Energy in the U.S. - Why Wind? Financing Wind Power: The Future of Energy Institute for Professional and Executive Development Santa Fe, N.M. July 25, 2007

Overview Market Progress Market Drivers

Market Progress – Installed Wind Capacity U.S.:1999 – 2,500 MW 2006 – 11, 605 MW 2,400 MW installed in MW projected for 2007 Source: NREL

Market Progress – Installed Wind Capacity Worldwide:1999 – 13,600 MW 2006 – 74, 225 MW 15, 200 MW installed in 2006 Source: Global Wind Energy Council

Market Progress - $ 2006 Value of Global Wind Capacity additions: $23 Billion

Market Progress – U.S. Projections Projections vary: - Many consider 45,000 MW of installed capacity by 2015 to be realistic - Other estimates project up to 100,000 MW by 2015 Dollar investment projected to range from $81 Billion to $180 Billion over that range

Drivers for Growth of Wind Capacity Technology advances Cost competitiveness Fossil fuel cost increases Environmental issues/climate change Renewable Portfolio Standards (RPSs)

Drivers for Growth of Wind Capacity - 2 Production tax credit Economic development Energy demand growth Energy Security

Technology Advances Larger wind turbines developed and proven 1995: 500 kW 2007: 2.5 MW With larger turbines, greater efficiency - Improved materials - Improved gearboxes - Larger blades - Less overall land area needed to produce more MW

Technology Advances - 2 Greater efficiency results in lower cost of generation 1990: average cost of 7.5 to 11 cents/kWh 2006: average cost of 4 to 6 cents/kWh for new capacity

Cost Competitiveness Wind vs. other sources of generation ($/MWh) Coal25 – 45 Natural gas50 – 55 Oil100 Solar200 – 500 Wind40 – 70 (depending on wind resource)

Cost Competitiveness Natural gas prices doubled from

Environmental Considerations/Climate Change No emissions from wind Clean Air Act requirements tightly regulate emissions from fossil fuel-fired plants – S02, PM, NOx, Mercury Climate change policies are developing, focusing on carbon emissions – Cal., RGGI, Kyoto Protocol Wind uses no fossil fuel – therefore no impacts from fuel cycle No water intake or discharge – at the same time that CWA requirements are tightening for fossil plants

RPSs RPS is a policy which either requires or encourages that utilities supply a stated percentage of their power from renewable resources

States with RPSs Source: NREL

RPSs Percentage goals vary from 4% to 30% with varying target years Many are mandatory; some are just aspirational National RPS is under consideration in Congress

RPSs/Renewable Energy Credits RPSs stimulate the development of markets for RECs A REC is a credit equal to a unit of production of renewable energy (e.g., a MWh) RECS may be used to satisfy RPS requirements, instead of actual generation

RPSs/Renewable Energy Credits - 2 RECs have economic value that can approach the avoided cost of generation Prices for RECS vary geographically, and there is not yet an active market in many areas - in some places, e.g., MA and CT, can be in the $40 – 50/MW range REC sales can provide a revenue stream to support wind energy projects

Production Tax Credit Federal income tax credit for production of energy by wind and other renewable resources Currently 1.9 cents/kWh, for 10 years Provides significant economic support for wind energy projects Much more about PTC later Short term renewals have produced stop/start development cycles

Economic Development Revenue source for host communities Revenue source for landowners, especially rural Spin-off local revenues from construction Construction jobs A few good local jobs during operation

Energy Demand Growth Electric energy demand in the US continues to increase Most projections are for continued increase New generation is needed to meet increased demand - although wind is not a base load resource, it contributes to meeting load

Energy Security Foreign oil Foreign policy Wind uses no oil

Why Wind? Its the $, stupid