Public Policy Forum V
Cameron University
October 28, 2010
Travis Narum
Development Director
1
689.5 MW Operating or Under
Construction
McGrath Wind Farm
30 MW, Alberta
Chin Chute Wind
Farm
30
MW,Wind
Alberta
Velva
Farm
12 MW, North
Dakota Wind Farm
Tatanka
180 MW, N & S
Dakota
Ripley Wind Farm
76 MW, Ontario
EcoGrove Wind
Farm
100.5 MW,
Blue Canyon Wind
Illinois
Farm
74 MW, Oklahoma
Red Hills Wind
Farm
123 MW, Oklahoma
2
Abouse
US Wind Farm Development
3
U.S. Wind
Installations
Source: American Wind Energy Association (AWEA)
4
20% Wind … What Does it Mean?
Projected US Wind Growth
400
150 GW
Shortfa
ll
350
300
300GW
250
150GW
200
150
110GW
100
US Target:
20% Wind
60GW
50
18GW
0
2007
US wind @
global
install
growth rate
of 9%
30GW
2010
2015
2020
2030
stry needs to scale to 1 turbine every 30 minutes
5
U.S. REMAINS GLOBAL LEADER
IN WIND INSTALLATIONS
The U.S. maintained its position as global
leader in installed capacity in 2009, growing
to over 35 GW after becoming the world
leader in total wind capacity in 2008.
Total global wind power capacity is now
over 150,000 MW.
6
Abouse
Wind Farm Development Driv
7
Rules of Thumb: Wind Economics
Turbine Technology
1pt Capacity Factor =
~$50k/MW NPV
CAPEX
Turbine = 2/3
BOP = 1/3
Wind
1 mph = $150k/MW
NPV
One 1.5 MW
turbine can
power ~500
average size US
homes
One 1.5 MW
turbine
generates
~$1,000 in
revenue per day
(power + tax
Power Price
$1/MWh = ~$30k/MW NPV
Tax Benefits
Large Driver of Project NPV
8
Production Tax Credits Have Been Critical…
9
…to Bring a More Level Playing Field
10
Transmission Constraints Limit Development
• Typically windy spots are not
near population centers
(load)
• Transmission from wind
projects to load can cost
$100M
• Free-rider problems and cost
assignement issues can stall
needed transmission
• Cost allocation strategies or
funded Super Grid ideas
could help enable
transmission build
• Change paradigm from
building transmission for load
to building it for generation
11
Gas Prices Can Impact Competitiveness
12
US Energy Markets : Historic and Forward Fuel Prices
$30
<< Historic
Prices
$28
$26
Forward Prices
>>
Uranium
Coal - CSX
Coal - PRB
$22
NG - Henry Hub
$20
Oil - #6 NY 1%
$18
Oil - #2
$16
$14
$12
$10
$8
$6
$4
$2
Dec-14
Jun-14
Dec-13
Jun-13
Dec-12
Jun-12
Dec-11
Jun-11
Dec-10
Jun-10
Dec-09
Jun-09
Dec-08
Jun-08
Dec-07
Jun-07
Dec-06
Jun-06
Dec-05
$0
Jun-05
Fuel Price ($/MMBtu)
$24
• Prices do not include SO2, NOx, or CO2 allowances
• Uranium prices include U308 commodity, conversion to UF6, enrichment, and fuel fabrication. The CEF cost is about $43 per lb-U308.
Heat content is about 131 MMBtu/(lb-U308)
• CSX coal prices include $15/ton transportation cost. CSX coal heat content is about 25 MMBtu/Ton.
• PRB coal prices include $40/ton transportation cost. PRB coal heat content is about 17.6 MMBtu/Ton.
• #6 Oil has a heat content of 6.287 MMBtu/bbl
• #2 Oil has a heat content of 0.1387 MMBtu/gal
13
Developing Wind in Oklahoma
14
Development Steps
Land
Management
Wind
Assessment
Interconnection
Permitting
Power
Marketing
Construction
• For every project the Development steps are the same … but every state, county and
municipality will have different requirements
• Interconnection will differ by Regional Transmission operator.
• Permitting can have state and federal requirements
- Interface with US Fish and wildlife
- Army Corp of Engineers
- Local Environmental groups
• Power markets are different by Regional transmission operators, state market.
• Construction requirements will differ by county and municipality. There may be restrictions
to noise, congestion, etc
15
Development Steps
Land
Management
Wind
Assessment
Interconnection
Permitting
Power
Marketing
Construction
• Land is typically optioned for 5-7 years; Long-Term agreement is typically 20-40
years.
• Many states restrict how long land can be optioned before project construction.
• Land owners typically receive a royalty of the project revenue or fixed prices per MW
installed
• Royalty payments are typically paid every 6 monthsLandowner relations and
community relations is key to having a good 20 year relationship with the community.
• Oklahoma tends to have very savvy landowners due to oil/gas lease experience
• Oklahoma’s large ranches with low density housing are ideal for development
•
Little crop damage, few drain tiles or other irrigation issues
•
Fewer concerns with sound and shadow flicker setbacks
16
Development Steps
Land
Management
Wind
Assessment
Interconnection
Permitting
Power
Marketing
Construction
Acciona typically requires 2 years of wind data for any project
• Hub height data is strongly preferred and has become the norm for financing
• Lidar and Sodar are not typically financeable for projects but this may be changing slowly.
• Given the size of the projects it is not uncommon to have 3-4 met towers per project. The
more spreadout the project sthe more met towers required
• An 80m met tower will run $100 – 120 K. If power is not available solar panels and
batteries may be required
• In some areas, permitting to install met towers can take 6-12 months.
17
Oklahoma Wind Map
18
Development Steps
Land
Management
Wind
Assessment
30 Days
Request
~ 70 Days
Interconnection
30 Days
Feasibility
Study
~ 90 Days
Permitting
45 Days
System
Impact
Study
~ 180 Days
Power
Marketing
Construction
40 Days
Facility
Study
~ 180 Days
LGIA
60 Days
• The interconnection process can take 2 years. Depending on the
number of projects in the queue the process could take longer
• The timing of various steps in the process is extremely
unpredictable with few requirement for the ISOs to follow a
schedule
• The cost through the facility study can range from $300K to $1MM
19
Development Steps
Land
Management
Wind
Assessment
Interconnection
Permitting
Power
Marketing
Construction
• Permitting in Oklahoma tend to be fairly straightforward. Little NIMBY activity –
general attitude that each landowner controls their land alone
• Generally low population of endangered species or other environmental concerns
•
Whooping Crane Corridor, Eagle, some bat populations, and growing Lesser
Prairie Chicken concerns are top concerns but few show stoppers.
20
Development Steps
Land
Management
Wind
Assessment
Interconnection
Permitting
Power
Marketing
Construction
• Current environment nationwide is nearly all deals require Power Purchase
Agreements (PPAs) to get equity financing
• SPP doesn’t have true real-time markets further limiting Merchant Hedge
Options
Energy
• QF
• Utilities
• Power Purchase Agreement
(PPA)
• Power marketers
• Merchant Hedge
• Merchant Sales
Renewable
Energy Credits
(RECs) /
Carbon
Counterparties
• REC sales
• Carbon offsets (future
potential)
• Financial institutions
• ISO/RTO
•
•
•
•
•
Utilities
Power marketers
Financial institutions
REC aggregators
Corporations
21
US Energy Markets : Historic Power Prices
and Sensitivities to Natural Gas Prices
CAISO NP15
2009 Average Price: $35.79
2008 Average Price: $71.01
Natural Gas Sensitivity: 0.91
MDU.MDU
2009 Average Price: $23.21
2008 Average Price: $45.28
Natural Gas Sensitivity: 0.57
NYISO Zone E
2009 Average Price: $36.49
2008 Average Price: $67.56
Natural Gas Sensitivity: 0.78
Eco Grove
2009 Average Price: $25.25
2008 Average Price: $48.40
Natural Gas Sensitivity: 0.50
Red Hills
2009 Average Price: $26.90
2008 Average Price: $49.77
Natural Gas Sensitivity: 0.72
ERCOT South Zone
2009 Average Price: $32.63
2008 Average Price: $73.01
Natural Gas Sensitivity: 0.96
22
Development Steps
Land
Management
Wind
Assessment
Interconnection
Permitting
Power
Marketing
Construction
•Requirement for building a wind project will vary by state, county and
local codes
•Costs in Oklahoma tend to be on the lower end due to lower labor rates
and relatively easy transportation requirements
23
Key Drivers for OK Wind
• Oklahoma Installed Capacity – 1130 MW + 380 under construction
• 11th in US for Installed Capacity
• 8th in US for Potential Capacity
What Has Driven This Development?
•
High Net Capacity Factors – 40% Plus
•
State Zero-Emission Facility Production Tax Credit
– Facilities placed in service on or after January 1, 2007 and before January 1,
2016 the credit is $0.0050/kWh for the first ten years
– Fully transferable – allows monetization at about 90% of value for companies
without a tax appetite
– Payments temporarily suspended through moratorium in 2011
•
Property Tax Exemptions (5 years) – reimbursed to the Counties from State
•
Sales tax exemption as qualified manufacturer
•
RPS Goal of 15% - goals are sometimes effective if treated more like a
mandate or it ensures cost recovery for utilities
24
Wind and Other Renewables - 3% or 20%?
•
How will we address externalities
– CO2 and other Greenhouse Gases
– Other pollutants – particulate, lead, etc.
– Energy Security
•
Supply and Demand; Price elasticity
– Will customers return to a willingness to pay for and drive renewables over other
generation forms
•
How will we handle transmission - cost allocation, Eisenhower type plan?
•
Wind forecasting and improved ability to limit negative grid effects
– Tied to transmission – improved grid integration reduces wind’s variability effects
through wind diversification
•
What impact will disruptive technologies or breakthroughs have
– Electric car adoption  increased off-peak demand
– Continued improvements in wind, solar and other costs
– Storage
25