Wednesday, March 19, 2008

Investors' new "ethanol"...

Money is flowing into wind energy. In fact, it looks similar to the investor rush to ethanol a few short months ago.
General Electric Co. and Vestas Wind Systems A/S, the world's two biggest wind-turbine makers, are reaping benefits from record orders by U.S. utilities racing to add generating capacity even as they face the loss of subsidies. GE, Vestas and Siemens AG stand to gain although the extension of the production tax credit, due to expire in December, is stalled in Congress. Four years ago, the last time the credit wasn't renewed, orders came to a near standstill. Now, rising natural gas prices and state greenhouse-emission laws are fueling a surge in demand for wind power, which accounts for 30 percent of new generating capacity and may boost GE's wind-turbine sales 25 percent to $6 billion this year. Xcel Energy Inc., the biggest U.S. provider of wind power, is buying 67 GE turbines for a Minnesota wind farm because the state requires it to get almost a third of its power from non- polluting sources. That will help GE reach operating income margins of 17 percent on wind turbines based on this year's sales, as much as 5 percentage points greater than those of Danish competitor Vestas. Wind is the fastest-growing unit at GE Energy, the world's biggest power-plant equipment maker. ``Customers are giving billions of dollars of orders already because they're afraid they're going to lose their spot in line,'' John Krenicki, who runs the GE Energy division, said March 5. GE posted more than $4.5 billion in wind-turbine sales last year, the most since it bought the business in 2002 for less than $300 million from Enron Corp. GE's total revenue last year was $172.7 billion. [More]
One interesting thing is how these new sources of electricity highlight our inadequate grid and arcane power economics. The transmission (grid) problem can also be seems as an investment opportunity.
While the need for long distance transmission often holds up the construction of wind farms for logistical reasons (there is no incentive to erect wind turbines if you cannot get the power to market), it is unlikely to prevent investment in renewables for financial reasons. The ERCOT Competitive Renewable Energy Zones Study found that the necessary investment in transmission for the high resource zones they identified in Texas ranged from a low of 1.5% to about 12% of the cost of the generation, which will only change the overall economics of any project in marginal cases. Some of these transmission improvements will also be likely to improve system reliability, and so the full cost is unlikely to be considered totally attributable to the wind projects.

As a less expensive but unavoidable investment for new renewable energy projects, transmission improvements are well positioned to be profitable investments in our energy infrastructure as the US shifts to more sustainable electrical supplies. [More]
Every farm community I have been in lately has had their own rumors of wind farms being considered somewhere close. While much of this is undoubtedly wishful thinking, it does demonstrate to me how generally open rural America is to wind development.

To be sure there is staunch opposition based largely on the aesthetics of the turbines. But if Danish experience is any guide, after about 20 years you get used to them. After all, power lines must have been a hideous blight when they first appeared.

1 comment:

Ol James said...

I'll bet, if they put some of those generators around D.C.they could power the USA and probably half the world. Just think of ALL that wind and steam generated boggles the mind!
On another note..don't you believe the power companies should pay for this instead of the consumer??Down here in Dixie, Southern Company, namely Alabama Power, have petitioned the Legislator and the Energy Commission to raise rates, to subsidize the cost of producing power. Yeah, they'll get it too.
Take for instance, if your tractor, combine, vehicle tore up and was not covered by a warranty, who would have to pay for the repair?? Not the dealer who bought your last load of grain. It seem the Company and the shareholders should have to carry this burden, after all if you want to make money, you have to spend some. Politicians and Utility companies and others, (mostly big business), look at the public as a if we were an unlimited source of income.