Issue 26 • August 8, 2011 In this report: On-Site Wind Power • Manufacturers, Benefits, Costs • Latest Developments & Trends • Adoption by Business • Projections • Q&As with The Kroger Co., Adbobe Systems EL Insights: On-Site Wind Power On-Site Wind Power at a Glance Wind power is one of several types of on-site renewable generation that companies may choose to install at their commercial or industrial facilities. On-site turbines can range from small models of less than 1 kW all the way up to utility-scale models of one megawatt (MW) or more. Manufacturers About 250 companies around the world make or have plans to make small wind turbines (100 kW or less), and of these 95 are U.S.-based. But the vast majority of these companies are in start-up phases: only about 47 small turbine makers, 12 in the U.S., had begun to sell commercially by the start of 2010. About 95 percent of small wind units sold in the U.S. in 2009 were produced domestically. The five largest manufacturers of small turbines in 2009, in kW sold, were Southwest Windpower (U.S.-based, 11,700 kW); Northern Power Systems (U.S., 9,200); Proven Energy (U.K., 3,700); Wind Energy Solutions (Netherlands, 3,700); and Bergey WindPower Co. (U.S., 2,100).1 Among all turbine manufacturers, GE has maintained far and away the biggest market share over the past three years. In 2010 it garnered 49.7 percent of the U.S. market (by total capacity of turbines sold), followed by Siemens (16.2 percent), Gamesa (11), Mitsubishi (6.8), Suzlon (6.1), and Vestas (4.3 percent, down markedly from a second-place finish in 2008 and 2009). These are the powerhouses of utility-scale wind, and the average turbine size for each last year ranged from 1.5 to nearly 3 MW. Some 1 AWEA, Small Wind Turbine Global Market Study, Year Ending 2009. EL Insights | © 2011 Environmental Leader LLC. Single license EL PRO subscription can be used by one person. For multiple users, purchase an enterprise license by emailing [email protected] for information. manufacturers that sold mid-size turbines in the U.S. last year include EWT Americas (which manufactures 500, 750 and 900 kW models)2, Turbowinds (400 and 600 kW)3, PowerWind (500 and 900 kW)4 and Elecon (600 kW).5,6 Benefits Emissions reduction: This is the primary benefit of on-site wind generation. To give some indication of scope: the 100 MW of small-capacity wind turbines installed in the U.S. can displace 101,000 tons of CO2 per year, the equivalent of removing 17,000 cars from the road.7 Protection against price volatility: Power purchase agreements usually involve an agreed-upon price that lasts for an agreed period, usually between ten and 20 years. Although a wind installation will rarely be the sole source of a company’s power (see Intermittency, below), the use of a wind PPA can still provide a partial hedge against power price fluctuations. 2 www.ewtinternational.com 3 www.turbowinds.com 4 www.powerwind.de 5 www.elecon.com/aed/wind-turbines.php 6 AWEA U.S. Wind Industry Annual Market Report 7 AWEA, Small Wind Turbine Global Market Study, Year Ending 2009. EL Insights | © 2011 Environmental Leader LLC. Single license EL PRO subscription can be used by one person. For multiple users, purchase an enterprise license by emailing [email protected] for information. Demonstration of environmental commitment: On-site generation can be a more visible symbol of a company’s environmental effort than some other means of procuring renewable generation, such as renewable energy certificates (RECs) and utility green power programs. Wind towers are also more visible to the public than some other on-site renewable systems, such as geothermal heat pumps. This can maximize the visibility of renewable energy investment, which could be particularly important for locations with significant retail traffic or near transportation thoroughfares.8 That visibility could also potentially work against companies installing wind turbines, as there is a substantial amount of “not in my backyard” public opposition to wind developments – but such protests are usually directed to much larger, utility-scale projects, which use the tallest towers. Costs Wind power typically has higher capital costs and lower operating costs than fossil-fuelled generation. Once the installation is complete, the annual budgets for maintaining the system can be easier to justify than the costs of purchasing renewable electricity.9 According to the World Resources Institute, the cost of electricity production through small wind turbines (three to 100 kW) varies between about 15 and 25 cents per kWh. Large wind turbines (one to three MW) are able to produce much cheaper electricity, about 5 to 8 cents per kWh.10 8 World Resources Institute, Harnessing Nature’s Power: Deploying and Financing On-Site Renewable Energy. 2009. 9 U.S. Department of Energy, EPA Green Power Partnership, World Resources Institute and Center for Resource Solutions. Guide to Purchasing Green Power: Renewable Electricity, Renewable Energy Certificates, and On-Site Renewable Generation. March 2010. 10 World Resources Institute, Harnessing Nature’s Power: Deploying and Financing On-Site Renewable Energy. 2009. EL Insights | © 2011 Environmental Leader LLC. Single license EL PRO subscription can be used by one person. For multiple users, purchase an enterprise license by emailing [email protected] for information. Prices for small wind turbines vary widely but mostly fall in the range of $3 to $6 per watt. Costs and ROIs vary according to a number of factors, including the availability of state and local incentive, the availability of state and utility net metering policies, average annual wind speed at the location, costs of traditional electricity from the local utility, and variations in operations and maintenance costs. Two widely used formulae for estimating O&M costs for a small turbine system are $0.01 – $0.05 per kWh, and one percent of the retail cost of the installation, accrued annually. Other costs to consider are sales and property tax rates and incentives, insurance, the method of financing and permitting costs (which can range from nothing to $1,000 or more).11 Companies are increasingly using power purchase agreements, under which a developer coordinates the installation and maintenance of the system, and the company at the turbine site only needs to pay for the electricity output. This avoids the problem of high capital costs. In other cases, companies buy, own and operate the equipment on their site. Companies should consider how each approach will affect their eligibility for tax credits and incentives. Companies using on-site wind generation should also ensure that they retire the RECs generated by the system, so they lay sole claim to the use of that renewable energy.12 11 AWEA, Small Wind Turbine Global Market Study, Year Ending 2009. 12 U.S. Department of Energy, et al. Guide to Purchasing Green Power: Renewable Electricity, Renewable Energy Certificates, and On-Site Renewable Generation. March 2010. EL Insights | © 2011 Environmental Leader LLC. Single license EL PRO subscription can be used by one person. For multiple users, purchase an enterprise license by emailing [email protected] for information. Incentives The 2009 American Recovery and Reinvestment Act expanded the federal investment tax credit (ITC) for small wind turbines, allowing consumers to take a credit worth a full 30 percent of the cost of a small wind system.13 The legislation, in its current form, will last through December 31, 2016. The ARRA also created a U.S. Treasury grant program (Section 1603). This allows commercial wind power owners, for a limited time, to receive up-front payments in lieu of the ITC. In December 2010, Congress passed a tax bill to extend Section 1603 through 2011.14 Many states offer financial incentives for companies and homeowners that install qualified renewable generation systems. Such incentives may take the form of direct payments (rebates), competitive solicitations, consumer financing, sales tax exemptions and property tax exemptions.15 Some municipalities also offer Property-Assessed Clean Energy (PACE) bonds. The local government lends the proceeds from these bonds to homeowners and businesses to help them purchase renewable energy equipment. Borrowers then repay the loan over 20 years via an annual assessment on their property tax bills. PACE bonds were available in 18 states as of the beginning of 2010.16 13 AWEA, Small Wind Turbine Global Market Study, Year Ending 2009. 14 http://www.awea.org/newsroom/pressreleases/release_121710.cfm 15 U.S. Department of Energy, et al. Guide to Purchasing Green Power: Renewable Electricity, Renewable Energy Certificates, and On-Site Renewable Generation. March 2010. 16 AWEA, Small Wind Turbine Global Market Study, Year Ending 2009. EL Insights | © 2011 Environmental Leader LLC. Single license EL PRO subscription can be used by one person. For multiple users, purchase an enterprise license by emailing [email protected] for information. Certification In December 2009, AWEA finalized a technical voluntary standard for the performance and safety of small wind systems. Third-party organizations such as the Small Wind Certification Council (SWCC) can certify systems tested to this standard. The North American Board of Certified Energy Practitioners (NABCEP) plans to begin certifying small wind turbine installation professionals, AWEA says. Wind manufacturer Vestas is leading a coalition creating WindMade, a seal to certify companies using wind power (either on- or off-site). The WindMade Standard for Companies and Organizations was released on July 15 and is undergoing two-month public consultation period, with a final version to be launched in the fall of 2011. The standard proposes that a company must use at least 25 percent wind to use the label.