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Large Wind Turbines

May 27, 1993
Paul Gipe and Paul White

Repowering California Wind Power Plants


 

American Wind Energy Association 122 C St. NW, 4th Floor Washington, DC 20001 phone: 202 383 2500 fax: 202 383 2505

AWEA West Coast Office

The American Wind Energy Association is a trade association representing manufacturers of wind turbines, operators of wind power plants, electric utilities, and others interested in the development of wind energy in the United States. A majority of the association's corporate members are located in California. Since this report was written AWEA's West Coast Office has been closed and the prospects for further wind development in the United States has greatly lessened. Address your comments to either AWEA or to the authors.

1. OVERVIEW

 California leads the world in wind energy generation. The state pioneered development of what are now widely known as wind power plants, large arrays of wind turbines generating commercial quantities of bulk power for the state's utilities. As a result of developing this technology, a strong domestic industry that specializes in the installation, operation, and maintenance of wind power plants has established itself. These wind plants employ more than 1,000 people to operate nearly 17,000 wind turbines.

 But because of rapid technical evolution, much of the existing fleet of turbines is outmoded. At the same time, the market for wind generated electricity in California has stagnated, and revenues from wind generated electricity in the state are expected to fall dramatically during the mid-1990s. This has raised questions about the future of the wind industry in California, and left many California firms to consider the growing opportunities for expansion outside the state. All told, these realities could begin to lure the infrastructure, jobs, and economic development associated with wind energy away from California.

 This paper examines California's competition in the United States and Europe for new wind energy development, and the role of the wind industry in California's economy. Policy measures are recommended that will retain California's pre-eminence in wind technology through repowering the state's existing wind plants, and strengthening the manufacturing base that supports the wind industry.

 2. CONTEXT FOR EXPANDED WIND DEVELOPMENT

 Interest in wind energy is developing rapidly across the United States and in Europe. For the first time, wind generation is widely considered not just as an environmentally sound energy choice, but a least-cost option in energy resource planning.

Two principal forces are driving this renewed interest in wind energy: increased demand for reducing emissions of carbon dioxide and other pollutants from electricity generation, and wind energy's increased economic attractiveness. Growing environmental pressures, particularly air quality degradation and the risk of global climate change linked to electric power generation, have increased the demand for energy efficiency and use of renewable energy resources like wind. At the same time, the cost of wind energy technology has declined rapidly during the past decade to where it is the cheapest bulk power renewable resource option available to electric utilities. These factors, combined with aggressive marketing of new lower-cost, higher-efficiency wind turbines by wind development companies, has spurred enthusiasm for wind generation both in the United States and around the world.

 2.1. Growing National Interest in Wind Energy

 Plans for wind energy development are underway in several states, including:

  • Bonneville Power Administration issued a solicitation for up to 50 MW of wind as part of the Northwest's RD&D strategy. In response, a total of 270 MW of wind projects were proposed from five developers working with virtually every major utility in the region;
  • New England Power issued a "green" (renewables-only) solicitation for 45 MW, two wind projects were included on the "short list;"
  • Northern States Power Company in Minnesota has announced plans to bring a total of 100 MW of wind power on line by 1997, and recently issued a RFB for the first 25 MW to be on-line in 1994;
  • Puget Sound Power & Light, in conjunction with three other utilities, plans to bring 50 MW of wind turbines on-line by 1996 in the Pacific Northwest;
  • Niagara Mohawk Power Corporation installed the first two utility-scale commercial turbines in the state near Lake Ontario in anticipation of a larger pilot project;
  • Green Mountain Power Co. submitted wind proposals (a 20-MW project in Vermont and a 10-MW project in Massachusetts) under New England Power's RFP;
  • Iowa-Illinois Gas and Electric Co. formed a joint venture with U.S. Windpower to market 250 MW of wind power to utilities in the Midwest, to be expanded to 500 MW after five years;
  • The Electric Power Research Institute (EPRI) and the Department of Energy have jointly issued an RFP to obtain utility sponsorship for demonstrating state-of-the-art wind turbines in five pilot projects;
  • The Electric Power Research Institute will launch a national wind energy utility working group later this year to support utility interest in wind power.
  • Waverly Light and Power company of Iowa is soliciting bids for what will be the first municipal wind power plant in that Midwestern state;
  • California utilities have identified nearly 300 MW of wind power as identified deferrable resources (IDR) under the PUC-mandated set-aside and 250 MW of geothermal IDR set-asides against which wind projects can also bid. Several states are holding hearings and taking action to foster greater development of renewables:
  • In New York, a governor-approved State Energy Plan recommended a "market test/demonstration program" for 300 MW of a "diverse range of renewables," including wind, to be on-line by 1998;
  • Texas has formed a sustainable development council with the encouragement of the TPUC to foster development of renewable resources in the state;
  • Iowa legislation requires 105 MW of alternative energy production by investor owned utilities in the state; and
  • Oregon and Colorado are investigating in-state barriers to renewable energy.
  • The Wisconsin Department of Administration has concluded that the state could reap major economic benefits from doubling its use of renewable energy, including adding 735 MW of renewable electric capacity.

2.2. Growing European Development of Wind Energy

 European countries are installing growing numbers of wind turbines each year. In 1992 European development far outstripped that in the United States, with 225 MW of new capacity compared to the United States' 15 MW. This year, European countries will install approximately 300 MW, and as few as 25 MW will be installed in the U.S. Even eastern Europe has begun developing its wind resources. Ukraine recently began construction of wind power plants that will use more California-designed wind turbines than all the proposed projects in the United States combined through 1996.

Total installed wind capacity in Europe reached 1,000 MW in 1993, and will exceed that installed in California by the end of 1995. At the center of this European development is Denmark, a small nation of five million, which will become the world's largest regional producer of wind energy in 1995 when its total generation exceeds that from California's Tehachapi Pass, the current world leader. All told, the message is clear--European development will continue to dwarf that in the United States through the mid-1990s.

 The reasons for Europe's dramatic development of wind energy are simple: European nations place a high value on the economic and environmental benefits of wind-generated electricity, and they are willing to implement policies to achieve their wind energy goals. The Europeans view wind as a key electric power technology for the 21st century, and they are providing significant market incentives to build their domestic wind industry with the expectation of dominating global markets for wind technology as they open up in the mid-to-late 1990s. In the two European countries with the most successful programs, Denmark and Germany, utilities purchase wind-generated electricity from all suppliers for a pre-defined and stable price for a fixed number of years. Denmark sets the non-fossil-fuel tariff at 85 percent of retail rate and exempts wind power from its value added tax. Germany set its tariff at 90 percent of the retail rate. Many German projects also qualify for a renewable research premium of 3.5 cents per kWh, plus an equipment credit. As a result, Germany has the most rapidly expanding market for wind energy in the world.

In England, short-term, high-paying contracts have stimulated fast-paced development, attracting wind companies from America as well as Europe. As a result of this market pull the largest project by a U.S. company during 1992 was not in the United States, but in Wales. In just two years, the United Kingdom will increase its installed wind capacity from 10 MW to 130 MW.

 Beyond these plans for development in the near-term, European countries have established aggressive goals for wind energy development into the 21st century. Denmark plans to meet 10 percent of its demand for electricity by installing 1,000 MW of wind capacity before the year 2000, and 15 percent of its supply (from 1,500 MW) by 2005. Currently, about 3 percent of Danish electricity comes from wind energy. The Netherlands is equally ambitious with an official goal of 1,000 MW by the year 2000, and 2,000 MW by 2010. The German states of Schleswig-Holstein and Niedersachsen each have set goals for wind development independent of the federal republic. Niedersachsen is the slightly more ambitious, targeting its goal of 1,000 MW for the year 2000, while Schleswig-Holstein is seeking a more modest 2010 completion date for 1,000 MW. This figure represents 10 percent of Schleswig-Holstein's electricity supply--a ten-fold increase over wind's current contribution. Even France, a nation long known for its commitment to nuclear power, plans to install 500 MW of wind capacity by 2005. If successful, French wind generation could rival that from any of California's wind resource areas. These ambitious goals have led the European Wind Energy Association to expect 4,000 MW of wind power on line by 2000 in the European Community, and 11,500 MW by 2005.(1)

By contrast, the United States has no goals for wind energy development, and during the mid-1980s, California rescinded its one-time objective of supplying 10 percent of the state's electricity generating capacity with wind turbines.(2) In effect, the state appears to be losing interest in this renewable energy resource just as the economic and environmental benefits of wind energy are about to be realized.

 3. PROFILE OF WIND ENERGY IN CALIFORNIA

Wind turbines generate 2.7 billion kWh of electricity annually in California from about 1,760 MW of capacity, meeting about one percent of the state's electricity demand. Electricity generation from wind energy grew rapidly in the late 1980s in part because of an increase in capacity, but also because the industry gradually resolved technical problems that hindered many first generation designs. Many of the first-generation wind turbines that were installed in the early 1980s are still generating electricity; however, productivity remains significantly lower than that from more recently installed turbines.(3) If current trends continue, total generation of electricity from wind power will peak at 2.7-3.0 billion kWh between 1993 and 1995, after performance improvements from existing turbines are exhausted, and all unused fixed-price contracts are implemented.

About 90 percent of California's wind capacity operates under Interim Standard Offer 4 (ISO4), a fixed-price contract. No new ISO4 contracts have been issued since 1984, and the number of remaining unused contracts has gradually diminished (see Table 1). For most of these contracts the fixed-price portion expires between 1994 and 1997.

 

TABLE 1:
START UP DATES
FOR CALIFORNIA WIND CAPACITY ISO4
CONTRACTS
(YEAR)
ON-LINE CAPACITY
(MW)
1984 239
1985 432
1986 404
1987 188
1988 153
1989 98
1990 96
1991 19
1992 0
Total: 1,629
Source: Independent Energy Producers Association

California currently leads the world in wind energy production, but its position is rapidly eroding. California's percentage of world generation has dropped dramatically since 1988, when the state produced 90 percent of the world's wind-generated electricity. The state now produces only 60 percent of world generation, and this percentage will continue to decline as development expands elsewhere in the United States and in Europe. Further, when ISO4 fixed-price payments expire this trend will likely accelerate.

4. ECONOMIC DEVELOPMENT FROM WIND ENERGY

World sales of wind turbines and wind-generated electricity will exceed $1.0 billion in 1993 for the first time since California wind development reached a zenith in 1985. Most of this revenue will be generated from the sale of more than 300 MW of new wind generating capacity, nearly all of it to be installed in western Europe. Worldwide, wind turbines already installed are expected to produce approximately 4.8 billion kWh of electricity in 1993, worth an estimated $400 to $500 million.

 Direct employment in the wind industry is approximately 4,000 jobs worldwide, mostly in Europe where the majority of wind turbine manufacturers are located. California has dominated electricity generation over the last decade, and Danish manufacturers have dominated wind turbine sales. Nearly half the wind turbines operating in California were imported, primarily from Denmark, where 600 people are employed full-time for every 100 MW of annual sales.(4)

 For nearly two decades, a stable domestic market for 50-70 MW of new wind capacity, and exports of 30-50 MW, have assured Danish wind turbine manufacturers sufficient sales to support private research and development activities and plant expansion, effectively providing a springboard for export sales throughout northern Europe and the world. The potential for expansion of the American market outside California has led at least three of Denmark's leading manufacturers to open offices in the United States. These subsidiaries are not only exploring marketing opportunities, but also are examining the potential for local manufacturing facilities. In contrast, the purchase of wind turbines manufactured overseas has cost Californians more than 9,000 job-years of employment in the last decade.(5)

 

TABLE 2:
EMPLOYMENT ASSOCIATED WITH CALIFORNIA WIND INDUSTRY
  (FULL-TIME EQUIVALENTS)
JOB TYPE(1) PERMANENT TEMPORARY INDIRECT
AND
INDUCED(2)
TOTAL
DEVELOPERS 862 18 3,048 3,928
OPERATORS 271 17 996 1,284
SUPPORT ORG.(3) 84 5 307 395
TOTAL: 1,217 39 4,351 5,607
  1. Developers are companies that own turbines, operators are companies contracted by developers for operation services.
  2. An additional 4.5 jobs are created in the California economy for each job in electric services. U.S. Department of Commerce, Bureau of Economic Analysis, "Total Multipliers by Detailed Industry, for Output, Earnings, and Employment."
  3. Employment at support organizations devoted solely to the wind industry qualify as direct employment. C. Pigler, U.S. Dept. of Commerce, Bureau of Economic Analysis, personal communication, April 1993.

 4.1. Employment in California's Wind IndustryIn 1993 AWEA surveyed employment in California's wind industry, yielding the most accurate assessment of employment in the California wind industry since the industry's inception. The survey found that more than 1,200 people are employed directly in the state's wind industry. This work force is divided among more than 50 California firms, most of which own or operate wind power plants. In addition, the wind industry creates more than 4,000 jobs indirectly. Altogether, California's wind industry supports 5,000 to 6,000 jobs (see Table 2). Nearly all the jobs are related to operating, maintaining, and servicing the existing fleet of wind turbines.(6)

 In addition to jobs creation, the public sector also benefits economically from California's wind power plants. Property taxes paid to local governments total an estimated $10 to $13 million annually, not including rent paid to the Bureau of Land Management.(7)

 The survey also found that employment has dropped in some sectors of California's wind industry since the mid 1980's. The Among the businesses that support California's wind industry are dozens of manufacturing and consulting firms that supply services and equipment to the state's wind power plants. As growth in the state's wind industry has halted, purchases from these companies have dropped, requiring them to search for markets in other states and abroad.

 5. IMPROVEMENTS IN WIND TECHNOLOGY

 The levelized cost of energy from wind turbines has decreased by a factor of four since 1980, from approximately 30 cents per kWh to 7.5 cents per kWh in 1990.(8) According to the California Energy Commission, wind energy is now one of the most cost-effective of all the technologies available for new generating capacity.(9) Further, new designs are expected to generate electricity for even less.

Wind energy's improved cost-effectiveness is attributable to several factors: lower installed costs, improved productivity, and lower costs of operation and maintenance. The installed cost of wind power plants has fallen from more than $6,000 per kW (1992$) in the early 1980s to about $1,000 per kW today. Productivity has risen markedly during the same period with the addition of new airfoils, more efficient transmissions and generators, and the use of taller towers. In addition, improved wind turbine designs and maintenance programs have led to higher reliability, increasing the time wind turbines are available for operation from 60 percent in the early 1980s to over 98 percent for recent installations. (10) Finally, state-of-the-art wind plants employ larger wind turbines that offer as much as a ten-fold increase in production for about the same operation and maintenance costs, thus dramatically cutting the O&M cost per kWh. By almost any figure of merit--whether capacity factor (kWh per kW of capacity) or kWh per square meter of rotor swept area--productivity has risen steadily, and costs have dropped.

 

TABLE 3:
TURBINE SIZE AND PERFORMANCE
SIZE
(KW)
CAPACITY
FACTOR
KWH/SQUARE
METER
PERCENT OF
TOTAL CAPACITY
1-50 15% 398 3%
51-100 17% 623 54%
101-150 20% 701 14%
151-200 21% 778 4%
200+ 23% 860 24%
Source: "Draft" Wind Project Performance Reporting System, 1992 Annual Report

Larger turbines installed during the late-1980s and early-1990s are proving more productive than smaller, first generation designs (see Table 3). When wind turbines installed since 1985 are isolated from the entire fleet, the average capacity factor rises from 20 percent to 25 percent.(11)

 Both equipment and siting variables affect wind turbine capacity factors. Higher capacity factors for individual turbines may result from their concentration at particularly good sites, while low capacity factors of other turbines may be the result of poor wind resources or micro-siting.(12) Nevertheless, it is clear that significant performance improvements could be realized by replacing the least-efficient wind turbines at good wind sites with state-of-the-art turbines.

 Today's state-of-the-art designs employ rotors 25 to 40 meters in diameter, sweeping 500 to 1,300 square meters of area. These machines power 225 to 500 kW generators and operate either at constant or variable speed. Many, though not all, vary the "pitch" of the blades to control power output in high winds. Constant-speed turbines that regulate power by aerodynamic stall are derivatives of the technology that has been proven in California and throughout Europe. Some manufacturers have opted to vary the pitch of the blades to limit power on today's larger turbines instead of relying on stall. Others, including one California manufacturer, have chosen to vary both blade pitch and rotor speed. Variable speed proponents believe that this approach reduces the dynamic loads on the wind turbine while improving overall energy capture.

During the early 1990s more than 2,000 state-of-the-art wind turbines in the 225 to 400 kW range were installed worldwide. In 1992 and 1993, several companies began introducing 500 kW wind turbines, using rotors 35 to 40 meters in diameter that sweep 1,000 to 1,300 square meters of rotor area. Pre-production prototypes of these turbines are just being deployed.(13)

6. POTENTIAL FOR REPOWERING EXISTING SITES

There is a significant potential for expanding wind generation in California through the repowering of existing wind plants. Much of the state's existing wind capacity was installed using first- or second-generation wind turbine designs that are less efficient and more costly to operate and maintain. In several cases, this has been compounded by poor project design and turbine siting. Repowering poorly-designed projects with third-generation wind technology could result in significantly higher energy production with lower variable costs.

Repowering wind power plants is not a new concept. The Danish wind industry is presently investigating various repowering programs, and Denmark's current energy minister advocates a collaborative process among utilities and citizens to hasten re-development of existing wind power sites.(14) Consultants to the Danish government estimate that the country could nearly double current capacity by repowering with today's technology.(15)

 Several California wind companies have experience repowering older turbines with state-of-the-art technology. For example, in the late 1980s one Tehachapi company replaced a densely packed array of 71 obsolete, 40-kW turbines with 16 state-of-the-art 225 kW machines. This upgrade increased nameplate capacity at the wind site by one-quarter, and increased production more than four-fold.(16)

 Much of the performance improvement for repowering sites in California will result from the use of taller towers. Most wind turbines in the state were installed on 80-foot towers. Modern wind turbines, in part because of their greater rotor diameter, are installed on towers 120 to 140 feet tall. In general, the available power in the wind increases 25 percent with an increase from 80 to 140 feet. Increased production from turbines on tall towers in densely-packed arrays has reached as high as 40 percent at sites in California.(17)

 6.1. Potential Range of Repowers

 The range of repowers that is possible for state's wind industry is dramatic. The first and second generation of wind technology used in California was applied on a vast scale, and is now outdated as a new generation of technology is redefining the state-of-the-art. Obsolete, first generation turbines make up 13 percent of the 1,760 MW of the state's wind capacity and account for 18 percent of the total number of turbines. Second generation designs form the bulk of the current fleet and account for 69 percent of capacity and 74 percent of the installed turbines. Third generation, or state-of-the-art technology represent 17 percent of the capacity but only 8 percent of the turbines.

First generation turbines are characterized by rotors from 10 to 15 meters in diameter driving 10 to 65 kW generators. Second generation machines typically employ rotors 15 to 25 meters in diameter, and are rated less than 200 kW. Performance of first generation turbines is less than that of either second generation or state-of-the-art designs. In many cases, state-of-the-art turbines exhibit capacity factors 10 to 20 percent higher than outmoded machines.

Unsalvageable Turbines. Most of the first generation machines are technologically obsolete for bulk power generation in California and have little or no salvage value.(18) Some of these turbines are no longer in service, or operate infrequently. Public complaints about "abandoned" turbines are targeted primarily at these machines. Production from this class of turbines is particularly low, and repowering could result in production increases of up to an order of magnitude. The ability to successfully upgrade this class of turbines will largely depend on the quality of wind resources at each site, along with receptive policy and practices from state agencies and utilities. Turbines located at sites with modest wind resources will exhibit less production improvement than those at more energetic sites.

Reusable Turbines. Most of the second generation wind turbines are still in regular service and have many years of service left. However, wind plant productivity can be improved and the cost of operations and maintenance reduced by replacing second generation turbines with state-of-the-art technology. Because these machines have not exhausted their useful lives they have a value and can be resold in growing markets for used turbines. During the early-1990s, used Danish wind turbines in this class were being sold from sites in California for $240-320 per kW.(19) Wind resources at many of the sites with these turbines are generally sufficient to support repowering, and accumulated knowledge of wind resources on a site-by-site basis can enhance siting for new turbines.

 6.2 Repowering Phases

Repowering California's wind industry can be accomplished in three phases, (see Table 4). Each phase will maintain the approximately 1,760 MW of capacity and 4.1 million square meters of rotor swept area currently installed in California. State-of-the-art turbines are labeled "Class A," second generation turbines are labeled "Class B," and obsolete, first generation turbines are labeled "Class C."

 PHASE I:

 Remove all unsalvageable wind turbines (Class C) and replace them with an equivalent amount of capacity using state-of-the-art technology. This phase replaces large numbers of obsolete wind turbines in densely-packed arrays with 75 percent fewer state-of-the-art turbines (see Appendix A1). This will add 50 to 200 percent more production at repowered sites, and could result in an additional 126 million kWh per year (see Table 5). Total installed costs for Phase One, including removal of existing Class C turbines and environmental planning, (20)is $209 to $256 million based on a cost of $900 to $1,100 per installed kW. At the end of Phase One, all obsolete turbines have been replaced with state-of-the-art wind generating capacity.

 

TABLE 4:
SUMMARY OF CAPACITY AND NUMBER OF TURBINES
AFTER REPOWER,  PHASE I, II, AND III
  TURBINE CLASS    
  A B C TOTAL DIFFERENCE

M E G A W A T T S
CURRENT FLEET 317 1,211 233 1,760 1.00
PHASE I 549 1,211 0 1,760 1.00
PHASE II 1,155 605 0 1,760 1.00
PHASE III 1,760 0 0 1,760 1.00

NUMBER OF TURBINES
CURRENT FLEET 1,286 12,509 3,078 16,873 1.00
PHASE I 1,984 12,509 0 14,493 0.86
PHASE II 4,498 6,255 0 10,752 0.64
PHASE III 7,012 0 0 7,012 0.42
  A = STATE-OF-THE-ART TECHNOLOGY
B = SECOND GENERATION WITH SIGNIFICANT RESALE VALUE
C = FIRST GENERATION WITHOUT SIGNIFICANT RESALE VALUE

PHASE II:

 Remove 50 percent of second generation turbines (Class B), and replace them with an equivalent amount of capacity using state-of-the-art technology (see Appendix A2). This will add 15 to 30 percent more production at repowered sites, and could result in an additional 319 million kWh per year (see Table 5). Total installed costs for Phase Two, including removing half of existing Class B turbines and environmental planning, is $545 to $605 million, based on a cost of $900 to $1,000 per kW. Revenues from sale of replaced turbines account for the slightly lower installed cost compared to Phase One. At the end of Phase Two, all obsolete turbines, and half of the second generation turbines, have been replaced with state-of-the-art wind generating capacity.

 PHASE III:

 Replace all remaining second generation capacity with an equivalent capacity of state-of-the-art technology (see Appendix A3). This will add 15 to 30 percent more production at repowered sites, and could result in an additional 319 million kWh per year over that realized from repower Phases One and Two (see Table 5). As in Phase Two, total installed costs for Phase Three, including removing all remaining Class B turbines and environmental planning, is $545 to $605 million, based on a cost of $900 to $1,000 per kW. At the end of Phase Three, all obsolete and second generation wind turbines have been replaced with state-of-the-art wind generating capacity.

 

TABLE 5:
ELECTRICITY PRODUCTION AFTER REPOWER
PHASES I, II, AND III
AND COST OF REPOWERING
  PRODUCTION COST
(MILLION KWH)
TURBINE CLASS
  COST OF
REPOWER
PHASE A B C ADDED TOTAL DIFFERENCE (MILLION)
(1991) 596 2,129 63 - 2,789 -
I HIGH 785 2,129 0 126 2,914 1.045 $256
  LOW 691 2,129 0 31 2,820 1.011 $209
II HIGH 2,169 1,065 0 319 3,234 1.160 $605
  LOW 1,915 1,065 0 160 2,980 1.069 $545
III HIGH 3,553 0 0 319 3,553 1.274 $605
  LOW 3,139 0 0 160 3,139 1.126 $545
  A = STATE-OF-THE-ART TECHNOLOGY
B = SECOND GENERATION WITH SIGNIFICANT RESALE VALUE
C = FIRST GENERATION WITHOUT SIGNIFICANT RESALE VALUE

6.3. Improved Production and Lower Costs from Repowering.

Altogether, repowering could increase total production by more than 750 million kWh (27 percent) and cut the number of turbines by more than half, dramatically decreasing the density of wind turbines at each of California's wind resource areas.

 The capacity distribution by region may change slightly, but overall capacity will remain roughly the same in each phase of repowering. Repowering increases installed capacity only when single, isolated turbines are replaced, as in Denmark, or when turbines in linear arrays are replaced. Thus, repowering could increase installed capacity among the linear arrays found on ridge-tops in the Altamont Pass and Solano County, but not elsewhere in California. Wind turbines in the Tehachapi and the San Gorgonio resource areas are generally employed in geometric arrays. These are less likely to see an overall increase in capacity from repowering because the spacing between wind turbines increases in direct proportion to increases in rotor diameter.

 Repowering existing wind plants is more cost-effective than developing new wind projects for several reasons. First, production improvements of 15 to 200 percent for repowered wind generating capacity may contribute to an overall production increase of 25 percent. Second, overall operation and maintenance (O&M) costs will drop significantly, because the number of turbines operating in the state is reduced by more than half, while O&M costs per turbine remain approximately the same. Third, equity in existing infrastructure and technical resources may reduce installed costs.

Though repowering is technically feasible and will result in clearly definable benefits, it is beyond the scope of this report to determine what prices for energy and capacity are sufficient to make each phase economically feasible. To do so, it will be necessary to evaluate what effect various pricing scenarios will have on the rate of repowering. For example, at least the following four scenarios should be considered.

 Scenario 1. Payment for only the increased energy output that results from repowering by using the energy price from ISO4 short-run avoided cost.

 Scenario 2. Payment based on some other method for calculating energy price that is not indexed to natural gas.

 Scenario 3. Payment for increased energy and capacity using Final Standard Offer 4 prices for both new capacity and new generation above existing levels covered by ISO4 contracts.

Scenario 4. Payment for all energy and capacity from repowering by using Final Standard Offer 4, i.e. replace the ISO4 contracts.

 7. JUSTIFICATION FOR REPOWERING

 Though more detailed study would be needed to quantify the benefits of repowering, the replacement of obsolete turbines with modern designs would increase the technical efficiency of the state's wind industry as well as provide other benefits.

 Environmental Benefits. Repowering would maximize wind generation from existing land already developed, producing more kWh per acre. Also, it would maximize benefits from ancillary land uses such as access roads and transmission line right-of-ways.

Because most modern wind turbines are quieter than typical first and second generation designs, repowering will reduce the noise impact associated with the state's wind plants.

 To the extent that electricity production is increased, repowering will offset more emissions of air pollutants and greenhouse gases that would otherwise have been emitted from a conventional power plant.

 Though the exact relationship between the collision of birds and wind turbines is still under study, reducing the density of wind turbines on the landscape, through repowering, could reduce the number of collisions.

Reducing the density of wind turbines on the landscape through repowering also reduces the visual impact of wind power plants. Similarly, installing more reliable modern turbines improves the appearance of existing wind projects. Currently most of the older, less productive wind turbines are located within sight of major travel corridors such as I-580 and I-10. Many first generation turbines and some of the second generation designs are inoperative, and all turbines of these generations are more prone to mechanical failure than contemporary designs. Public opinion surveys have consistently found that inoperative wind turbines tarnish the public's perception of wind energy's efficacy.

 "Our research and that of others show that turbines' non-operation and public fear of wind farm abandonment is still a critical issue, and it therefore behooves the wind industry to return to the 'big three' wind farm sites (Altamont, San Gorgonio, and Tehachapi) and to ensure that these areas are operating as efficiently as possible, and all turbine arrays which do not contribute significantly and conspicuously to power production are either replaced or, if necessary, removed."(21)

 Unfortunately, many of the most recent wind projects employing reliable, state-of-the-art turbines are located far from public view. Repowering enables the wind industry to rehabilitate sites with modern, more aesthetically pleasing designs, and less dense arrays. This improves the public's acceptance of wind energy.

 Potential Tax Benefits. If a BTU or carbon tax is instituted, the financial impact on California electric ratepayers will be reduced in direct proportion to the amount of exempt fuels in the generation mix. Tax benefits also would be associated with the increased property, sales, income, and employment taxes paid as a result of increased production from repowering.

Competitive Status Benefits. Until recently California wind companies were pre-eminent in the worldwide wind industry. Government, utility, and environmental representatives from all around the globe have flocked to California to see the world's largest wind plants using state-of-the-art technology. Encouragement for repowering will reinvigorate California's wind industry. The design, manufacture, and installation of state-of-the-art wind turbines will give California's wind industry the invaluable experience necessary for maintaining its competitive edge against international competition. Repowering will also restore California to its once prominent position as a showcase for renewable energy.

 Job Benefits. California will preserve the existing infrastructure of its wind industry only if there is a domestic market. This is the principle lesson from Denmark's success--an industry will grow where there is a stable domestic market. If California's market remains stagnant, jobs and the economic development associated with them will move to other states, or nations.

 As the world's wind energy industry promises to grow by at least 5,000 MW of installed capacity over the next decade, new opportunities exist in manufacturing. California firms are developing several prototype wind turbines expected to compete for this market, and the manufacturing base that will supply these state-of-the-art turbines could more than double the number currently employed in manufacturing before the turn of the century.

 Two important parts of this manufacturing base will be the manufacture of electronic wind turbine controllers and the fabrication of wind turbine blades. Modern wind turbines use solid-state controls to operate and monitor wind turbine performance. They also use composite blades that incorporate engineering designs unique to wind turbine applications. California businesses employ a highly-skilled work force capable of supplying these products competitively.

 The employment impacts of manufacturing both blades and controllers for 100 MW of wind capacity are significant, together totaling 75 to 100 job-years of direct employment. Blade fabrication is particularly labor intensive, requiring 70 to 90 job-years per 100 MW. Controllers are less labor intensive, requiring only 6 to 10 job-years per 100 MW.(22)

 Electronics manufacturing is still a California specialty, and manufacturers of wind turbine blades already exist in the state. Wind turbine controllers designed and built by a California firm have been installed on turbines in Minnesota and Hawaii, and will be deployed shortly in Mexico. One California firm has the capability to fabricate blades for up to 100 MW of wind capacity per year. These California products are technically and economically competitive for application on state-of-the-art wind turbines anywhere in the world.

 The modularity of wind turbine components allows flexibility in the location of manufacture and assembly plants. One U.S. manufacturer recently sold monitoring equipment for use on 103 Japanese-built wind turbines in the United Kingdom. With the support of the CEC's Energy Technology Advancement Program, a California office of this Massachusetts-based firm has designed, built, and is now operating state-of-the-art monitoring equipment to test a new wind turbine. This wind turbine was designed by a Southern California firm for a wind power plant operator in Tehachapi.

 If California wind companies see little additional market in California in the near future they will turn their attention and resources to developing projects in other states and regions of the country. Rather than re-tooling to build advanced turbines in California, they may establish manufacturing and assembly plants and central offices adjacent to areas with the largest market. Some states, such as Minnesota and Iowa, are interested in wooing the California wind industry to within their borders, and have provided financial incentives for wind companies. Once this flight from California begins it will be difficult to reverse.

 Alternately, if these companies see a sufficient immediate market in California, they are more likely to maintain their central offices and primary manufacturing operations here and establish only local assembly and service operations elsewhere.

Benefits from Tourism. People who work in the electric generation field come to California to see the latest in wind technology. If state-of-the-art technology is being installed elsewhere, and not in California, these professional tourists will bypass California. In addition to the lost tourism dollars, the lost exports, and associated jobs, the ramifications of this will include diminishing the attractiveness of California as an international study center. For example, California is trying to attract international organizations such as the United Nation's sustainable development group and the International Study Center for Energy and the Environment. Maintaining a commitment to sustainable technologies, showcasing model projects (particularly high-profile technologies such as wind), and employing these projects to provide a significant portion of electric generation can make a positive contribution toward attracting these organizations.

 More intangible, but no less important, is the contribution that the wind energy industry makes to maintaining California's image as an innovator. Allowing this industry to languish or move to another state will diminish California's reputation for leadership.

If the current trend continues, governments and potential customers interested in wind energy will bypass California for other regions and countries that demonstrate a variety of state-of-the-art renewable technologies. This would not only result in a loss of wind energy exports, but possibly the export of other renewable energy technologies as well since many visitors to California's wind plants tour other types of renewable power plants.

 8. REGULATORY CONTEXT FOR REPOWERING

Several state policies can affect repowering, particularly those that influence whether power purchase contracts allow (or even encourage) replacement of existing turbines, and those that determine how increased generation would be treated. More specifically, the interpretation of existing contract terms regarding energy and capacity, state and federal tax policies, and ownership structures, will bear on the economic viability of repowering.

 There are two primary issues associated with existing ISO4 contracts:

  1. Contract interpretation. Would increased energy generation be allowed under existing contracts? The Joint Petition of Southern California Edison Company and the Division of Ratepayer Advocates (April 23, 1993) indicates that this could be a problem.
  2. Energy price to be paid. As repowering would most likely take place after a project's fixed price period, the present dialogue about short-run avoided cost calculations for ISO4 contracts has a direct bearing on the economic feasibility of repowering.

8.1. Contracts For Increased Capacity.

The economic viability as well as the benefits of repowering are enhanced if repowering not only improves efficiency but also results in increased generation. If capacity increases as a result of repowering, a new contract may be necessary for the increase. However, if new turbines replace those on existing ISO4 contracts and, in addition, sell electricity under a new contract with different energy and capacity payments, care would need to be taken to designate which equipment is operating under which contract and to meter the two sets separately. Alternatively, a new contract could be issued for the entire repowered project, balancing ratepayer interests in such a transaction.

8.2. Taxes and Permitting.

There are several potential tax implications of repowering.

 Federal Production Tax Credit. To the extent that the equipment is installed consistent with the provisions of the new 1.5 cent per kWh federal production tax credit for wind generation, and to the extent that the project owners are able to take advantage of the credit, repowering becomes more economically attractive. This situation argues in favor of timely action to allow for these benefits, since turbines must be installed by June 30, 1999, to receive the benefits. However, the present interpretation by the Public Utility Commission that a full 1.5 cents per kWh be deducted from the utility's identified deferrable resource penalizes wind companies that cannot fully utilize the credit (either because they have insufficient taxable earnings, or are subject to the alternative minimum tax, or "AMT"). This would reduce the attractiveness of repowering wind projects under Final Standard Offer 4 rates.

 Federal Investment Tax Credits. To the extent that some of the turbines to be replaced may be covered by recapture provisions of the pre-1985 investment tax credits, repowering will be delayed until the recapture period has been surpassed.

Property Tax. For the most part, existing installed wind generation equipment already will have been fully depreciated before repowering is considered. This means that new equipment will be subject to full taxation of 1.2 percent of the appraised value. If the state wished to encourage repowering of wind projects on existing land due to the environmental and other benefits described above, a property tax exemption for up to the original capacity of the project would make such projects more economically viable.

 Environmental Permitting. To the extent that it alters the project description contained in the original permit, replacement of existing turbines could require new environmental review. The CEC could expedite this process by providing leadership and guidance for local siting authorities.

 8.3. Ownership Structures for Repowering.

There are a number of different scenarios and ownership structures under which repowering could take place. Existing non-utility owners could undertake these changes and investments, or new non-utility generators could make the investments either through sale and assignment or through some type of default transaction. Alternatively, the host utility could purchase projects and repower them, or the host utility could enter into joint venture agreements with existing wind project owners for repowering projects.

Whether, and to what extent, any or all of these ownership structures are economically and institutionally possible will depend on contract pricing and interpretation issues discussed above and PUC rulings on utility participation in this type of program. Care should be taken, however, that electric utility policy does not force projects into bankruptcy for the sake of benefiting utility shareholders.

Under one scenario, the worst case, no action would be taken by the PUC with regard to the ISO4 energy price methodology or an owner's ability to repower under existing contracts. In this case, repowering would only take place upon purchase by new owners after bankruptcy and contract default. Such ownership could be either by non-utility generators, utilities, or utility affiliates but would probably be sporadic. Under this scenario, one might expect few efficiency improvements under existing contracts, but some bidding for Final Standard Offer 4 contracts based on building new projects on old sites.

Under another scenario, the PUC would facilitate repowering by favorably interpreting contracts and clarifying policy. PUC-approved criteria or guidelines for repowering could lead to more orderly development and more timely activity than otherwise with the intent of maximizing benefits for both ratepayers and the citizens of California. A greater amount of repowering of existing wind projects would result under this scenario than the laissez faire approach.

 9. RECOMMENDATIONS

 The CEC should examine the benefits and issues discussed in this report and undertake further study to more accurately assess the technical and economic potential of repowering the state's wind industry. If the benefits are confirmed, the CEC should provide policy recommendations for encouraging the repowering of the existing wind resource to maintain California's leadership in wind technology.

Based upon the information available AWEA recommends that:

  1. The CEC support PUC policies on ISO4 contracts that maintain the viability of existing wind projects, and thus, their environmental and economic development benefits.
  2. The CEC support the PUC's interpretation of existing contracts to allow repowering of wind projects.
  3. The CEC issue a policy statement or guidelines for permitting repowered projects.
  4. The CEC strongly urge the PUC to undertake a joint effort (possibly even before the completion of the current Biennial Resource Plan Update proceedings) to develop contract mechanisms for handling wind project repowering. This joint group might also examine incentives or other measures which would encourage more efficient use of existing wind resources.
  5. The CEC, in cooperation with the PUC, identifies a target MW set-aside for capacity increases resulting from wind project repowering and make other program recommendations for achieving the desired results. For example, enacting a state exemption of repowered wind plants from property taxes up to their original nameplate capacity.
  6. The CEC, with the PUC, recommend regulatory as well as legislative incentives that would encourage repowering.
  7. The CEC acknowledge the employment value of this industry, and identify means to strengthen local markets to ensure that the industry remains in the state and continues to grow. Jobs created by the production of electricity from this clean, renewable energy resource offer a stabilizing force to California's economy at a time when unemployment is a major concern.
  8. The CEC acknowledge the compatibility of California's manufacturing industries with various wind turbine components, and begin to initiate measures to insure the state's role in supplying the growing worldwide market. Highest priority should be directed to creating local markets for these California products, thereby encouraging manufacturing firms to establish production facilities here at home.

10. CONCLUSION.

 Repowering California's existing fleet of wind turbines can increase annual generation by up to 25 percent while cutting in half the number of wind turbines. A program to revitalize California's wind industry will boost the state's industrial competitiveness and maintain the technological edge of California companies, preserving, if not enhancing, job opportunities for the state's growing population.

 11. APPENDIX

After Phase I of repowering, the number of turbines and capacity in Class C will drop to zero. The amount of capacity removed from Class C at each wind resource area has been added to Class A, state-of-the-art technology. The number of turbines added to Class A will be less than what was removed from Class C, as the capacity of each Class A turbine is equivalent to the sum of several Class C turbines.

 

TABLE A1:
CAPACITY AND NUMBER OF TURBINES
AFTER REPOWER, PHASE I
  T U R B I N E   C L A S S
  A B C TOTAL

M E G A W A T T S
TEHACHAPI 300 370 0 670
ALTAMONT 162 549 0 711
SAN GORGONIO 86 217 0 304
SOLANO 0 60 0 60
PACHECO 1 15 0 16
TOTAL 549 1,211 0 1,760

NUMBER OF TURBINES
TEHACHAPI 1,235 3,791 0 5,026
ALTAMONT 495 5,251 0 5,746
SAN GORGONIO 250 2,704 0 2,954
SOLANO 0 600 0 600
PACHECO 4 163 0 167
TOTAL 1,984 12,509 0 14,493
  A = STATE-OF-THE-ART TECHNOLOGY
B = SECOND GENERATION WITH SIGNIFICANT RESALE VALUE
C = FIRST GENERATION WITHOUT SIGNIFICANT RESALE VALUE

After Phase II of repowering, the number of turbines and capacity in Class B will be cut in half. The amount of capacity removed from Class B at each wind resource area has been added to Class A. The number of turbines added to Class A will be less than what was removed from Class B, as the capacity of each Class A turbine is equivalent to the sum of several Class B turbines.

 

TABLE A2:
CAPACITY AND NUMBER OF TURBINES
AFTER REPOWER, PHASE II
  T U R B I N E   C L A S S
  A B C TOTAL

M E G A W A T T S
TEHACHAPI 485 185 0 670
ALTAMONT 436 274 0 711
SAN GORGONIO 195 109 0 304
SOLANO 30 30 0 60
PACHECO 8 8 0 16
TOTAL 1,155 605 0 1,760

NUMBER OF TURBINES
TEHACHAPI 1,841 1,896 0 3,737
ALTAMONT 1,754 2,626 0 4,380
SAN GORGONIO 786 1,352 0 2,138
SOLANO 90 300 0 390
PACHECO 27 82 0 108
TOTAL 4,498 6,255 0 10,752
  A = STATE-OF-THE-ART TECHNOLOGY
B = SECOND GENERATION WITH SIGNIFICANT RESALE VALUE
C = FIRST GENERATION WITHOUT SIGNIFICANT RESALE VALUE

After Phase III of repowering, the number of turbines and capacity remaining in Class B will drop to zero. The amount of capacity removed from Class B at each wind resource area has been added to Class A. The number of turbines added to Class A will be less than what was removed from Class B, as the capacity of each Class A turbine is equivalent to the sum of several Class B turbines. At the end of Phase III, all Class C, unsalvageable, and Class B, reusable, turbines will have been replaced.

 

TABLE A3:
CAPACITY AND NUMBER OF TURBINES
AFTER REPOWER, PHASE III
  T U R B I N E   C L A S S
  A B C TOTAL

M E G A W A T T S
TEHACHAPI 670 0 0 670
ALTAMONT 711 0 0 711
SAN GORGONIO 304 0 0 304
SOLANO 60 0 0 60
PACHECO 16 0 0 16
TOTAL 1,760 0 0 1,760

NUMBER OF TURBINES
TEHACHAPI 2,447 0 0 2,447
ALTAMONT 3,014 0 0 3,014
SAN GORGONIO 1,322 0 0 1,322
SOLANO 180 0 0 180
PACHECO 50 0 0 50
TOTAL 7,012 0 0 7,012
  A = STATE-OF-THE-ART TECHNOLOGY
B = SECOND GENERATION WITH SIGNIFICANT RESALE VALUE
C = FIRST GENERATION WITHOUT SIGNIFICANT RESALE VALUE

 

TABLE A4:
NUMBER OF TURBINES AFTER REPOWER, PHASES I, II, AND III
(#) CURRENT I II III
TEHACHAPI 5,259 5,026 3,737 2,447
ALTAMONT 6,835 5,746 4,380 3,014
SAN GORGONIO 4,012 2,954 2,138 1,322
SOLANO 600 600 390 180
PACHECO 167 167 108 50
TOTAL 16,873 14,493 10,752 7,012
  A = STATE-OF-THE-ART TECHNOLOGY
B = SECOND GENERATION WITH SIGNIFICANT RESALE VALUE
C = FIRST GENERATION WITHOUT SIGNIFICANT RESALE VALUE

12. NOTES

 (1) European Wind Energy Association, "Time for Action: Wind Energy in Europe," Rome, Italy, October 1991.

 (2) California Energy Commission, "Wind Energy: Investing in Our Future, Revised Edition." March, 1984, page 7.

 (3) California Energy Commission "Wind Project Performance Reporting System, Draft 1992 3rd Qtr Report"; CEC WPRS 1991 Annual Report.

 (4) P. Krogsgaard, BTM Consult ApS. Personal communication, May, 1993.

 (5) S. Miller, CEC Technology Evaluation Office, "Input/Output Model Results of QF LTBA Projections for PG&E and SCE Service Areas," January 24, 1989.

 (6) The survey found 460 direct jobs per billion kWh of annual generation. This is comparable to the number of jobs in the Danish industry for operating and maintaining their fleet of wind turbines. There are approximately 400 people directly employed in the service sector of the Danish industry. Wind turbines generated 900 million kWh during 1992, yielding 440 jobs per billion kWh of wind generation. B. Madsen, BTM Consult ApS, 1993, unpublished material.

 (7) An estimated $5.2 million in secured and unsecured property taxes are generated annually from wind energy developments in Kern County. J. Fitch, Kern County Assessors office, Bakersfield, CA. May, 1993, personal communication.

An estimated $5 million in secured and unsecured property taxes are generated annually from wind energy developments in Riverside County. N. Emmerton, Desert Wind Energy Association, N. Palm Springs, CA. April, 1993, personal communication.

Wind projects typically pay between $5,000 and $15,000 per MW capacity, higher rates for state-of-the-art technology, lower for second generation. AWEA independent survey of California wind companies, March, 1993.

 (8) Electric Power Research Institute, "Economic Lessons From a Decade of Experience," Utility Wind Interest Group, August 1991.

(9) California Energy Commission, Technology Characterization Report, ER 92, Final Report, November 1991.

(10) EPRI, 1991.

 (11) CEC, 1992.

(12) CEC, 1991.

 (13) P. Gipe, Wind Power for Home and Business, Chelsea Green Publishing, May 1993.

 (14) Windpower Monthly, Vol.9, No.5, May 1993, pp 4,24,25.

 (15) Report by BTM Consult ApS, Stauning, Denmark, for the Council of Energy & Environment Ministers, Special Committee for Wind Turbine Siting, March 1992.

 (16) J. Lantz, Zond Systems. May, 1993, personal communication; CEC, 1992; CEC WPRS 1986 Annual Report.

 (17) The increase is for Jacobs turbines on 120-foot towers in comparison with the same machine on 80-foot towers in an array near Palm Springs. CEC WPRS DRAFT 1992 3rd Qtr Report.

(18) P. Gipe, "Long Awaited Used Turbine Market Slowly Developing," in Windstats, Vol.4, No.3, Summer 1991.

 (19) P. Gipe, 1991.

 (20) Here the term "Environmental Planning" refers to all activities related to improving the environmental acceptability of planned repowers. These activities include environmental studies of the ecosystem, review power plant aesthetics, and efforts to minimize the impact of construction, such as minimizing road development.

 (21) R. Thayer, "Wind Farm Siting Conflicts in California: Implications For Energy Policy," Center for Design Research, University of California, Davis, 1991, page 39.

 (22) R. Widseth, President, Phoenix Industries of Crookston, Ltd., Crookston, MN. May, 1993, personal communication. Walter Sass, President, Second Wind, Inc., Somerville, MA. May 1993, personal communication.


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