built across several states—say, from the Dakotas to the big cities of the Midwest. That's how the interstate highway system and natural gas pipelines got built.
Utilities also need to step up and assume the risks that come with building their own infrastructure. One power company is showing the way. Florida-based NextEra Energy Resources, which owns 15 wind farms in Texas, built its own 230-mile transmission line from west Texas to near San Antonio. Lacking the government's ability to invoke eminent domain, the company made deals with 270 different landowners. "We essentially moved 950 megawatts of capacity," says Michael O'Sullivan, senior vice president of NextEra. That's enough to supply almost a million homes. "Transmission is logical, doable, and within our means." Other utilities should follow suit.
Marc Gunther (marc.gunther@gmail.com) is a senior writer at GreenBiz.com and a blogger at the Energy Collective.
