Wind Power– Can it make sense in Michigan ?

1. Wind Power– Can it make sense in Michigan ? Tom Hewson Energy Ventures Analysis Inc Arlington Virginia Hewson@evainc.com March 2003

2. Michigan Wind Power Overview • Existing Michigan renewable power generation is dominated by biomass and hydroelectric. Less than 1% of existing state renewable generation is from wind power (estimated 3,600 MWh in 2002). • Michigan mostly has wind resources of class 3 or lower, making wind power production costs high and non cost-competitive vs. conventional fossil power sources. • Demand for high cost wind power has been very limited in Michigan because of its high cost. Two utilities offer wind power purchase options. • Consumers Power Green Power Program. Michigan Public Service Commission authorized Consumers Power to supply up to 50MW of wind power to consumers willing to pay 3.2c/kWh higher cost. Only 500 consumers representing 2,800 MWh (0.008% of CMS 2000 sales) of load has signed up for program. Therefore, CMS current program contract demand is met by 2 WTGs-1.8 MW. • Traverse City Green Rate Program City green rate program (1.58c/kWh premium) fully subscribed but city has no plans to expand program beyond the 1 WTG- 600 kW. WTG output was 33% less and production costs 50% higher than projected.

3. Michigan Wind Power Overview • Local ordinances for wind power development should be designed to protect public health & safety and minimize adverse environmental impacts. Elements of ordinance should address: • Setbacks (Safety, wind access, scenic) • Safety & security • Fire protection • Noise • Interconnection & electric distribution facilities • Unsafe & inoperable wind energy facilities • Abandonment & Site Reclamation • Interference with navigational systems • Soil erosion • Certification • Monitoring • Time related conditions • Height limits

4. Existing Wind Capacity Highly Concentrated • 6 States* account for 88% of existing capacity • 5 States accounted for 98% of 2000 wind generation • Wind power supplied only 0.15% of US 2000 power output that is far less than the output of Michigan’s Monroe station

5. Why is Wind Power Capacity So Concentrated? • Few states offer significant green power incentives to offset higher wind production costs • Renewable portfolio standards– Mandated purchases from non-cost competitive renewable sources (California, Texas, Minnesota, Iowa) • Direct state payments to offset portion of higher production costs (California, Minnesota) • Net metering (California, Iowa, Texas, Oregon, Washington) • High quality wind resources (>Class 4) limited • Large available land area- • Rule of thumb had been 40 acres/turbine to avoid wind turbulence interference. AWEA believes 75 acres/turbine required for larger new turbine designs. To displace energy from CMS’ smallest coal unit would require turbines covering 100 sq-mi.

6. US Wind Resources- • The higher the wind class, the lower the projected production cost • DOE’s NEMS Model considers Class 4 or higher winds needed

7. Wind Power in Michigan • Only 3 operating wind turbines • Traverse City- 1 WTG– 600 kW • Mackinaw City- 2 WTG- 1.8 MW • 48.2 MW planned from 6 projects already contracted by CMS but will not be activated until Green Power program demand grows. • High production costs • Traverse City-- 15.1% average capacity factor (6/96-10/02)– TCLP Green Rate subscribers pay 1.58c/kWh premium (25% more) for wind power. Actual power output 33% less than projected. • Mackinaw City– Supplies Consumers Power Green Power Demand – 2,800 MWh in 2002 (18% CF)– Customers pay 3.2c/kWh premium (46% more) for wind power • Low project capacity factors indicate current sites likely have low grade wind resources • Non-detectable environmental benefit in Michigan since wind backs out already very clean, low emitting Michigan power generation

8. Traverse City Wind Turbine Output • Output is lowest when power demand greatest

9. Wind Power Siting Issues • Electric Transmission • Transmission costs high because wind variability makes control difficult & unpredictable. Wind has poor transmission capacity utilization. • Large Footprint • Wind has the largest area requirement per unit capacity of any power source. DOE estimates average 40 acres/turbine (75 acres for newer larger design) . • Need access to WTG for construction and maintenance • Environmental Health & Safety • Aesthetics • Effects on Local Property Values– Few studies exist • Lincoln County WI study found wind property values declined by 26% within 1 mile and by 18 % > 1 mile. • Assessed values declined significantly for property adjoining Mackinaw City WTG after it started operation. • Traverse City adjoining property for sale but languishes on market. • Leased wind property easements often can limit owner’s ability to develop land for >30 yrs (in some cases even if project not built).

10. Wind Siting Issues • Local ordinances for wind power development needed to protect public health & safety, minimize adverse environmental impacts and achieve land use plan • Noise– Address through setting minimum setbacks and limits on dBA, dB (for low frequency noise) and sound penalties. 45-50 dBA • Aerodynamic: Low frequency, impulsive, broadband • Mechanical: tonal • Visibility– Address through limiting allowable sites and setting minimum project setbacks and height restrictions. Setbacks can reach >2500 ft • Shadow Flicker– Address though minimum setbacks and/or WTG location • Safety (blade throw, ice throw, structural failure, ground clearance)– Use Setback & minimum clearance requirements • Wildlife– Minimize through eliminating sited along/near major bird migration paths, major nesting areas and sensitive areas. • Unsafe & inoperable wind energy facilities– Require bond to cover cost of removal & site restoration. • Interference with navigational systems– Location away from airport flight paths & locking mechanisms to limit airport radar interference • Soil erosion– Plan to control soil erosion from WTG and access roads • Safety Lighting for aviation • Non-compliance penalties– Must remove facility if out-of-compliance