1 / 28

Wind Energy

Wind Energy. Energy Advancement Leadership Conference November 17, 2004. Outline. Market Cost of Wind Energy Turbine Technology Wind Resource Financing. Market. Global Overview of Wind Energy. More than 39,000 MW of wind worldwide 5 year average growth of 32%

tiponya-gonzalez
Download Presentation

Wind Energy

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Wind Energy Energy Advancement Leadership Conference November 17, 2004

  2. Outline • Market • Cost of Wind Energy • Turbine Technology • Wind Resource • Financing

  3. Market

  4. Global Overview of Wind Energy • More than 39,000 MW of wind worldwide • 5 year average growth of 32% • Growth widely forecast to continue in double-digits into next decade • Europe and U.S. dominate market, accounting for 90% of new installations • World’s fastest growing energy source Source: American Wind Energy Association

  5. U.S. Market • Wind power capacity increased 36% in 2003 • AWEA projects that wind will be 6% of electricity supply by 2020 • Currently, less than 1% of U.S. electricity is generated from wind • Market fundamentals are strong, but inconsistent policy support • Less than 350 MW in 2004? Source: American Wind Energy Association

  6. National Wind Energy Status California, Texas, Minnesota, Iowa and Wyoming lead the market TOTAL INSTALLED U.S. WIND ENERGY CAPACITY: 6,373.8 MW as of Jan 12, 2004 Source: American Wind Energy Association

  7. Near-Term Growth Opportunity Source: Platts Analytics

  8. Factors Affecting Industry Growth • Federal Production Tax Credit • PTC provides 1.8 cents per kWh • Allowed to expire and then renewed late or retroactively several times • Recently extended to December 31, 2005 • Renewable Portfolio Standard • RPS requires a certain amount of energy to come from renewable sources • RPS’s in 14 states, but no U.S. national standard yet • Transmission constraints in certain states • Remote locations of wind farm • Intermittent not continuous • Cost of power

  9. Cost of Wind Energy

  10. Rapidly Decreasing Costs Source: American Wind Energy Association

  11. Competitive Posture Near-Term Opportunity Challenge Period Long-Term Competitiveness Wind without PTC Wind with PTC New Coal-Fired Generation Cost New Gas-Fired Generation Cost Source: Platts Analytics

  12. Fuel Price Hedge • Platts “conservatively estimates that generating electricity from renewable sources can ultimately save consumers more than $5/Mwh by eliminating fuel price risk.” Source: “Power Price Stability: What’s it Worth?”

  13. Wind/Natural Gas Compatibility WIND Low Operating Cost High Capital Cost Non-Dispatchable No Fuel Supply/Cost Risk No Emissions NATURAL GAS High Operating Costs Low Capital Cost Dispatchable Fuel Supply/Cost Risk Smog, Greenhouse Gas Emissions Wind and natural gas power plants are a winning combination on the grid and in a utility’s power portfolio because of their complementary characteristics. Source: American Wind Energy Association

  14. Turbine Technology

  15. Modern Turbines • Power : 1-3 MW • Rotor : 55-90 meters diameter • Nacelle: 100,000-150,000 pounds • Tower : 60-80 meters

  16. Turbine Sizes Today’s average wind turbine: Wind turbine with 80 meter rotor diameter superimposed on a Boeing 747 jumbo jet

  17. Wind Resource

  18. Wind • Variable • Site specific • Terrain • Height • Ground cover • Atmospheric pressure • Region Wide • Seasons • Diurnal • Annual • Measurable and Predictable

  19. Uncertainty Analysis The long term average production estimate has a significant impact on cost. More data and geographical coverage = less risk.

  20. Measurement • Multiple approaches to resource assessment and site characterization • Significant improvement with increasing investor sophistication and improvement in technology • Uncertainty can be reliably quantified if data are available • Strong correlation of data quality/quantity to accuracy of forecasts

  21. Financing

  22. Debt • Up to 15 year amortizing term loan facility • Average debt service coverage ratios of 1.4-1.5x • Leverage both cash and PTCs • Need good wind data, credit worthy off-takers, and well developed projects

  23. Equity • Strategic Investors include PPM, FPL, Shell, AEP • Institutional investors include Bank One, Goldman Sachs, Key Bank, Union Bank • Target rates of return of 10-11% unleveraged • Tax driven deals are usually unleveraged and incorporate flip structures • Need good wind data, credit worthy off-takers, and well developed projects

  24. Cost of Capital Typically 10-11% after-tax unleveraged IRR

  25. Investment Attractions • Stable revenue from long-term contracts • Proven technology with strong warranties • Low operating costs • No spark spread risk • Predictable wind resource • Tax incentives • Attractive risk/return

  26. Investment Challenges • Heavy tax component • PTC ownership requirements • PTC uncertainty • Tax market very specialized • Transmission constraints

  27. Conclusions • With the aid of tax incentives, wind energy costs have fallen from 45 ¢/kWh in 1980 to less than 3 ¢/kWh • As technology improves, costs are expected to continue to decline • US wind market expected to grow from 6.2 GW to over 10 GW over the next two years

  28. Conclusions (Cont’d.) • Due to high gas prices, wind should enjoy strong growth in the near term • In the mid-term, as fossil fuel prices decline and as premier wind sites are developed, growth may plateau • The long-term view is strong as wind becomes more economically advantageous relative to fossil fuel alternatives

More Related