Wind power last year continued its climb toward becoming a significant U.S. energy source, contributing 4.1 percent of the electricity generated in the country, up from 3.4 percent in 2012, according to figures released by the industry Wednesday.
That share still may sound puny, but consider that in 2000, wind was at a barely perceptible 0.1 percent, and it wasn’t until 2008 that it edged over the 1 percent mark. So it’s been on a steep growth trajectory lately, and in some states, wind is now a major producer: More than a quarter of South Dakota’s and Iowa’s electrical generation came from wind in 2013, and nine states – including Minnesota, Colorado and Oregon – were over 12 percent.
This government data, highlighted by the American Wind Energy Association, comes as yet another battle unfolds over federal support for wind energy projects. That debate has become the industry and Washington’s version of Groundhog Day, reappearing time after time, but now wind power comes armed with considerable evidence that it can be much more than a niche player.
Late last month, the Texas municipal utility Austin Energy completed a deal for up to 300 megawatts of power at a price that runs $26 to $36 per megawatt-hour—“lower than the $32/MWh average cost for all power in the Electric Reliability Council of Texas in 2013,” the utility said.
Elizabeth Salerno, AWEA’s vice president for industry data and analysis, pointed to that deal and a raft of others like it in Oklahoma, Nebraska, and elsewhere as evidence that wind was following through on a promise the industry has long made: that with a little bit of help, it would eventually deliver clean, cost-competitive electricity.
Wind has become so attractively priced, Salerno said, that whereas developers used to have to bang on utility company doors in search of customers, now “utilities are coming after wind energy projects.”
How will all of this new wind energy affect the grid? Recent studies—from the National Renewable Energy Lab looking at the West, and from the grid operator PJM looking at the East [PDF]—suggest that wind’s cost savings and clean energy benefits might be realized on a much bigger scale without as many of the grid integration issues and expenses that had been feared.
And the scaling up continues: AWEA in January said some 12,000 MW of generating capacity was under construction as of the end of 2013, more than ever.
For some, all this means that the industry ought to be able to make it without its key federal subsidy, the production tax credit (PTC), now worth 2.3 cents per kilowatt-hour of energy produced. The credit expired at the end of last year, but turbines already operating or even under construction by then will be able to take advantage of the PTC for their first ten years of service. Nobody questions that those cheap new power purchase agreements come partly as a result of the tax credit.
“Wind power has been steadily increasing over the past 10 years,” Rep. James Lankford (R-Okla.) said during a Congressional hearing last fall. “When does wind power take off on its own?” Picking up on that theme, House Ways and Means Committee Chairman Dave Camp (R-Mich.) recently offered a tax reform plan that would shrink the payment to wind farms now receiving the PTC, and leave new projects on their own. (Notably, too, Camp’s plan would end the oil and gas industry’s tax breaks and preferred accounting rules, Reuters reported.)
The wind industry in late 2012 signaled a willingness to discuss drawing down the PTC, in exchange for longer-term certainty for the credit’s existence, and it supported a tax reform plan last year from Max Baucus, the former Senate Finance chairman, to revamp the PTC and then end it once the country’s electricity sector hit an emissions intensity reduction target.
But these ideas, as well as Camp’s proposal, and President Obama’s new budget (which seeks to make the PTC permanent), are pretty much moot right now, given the slender chance of major tax reform this year. Instead, the wind fight is again about a limited, retroactive extension. And on that, AWEA is not ready to let go.
Wind’s chief competitor for new generation capacity in the past several years has been historically cheap natural gas, and Salerno said that even with wind’s recent success, the PTC remains vital to ensuring that the wind industry can continue to compete against fossil fuels. The PTC comes with costs – about $6 billion over the next 10 years for a one-year extension – but with utilities locking in low electricity prices for a couple of decades, it might also buy the country an energy price hedge.
“When we build new power assets, we’re making a commitment for 20, 30, 40 years,” Salerno said. “We want to make sure we’re making a good set of commitments and not over-relying on a source [natural gas] that could have price changes.”