For decades, Big Energy blew off renewable energy as insignificant. Now the industry's biggest players are racing to build wind farms -- and cash in on the latest energy boom.

by Alex Markels
July/August 2002

IF BEN GIVENS ever needs reassurance that his bosses at American Electric Power (AEP) --the country's biggest generator of electricity and a leading coal-mining company -- support his work to develop wind energy, all he has to do is whip out his company credit card. There on its face, pictured beside an image of belching smoke-stacks, is a cluster of huge, pinwheel-like turbines. "Pretty cool, huh?" says Givens, who operates the company's three wind farms in Texas. "We're finally hitting the big time!"

The credit card might seem like a public-relations ploy. But behind the green imagery is a remarkable corporate about-face: After decades of belittling wind as a puny and unreliable energy source, AEP and other major companies are scrambling to cash in on what is now the world's fastest-growing source of electric power. Multinationals like Shell and General Electric are investing hundreds of millions of dollars in wind farms from Washington state to Massachusetts. Last year, energy firms spent a record $1.7 billion on wind projects in the United States, increasing wind power capacity by some 60 percent, to more than 4,200 megawatts -- enough to provide electricity to 1 million homes. (By comparison, solar photovoltaic cells currently supply about 500 megawatts.) "The big players who didn't give a hoot about this a few years ago are finally getting in the game," says Ronald Lehr, a former Colorado public utilities commissioner and a wind energy expert. "Which is precisely what's needed to make wind a viable energy source."

Even with the recent growth, wind power fills only about one-half of 1 percent of the country's total electricity demand; the European Union, with a total population only about one-third larger than the United States, has four times as much wind power capacity and plans to obtain 22 percent of its electricity supply from renewables by 2010. Yet a growing number of industry experts say it is the United States -- with its huge electricity market and its vast, windswept plains and blustery coastlines -- that has the greatest potential to reap power and profit from wind. And perhaps nowhere is the trend more apparent than in Texas -- home to most of the nation's oil companies and their longtime champion, George W. Bush.

It was then-Governor Bush who, in 1999, signed off on a landmark provision requiring utilities to get 2,000 megawatts of their electricity from renewables by 2009, setting off the largest annual increase in wind-farm construction in U.S. history. As president, Bush has resisted calls to include a similar provision in his national energy plan. But as the economics of wind improve, even Bush's industry allies point to Texas as proof that, with just a little push from the government, renewables can compete. "Wind power is an increasingly viable source of power generation," says James Houck, head of the power and gasification division at ChevronTexaco, which plans to build its first wind farm this year.

The reason for Big Energy's turnaround is simple: After de-cades of false starts and mechanical failures, a host of technology advances and economies of scale have dramatically improved wind energy's bottom line. The cost of producing a kilowatt-hour of electricity from wind has fallen by more than 80 percent since the first wind farms were installed in California in the late 1970s and early '80s. Today, the cost stands at between 3 and 6 cents per kilowatt hour, depending on location -- comparable to or better than, in some cases, the standard 2 to 5 cents for conventional fuels. And with additional momentum from state mandates -- at least a dozen states now require utilities to get some of their energy from renewables -- wind power is in the midst of a full-blown boom.

The biggest projects on the drawing board include South Dakota's Rolling Thunder wind farm, a massive 3,000-megawatt installation that, once it begins operation in 2006, is slated to generate as much electricity as three average nuclear plants. A collection of six farms in Washington state will add another 780 megawatts by 2003. Off the coast of Nantucket, Massachusetts, the country's first offshore wind farm is slated to begin construction next year; it is expected to generate 420 megawatts, enough to displace two standard coal-fired plants.

And those projects are just the beginning. "If you look at this country's huge wind resources and the size of the energy market, the economics could blow us right past what they've done in Europe," says Lehr. "In five years or so, we could easily be the world leader in wind energy."

DRIVE FROM ABILENE INTO WEST TEXAS' rattlesnake country, and it doesn't take long before AEP's Trent Mesa wind farm comes into view. Even from 10 miles away, it makes for an extraordinary sight: a long line of 100 huge white pinwheels, each taller than the Statue of Liberty and with a rotor diameter longer than the wingspan of a Boeing 747. Like a Christo sculpture blowing in the breeze, they spin with an almost artistic subtlety; even in the stiffest gusts, they make but one gentle revolution every two to three seconds. That's still plenty to generate 1.5 megawatts each, more than almost any other wind turbine now operating in the United States.

"We get a lot of sightseers who drive up and want a tour," Ben Givens says as he steers his three- quarter-ton truck up a dirt road that winds to the top of the mesa. "People just 'ooh' and 'ahh' the closer they get to them, especially the little kids. If we ever went belly up, heaven forbid, we could always make a tourist attraction out of this place."

It's easy to see why visitors are intrigued. Givens, an affable West Texas native who is the plant's operations manager, rattles off a string of impressive facts: The towers' foundations take up a mere 150 square feet of ground, but their rotors sweep an area nearly twice the size of the mainsail on a large clipper ship. Perched atop each tower is a rectangular box the size of a school bus that contains 56 tons of power equipment. Computers send streams of data to a central server that helps fine-tune the turbines' operations and directs a total of about 590,000 megawatt-hours' worth of electricity, enough to power about 35,000 homes, to a nearby substation.

As we arrive at the base of one tower, we have to crane our necks to see the top of the structure, where we can just make out the now-notorious tilted E. Enron was an early player in the revival of wind energy; one of its most profitable subsidiaries, Enron Wind, supplied all the turbines for Trent Mesa and developed about one-third of the 900 megawatts of wind power that came online in Texas last year. When the company was sold after Enron's demise, AEP and others snapped up its wind farms, while its turbine-manufacturing operations went to General Electric.

Givens opens a porthole-shaped door on one of the towers and walks inside. A steel ladder leads upward through the darkness; at its base, a computer console keeps track of the turbine's operations. When he started work at one of Texas' first wind farms six years ago, Givens recalls, state-of-the-art turbines put out 550 kilowatts each. "These new machines can do three times that," he notes, "and for about half the cost per kilowatt-hour."

The new generation of wind turbines aren't just bigger than their predecessors; they're more reliable, easier to maintain, and better at adapting to changing wind conditions. And they're more popular. Though some wind projects have been criticized for marring the landscape and posing hazards to migrating birds, most environmentalists strongly support the technology. Here in West Texas, Trent Mesa has brought more than a dozen permanent jobs and a string of lucrative land leases for area ranchers. "The taxes alone are making a big difference for the schools and hospitals here," says Glenn Wortham, a city commissioner in nearby Sweetwater. "This has been a win-win situation."

While such praise makes for great P.R., it's the bottom line that's driving big investments in wind. Richard Walker, AEP's director of renewable energy business development, says company executives are especially enthusiastic about wind power's ability to deliver electricity at a stable price. "You can give them a firm number for 20 years," he notes, "which is something you can't do with natural gas." His phone rang off the hook last year when natural gas prices spiked. "People in the energy business want predictability, and you can get that now with wind."

BIG ENERGY'S SURGE OF INTEREST IN WIND power has been a long time coming. Although some large companies began research and development efforts during the 1970s' energy crisis, federal funding all but dried up during the Reagan and Bush years, and the United States' technology lead was lost to firms from Europe.

The U.S. wind industry didn't begin to revive until the 1990s, after Congress created a wind energy tax credit, and the Department of Energy launched a program to finance the development of new turbines. An enterprising team at a Texas utility called Central & South West Corp. was the first to take advantage of the funds and soon set up a dozen experimental turbines on a remote farm near Fort Davis, Texas. Walker, the AEP executive, was Central and South West's research director at the time. "We had all kinds of problems at first," he recalls. "When it got too windy, some of the parts would break and fly off. Then there was the lightning storms -- things started blowing up left and right." But the broken parts and burned-out generators provided just the trial by fire the industry needed. The company that built those turbines, a startup called Zond Energy Systems, later became Enron Wind.

To gauge whether the market was ready for wind, Walker organized a series of "deliberative polls," town hall-style meetings held in three Texas cities in 1997, at which customers could learn about the new technology and rank their preferred energy sources. In each of the polls, renewables came in first or second; only conservation was more popular. "None of us realized how much people would support the idea," recalls Walker. "It really turned the heads of our management." Walker was soon given the go-ahead to develop the company's first commercial wind farm. Setting out like wildcatters in search of an oil patch, he and his team fanned out across West Texas, scouting favorable locations in hopes of striking meteorological pay dirt. They eventually settled on a pair of high mesas and began erecting two massive wind farms.

By 1999, Texas legislators were taking note. As part of a bill deregulating the state's energy market, lawmakers -- with support from advocacy groups like Public Citizen and the Environmental Defense Fund -- crafted a provision requiring that power companies get at least 2,000 watts, or approximately 3 percent of their power, from renewable sources by 2009. It was the biggest such mandate in the country. "[The provision] was strongly resisted by most of the utilities," says Steve Wolens, a Democrat and the bill's co-author in the state House. "But it was the right thing to do. And in the long run, it was a booming success because the utilities finally realized they could make money with wind."

LAWS REQUIRING POWER COMPANIES TO
get some portion of their energy -- typically between 3 and 8 percent -- from renewables are now on the books in a dozen states, including Pennsylvania, New Jersey, Wisconsin, and Arizona. The mandates are widely credited with pushing wind to the top of the industry's agenda. Yet they pale in comparison to a measure passed by the European Commission last year: Looking, in part, to Texas' legislation as a model for creating market-based wind energy incentives, the commission directed countries to draw at least 12 percent of their energy from renewable sources within the next eight years. The law has sparked a wind-farm construction boom that is set to place thousands of supersize turbines throughout the continent and off the coasts of the United Kingdom, Denmark, and Germany.

Europe's aggressive approach is a result, in large part, of the European Union's commitment to the United Nations' Kyoto Protocol, which calls for reducing production of greenhouse gases. "The climate change thing is driving it here," says John Doddrell, director of sustainable energy policy for the Britain's Department of Trade and Industry, which recently distributed $100 million in capital grants to companies to help fund 18 new offshore wind farms. "There's a growing recognition of the seriousness of the problem and that we need to reduce consumption of energy and obtain the energy we do use from cleaner, renewable sources."

The Bush administration, which last year pulled out of the negotiations that produced the Kyoto agreement, has refused to take a similarly active role to promote renewables. Though Bush recently revived the wind energy tax credit, his energy plan includes no national mandates for renewables and instead looks largely to coal, oil, and nuclear power to feed the nation's future energy demand.

Of course, wind alone could never fully supplant those sources. While the fuel is essentially free, the vagaries of the weather don't guarantee enough wind to keep the lights on 24/7. Moreover, while wind resources in places like Texas, North Dakota, and Kansas -- the nation's windiest states -- are abundant, they tend to be far from the population centers that most need power, and transmission lines lose a great deal of electricity over long distances.

Still, the nation's wind resources are vast. According to Department of Energy estimates, those same three windiest states could meet the nation's entire electricity demand. With improvements to the transmission system, "there's absolutely no doubt that wind could supply at least 10 percent of the country's electric power," says Randall Swisher, executive director of the American Wind Energy Association, an industry research and trade group. "And it could do it without raising electricity rates." A recent report by the Union of Concerned Scientists estimated that, together with other renewable sources, wind could supply a full 20 percent of the country's electricity needs while actually reducing the average price consumers pay.

Renewable energy would get a modest boost under the energy bill passed by the Senate last spring. The measure requires companies to get at least 1 percent of their power from renewable sources by 2005, and it sets a goal of generating 10 percent of the nation's electricity from those sources by 2020. Like the Texas legislation, the bill also creates a credit trading system to help power companies meet the new requirement. "Utilities that aren't in wind-rich areas could buy credits from those where the wind is plentiful," notes Lehr, the former Colorado utilities commissioner, "which helps solve some of the geographic constraints that power generators face." The bill's House counterpart, passed last year, has no such provision.

Whether or not the measure ultimately becomes law, the idea has attracted some high-powered backers. "The federal government can set policy guidelines and then let the free market decide how they're achieved," says Robert Gates, senior vice president of development for General Electric's new wind energy division. "We did the same thing with catalytic converters. We decided to make the air cleaner. But we didn't tell companies how to do it -- just that they had to." A national renewables mandate, Gates adds, would prompt companies like G.E. to pump more money into wind and other renewable technologies, bringing down the cost even further. "We're now developing one of the biggest wind turbines ever," he notes. "And we're doing that primarily to meet the growing demand in Europe."

Futurists also envision a day when wind power can be used to electrolyze water to produce hydrogen, which can serve as a fuel for everything from cars to generators. "We can now see a future where farmers and ranchers can supply not only much of the country's electricity, but much of the hydrogen to fuel its fleet of automobiles as well," predicts Lester Brown, president of the Earth Policy Institute. "For the first time, the United States has the technology to divorce itself from Middle Eastern oil."

Of course, Brown and other environmentalists have been making grand predictions about wind for decades, only to have their ideas undermined as falling energy prices and the resulting lack of investment rendered alternative technologies unprofitable. But with the economic winds finally blowing in their favor, renewables proponents now sound less like Don Quixotes than like rational, forward-looking businesspeople.

Photo by Alex Markels

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