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The green power jungle

For the tiny wind industry, the Californian plunge into a competitive electricity market is both daunting and filled with promise. Not only does the state have the highest electricity prices in the western US, giving wind more of a chance than in areas where power is sold dirt cheap, it is also the crucible for large scale wind energy development. Few places in the world have so much experience of wind power, making the technology an obvious choice for meeting free market demand for green power.

Deregulation in California starts with a supposed bang from New Year's Day. Already it looks like a jungle for green suppliers, for consumers who want clean power -- and for just about every other participant smaller than an elephant in this massive experiment. For the tiny wind industry, the Californian plunge into a competitive electricity market is both daunting and filled with promise. Not only does the state have the highest electricity prices in the western US, giving wind more of a chance than in areas where power is sold dirt cheap, it is also the crucible for large scale wind energy development. Few places in the world have so much experience of wind power, making the technology an obvious choice for meeting free market demand for green power.

The market that is opening is huge. Seventy per cent of California's 32 million residents, tens of thousands of small businesses, and most of the state's 40,000 larger businesses and industrial users can choose their electricity supplier from January 1. The arrival of a $20 billion dollar market overnight is going to be a shock to the system. Somewhere in the middle of it all are customers who want to buy wind energy -- and wind power generators who want to sell it.

California is the first part of America to become "competitive" over the retailing of electrons. Because of the size of the shift no-one dare hold back in case they miss out. As much as four or five months ago, Enron Corp of Texas -- one of several competing for the green market -- had 400 employees in California, including no fewer than 15 attorneys and lobbyists, trying to ensure the rules of deregulation are as favourable as possible. Manoeuvring among larger players suddenly seems to be happening all over the place. Japan's Nichimen Corp has teamed up with ESI Energy, an offshoot of a Florida utility, and NEG Micon of Denmark. This team now stands poised to jump into sizeable wind farm repowering projects, replacing old turbines with more effective modern machines (page 18). Indeed, ESI seems to be gearing up to challenge Enron as king of the green power jungle, at least for as long as the residential market -- where environmental morality is stronger than in business -- is a sizeable battlefield for market share in the four year transition period set for deregulation.

A market for wind power seems to be there for the taking, at least in the short term. A plethora of companies are offering customers the choice of electricity from renewable sources during the next four years, during which time cash is available for some market protection for green players (pages 32-37). These special offerings of clean power, all with similar names and claims, have already formed a dense undergrowth of new green growth which could prove to be more off-putting than attractive to the bemused consumer.

All this is all happening just as the Kyoto Protocol is focusing the world's attention -- and that of Californians -- on renewables as never before. There is little doubt that at least some people have been swayed by all the talk to choose green electricity. That could make California a great market for wind once again. Unfortunately, though, there are already hints of confusion that could make the jungle impenetrable for ordinary mortals. Here in California we are hearing that both the Power Exchange to operate the spot electricity market, and the Independent System Operator to transport the power, are facing computer problems. And just to add to our confusion over which supplier to choose, the Public Utilities Commission is granting an unfair marketing advantage to a select few. Last month it ruled -- surprise, surprise -- that subsidiaries of the state's Big Three utilities may continue using their (familiar) names after January 1. Meanwhile, these utilities say they may not be able to switch over large chunks of customers to their chosen supplier, at least not in the beginning.

The whole point of deregulation is to reduce the price of electricity to the consumer by making the industry more efficient through competition. For wind power, though, it is good news that electricity rates cannot drop much in the near future because of the $28 billion bill for the Big Three's "stranded costs" of unlucky investments in mainly nuclear power. The majority of small consumers -- those who are most likely to be interested in green electricity -- will get little more than the mandatory 10% rate cut over the four year transition period, perhaps a $6.30 monthly cut on the average residential bill. This might make them look favourably on an alternative option -- to continue paying their current rate and receive electricity from renewable sources instead of getting a price cut.

Such effective restrictions on the market are not to the liking of the new brand of hard-selling power provider. It is only the large animals in the jungle, such as McDonalds and Neiman Marcus, who have really entered into the swing of things and struck power purchase bargains. "It's like California announced a party but nobody's showing up," sniffs a disappointed chief executive of Enron, Kenneth Lay, talking to the San Francisco Chronicle last month. He would be wise to spare a thought for his company's renewables division, and not least for Enron Wind Corporation (EWC). If it fails to get a foothold in the next four years, what are its chances in the long term? The situation is even more critical for the independent competitors of EWC, who must stand on their own feet to survive. They no doubt envy the position of a renewable energy company tucked safely under the wing of a giant parent whose main interest lies with fossil fuels.

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