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Clean Wind Power. Political Fundamentals. Cost of wind is decreasing Kyoto Ozone annex of Clean Air Treaty Cost stabilization Rural economic development – lease income not agriculture subsidies Cost of wind is decreasing. Cost Drivers. Swept areas Tower Heights (faster winds)
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Political Fundamentals • Cost of wind is decreasing • Kyoto • Ozone annex of Clean Air Treaty • Cost stabilization • Rural economic development – lease income not agriculture subsidies • Cost of wind is decreasing
Cost Drivers • Swept areas • Tower Heights (faster winds) • Economies of scale • Improved siting
Technology Cost Reductions 40 500 kW 1800 kW 35 30 1300 kW 25 750 kW Radius of rotor (metres) 20 500 kW 15 10 250 kW 5 50 kW Source : AWEA
Technology Cost Reductions Tower Sizes 40M 50M 65M 80M Taller towers capture faster winds
Technology: Cost Reductions • Cost driver for larger blades, is stronger light weight blade materials • Cost driver for taller towers is, improved tower and foundation designs
Worldwide Wind Capacity MW Compound 5-Year Growth 32% Source:BTM Consult and EWEA
Wind Economics • No fuel cost • Stable fuel cost • Strong correlation to load requirement • More production in winter • More production on windy days • More production during the day
Correlation between Supply & Demand Gaspé/Québec 14 12 10 8 % of annual total 6 4 2 Demand Supply 0 Jan Feb Mar Apr May Jun July Aug Sept Oct Nov Dec Months Source: GP CO Inc.
Wind Economics What about calm days? • Wind complimentary to water based storage • When wind is blowing, store the water behind the dam • When calm, run water through turbine Canada is > 60% water power
Wind Investment Fundamentals • More capital intensive than fossil fuel • Stable cost has public policy benefit by eliminating fuel cost risk • Will never have to buy carbon credits • Will never have to buy Nox or Sox credits • Distributed benefits – can decrease line losses if well located • Jobs in rural areas
Impact of Capital Intensity • Property tax – 20X coal plant in Ontario • The capital crunch in EPG makes this more challenging • Capital tax distorts investment to low capital, high operating cost investment – fossil fuel • Capital will tend to be provided for the least capital intensive project
Kyoto Process • Kyoto 2nd round starts 2005 • Evidence of human caused climate change will become stronger • What if 25% reductions are needed? • What if 50%?
Result? • Wind is THE low risk investment (and water) • Fossil plants will become more costly to operate (carbon credits) • Your regulator may not accept the argument that this was not forseeable
Federal Incentive 1.2 ¢/KWH 2003 1.0 ¢/KWH 2004 1.0 ¢/KWH 2005 1.0 ¢/KWH 2006 .8 ¢/KWH 2007 Payable for 10 years Taxable Limited to 1000 MW
Provincial Options RPS – renewable portfolio standard - require retailers to buy a percentage from renewables Green Power Procurement Match Federal incentive Systems Benefit Charge
Other Provincial Issues • Rules on interconnection and transmission • Property taxes, sales tax, capital tax • Can the power be sold? Price paid? • Emissions – are there caps? • Crown land policies
Other Support • Resource assessment, wind atlas • Net metering • Streamlined approvals • Electricity labeling
Wind Energy Truly Sustainable Energy for the 21st Century