Don wrote:
?
In California we have lots of windmill farms.? To see a hundred or so
windmills all?spinning at their varying rates?is novel and interesting,
maybe even pretty.? But they get old fast.? To see thousands of them
covering all?suitable hills and ridges is not so nice.? Most people I
know regard them as a blight.? I've also heard repeated rumors that
they would not be a profitable source of electricity without the
special incentives government offers, and that people invest in
them?primarily to take the tax write-offs.? Maybe you know whether or
not those things are?true.?
Al: I am no expert on this at all, but I am highly motivated to find
out about such things. I searched the internet briefly as well as
falling back on my memory regarding a project a student did for my class
this summer. This quick search and my gut feeling leads me to believe
that people really do think wind power is a legitimate, competitive
source of electricity but that tax credits do help. Apparently some of
these tax credits will expire at the end of the year, although the
energy bill that was not passed would have extended these credits. That
is one of the good things about that bill. With regard to wind power we
seem to have come a long way in 20 years. I have read that some places
claim to produce it for less than 3 cents per kWh where it was 80 cents
some years ago. It also doesn?t kill birds like it used to nor is the
noise very disagreeable. I agree that there are drawbacks related to the
sight of these windmills. Look at the hue and cry that went up as they
try to put up a wind farm off of Cape Cod. Walter Cronkite, the
Kennedy?s and all the rich people with their homes looking off the cape
are denouncing it. A good example of NIMBY.
There are some sites that have a lot of information on wind power that I
stuck at the bottom of this post, including one referenced at the end of
this post that says tax credits do make a difference, but that wind
power does not get as generous financing as fossil fuels. The Lake
Benton Wind Farm in Minnesota seems to be doing well. See
http://web.itctel.com/~lbenton/index.html
There is also really a nifty map of the regions that can most take
advantage of wind power. It has much more detail than the maps I have
seen in environmental textbooks. See it at
http://www.me3.org/issues/wind/pnlusmap.html
Burgy wrote:
That reminds me of the TIME article, 10/13/03, pages 61-68 plus the ad
on
page 79.
The title -- THE GREAT ENERGY SCAM.
Here is an industrial process that results in $1 billion a year in
profits for such corporations as DTE in Detroit, Progress Energy in
Raleigh, Ginger Hill Synfuels near Pittsburgh, Mariott International,
and
many others.
Al: I read that too. Unlike Bergy, who spent a good deal of time taking
theology courses, I have taken some courses in finance recently. Two
things really hit me after spending time in this field. 1.) Lots of
people will do anything to make money, including using government
programs that give tax credits merely to fill their own pockets. They
have no regard whether the spirit of the program is to further the lives
of the average American, they will use it merely to make money for
themselves at the expense of the taxpayer if that can be done. I have no
doubt that certain businesses will use alternative fuel tax credits to
increase the bottom line, even if it does not help the country at all,
or even makes things worse. 2) Financial people spend an inordinate
amount of time using models that assume that the economy, the company,
the stock market, the oil production etc. will continue just as it has
for the last 5-10 years. What I wanted to find out was how you predict
when the the economy, the stock market, etc. will change, but the money
people tend not to put their efforts into that. At least not in the
classes that I took.
Don wrote:
?
One positive indicator is that, where I live,?the waiting lists for such
cars are long.? We can't get enough of them, even though the
manufacturers are?tacking a premium onto?prices because of the
demand.??Evaluations I've read?indicate that at today's fuel prices
owners will not come out ahead financially because of the high
initial?capital outlay required.? Of course, vehicle prices should come
down?with time and?mass production.?
Al: I have test driven the Prius several times. I almost bought one a
couple of years ago, but it really is not economical now as you
indicate. This year there is a new, bigger version of the Prius that
gets even better milage than the older one. Some car magazine named it
Car of the Year and it seems to be the new cool thing to have, so I am
not surprised that California has waiting lists for it. I consider that
a plus. I almost for sure will buy one the next time around.
?
Also there was an article about increasing natural gas prices yesterday.
http://www.nytimes.com/2003/12/13/business/13gas.html?th
Spot gas prices have increased almost 50 percent in the last couple or
weeks. This would not happen unless the money people knew that we were
on the edge of supply problems, whether it is manipulation or not. The
writer says that Greenspan was recently promoting the building of LNG
terminals. The new wells that we are drilling are so small that they
deplete very rapidly. Canada is having difficulty making up the
difference. What will happen when the people of Canada find out about
this situation? Will they want to export the gas to the US when they
may need in several years down the road? Europe can get it much more
easily fron Russia and the Middle East, but North America is likely
going to have to import it at a much a higher cost than the gas from
North American fields.
Article on cost: Cost of Wind Power
http://www.awea.org/faq/cost.html
WIND POWER COSTS DEPEND
ON OWNERSHIP, FINANCING
[From Wind Energy Weekly #709, 12 August 1996]
Wind energy costs can be cut substantially if a wind project is owned by
a utility, and could also be sharply reduced if wind developers could
obtain the same financing terms as gas power plant developers,
according to a new study by two federal laboratory researchers.
In "Alternative Windpower Ownership Structures: Financing Terms and
Project Costs," Ryan Wiser and Edward Kahn of Lawrence Berkeley
Laboratory's Energy and Environment Division estimate that a typical
50-MW wind plant, which would deliver power at just under 5 cents/kWh if
financed by a wind developer, could generate at 3.5 cents/kWh--a
nearly 30% reduction--if an investor-owned utility (IOU) owned and
financed the facility instead.
Using typical gas project financing terms instead, the cost also drops
even if the developer owns the project, to 3.69 cents/kWh. Costs in all
cases assumed use of the federal production tax credit.
Wiser and Kahn set out to examine the proposition, long advanced by
members of the wind industry, that wind projects would be cheaper if
they could take advantage of the lower-cost financing available to large
electric utilities. In general, they said, that appears to be true,
although they caution that utility investment analysis methods may not
be completely accurate and may overstate the savings that could be
attained.
Their comparison is based on a 50-MW wind farm with an installed cost of
$1,000/kW, a 30% capacity factor, and operations and maintenance
(O&M) expenses of 0.65 cents/kWh.
The two actually examined six ownership and financing scenarios. In
addition to a wind plant owned by a private developer selling power to a
utility under a power purchase agreement (PPA) and to a plant owned by
the IOU, they also looked at four scenarios involving public utility
ownership.
"Assuming that the installed and general O&M costs are equal in all
ownership scenarios . . . we conclude that utility ownership of
windpower facilities results in a significantly lower estimated
levelized cost of energy. Compared to the private ownership,
project-finance structure, IOU ownership reduces apparent levelized
costs by approximately 30% (1.4 cents/kWh).
"Internally-financed public utility ownership is estimated to reduce
overall costs by approximately 10-40%, depending on whether [Renewable
Energy Production Incentive (REPI)] costs are included in the analysis."
The REPI is a payment to public utilities to compensate for the fact
that since they are not subject to federal taxes, they cannot qualify
for the Production Tax Credit (PTC). However, since REPI is not a tax
deduction, money must be appropriated for it each year by Congress, and
thus it is viewed by the financial community as subject to considerable
risk.
Utility ownership of wind plants is cheaper, Wiser and Kahn write, due
to lower cost debt (interest rate of 7.5% compared to 9.5% for a
developer), longer debt payment periods (20 years compared to 12 for a
developer), and the absence of a "debt service coverage ratio" (DSCR)
requirement. The DSCR is a mechanism by which a lender reduces risk of
default on a loan by requiring that a wind project generate enough cash
each year to exceed loan payments. Typically, this results in a
smaller loan than would be most advantageous for the developer.
Regarding the comparison to gas-fired power plants, the two write, "Due
to the real and perceived risks associated with wind turbine technology
and wind resources, privately-owned wind projects typically receive
financing that is both more costly and restrictive than is available to
more traditional gas-fired generation sources . . . If wind developers
received similar financing terms and costs as gas-fired NUGs
[non-utility generators], the nominal levelized cost of windpower might
decrease by 25% (1.2 cents/kWh) . . .
"As wind turbine technology matures, resource evaluation becomes more
accepted, and information becomes readily available to the financial
community, debt and equity costs and terms may become less restrictive
and costly for project-financed windpower facilities."
The most important variable, according to Wiser and Kahn, is the
relatively low return on equity (12%) that is required by investors in
gas projects, compared to 18% for wind projects. If a similar return is
required for wind projects, the cost drops from 4.95 cents/kWh to
4.05 cents/kWh, a reduction of 18%.
Wiser and Kahn note that policy options exist that could help overcome
some of the disparity between gas and wind: "The creation of
long-term contracts and a stable and predictable U.S. wind market would
indirectly reduce finance costs by decreasing the market risks of
windpower development. More direct mechanisms, such as direct low-cost
government loans, loan guarantee programs, interest-rate buy-downs,
and government- facilitated project-aggregation mechanisms could also be
implemented at the state or federal levels to promote investment and
reduce financing costs."
Overall, Wiser and Kahn estimate wind power costs, depending on
ownership and financing method, as follows:
Private ownership, project financing: 4.95 cents/kWh including PTC, 6.56
cents/kWh without PTC.
IOU ownership, corporate financing: 3.53 cents/kWh including PTC, 5.9
cents/kWh without.
Public utility ownership, internal financing: 2.88 cents/kWh including
REPI, 4.35 cents/kWh without.
Public utility ownership, project financing: 3.43 cents/kWh including
REPI, 4.89 cents/kWh without.
?
?General Wind Power Links
http://www.nrel.gov/wind/
Received on Sun Dec 14 16:14:55 2003
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