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United States

The great tax credit rush of the nineties

Wind companies have until July to get around 700 MW of scheduled capacity up and running in the US before the federal production tax credit expires. The pressure to meet the current deadline is enormous, even though lobbyists in Washington DC apparently feel the drama is being over played and that the PTC will surely be extended. The money turbines owners may stand to lose is startling. For politicians to apply such unreasonable pressure to a new industry is a questionable approach to supporting clean energy technologies.

The rush is on for American wind projects to be in the ground in time to qualify for millions of dollars of tax credits. Hundreds of megawatts are planned over the next seven months, with developers and turbine makers stretched to the limit to make the most use of the time remaining. To qualify for the all important federal Production Tax Credit (PTC), which adds $0.016-$0.017/kWh to utility payments for wind power, projects must be on line by June 30. The PTC, $0.015 in 1990 dollars, adjusted for inflation, is available for the first ten years of a wind plant's life.

Although wind advocates are desperately trying to get an extension of the PTC, or have it reintroduced once it has expired, developers say they cannot afford the uncertainty and must meet the cut-off date. "This is the most important deadline in the history of wind power," says Leif Andersen of NEG Micon in Palm Springs, the US affiliate of the large Danish turbine maker and developer NEG Micon A/S.

On average more than 100 MW will be installed each month until July -- if the wind industry can keep up the pace, and if the financing and permitting is secured in time. Questions of where and how to get the required megawatts of capacity will be crucial. In one case a developer has already had to chose another turbine vendor, because after a brief delay in the project's plans the production lines of the original choice of supplier had become fully booked.

The pressure to meet the current deadline is enormous, even though lobbyists in Washington DC apparently feel the drama is being over played and that the PTC will surely be extended. Indeed, the money turbines owners may stand to lose, if their plant does not qualify for the PTC, is startling. If a modern wind turbine generates 1.5-2 million kWh yearly, then the loss could be as much as some $30,000 per turbine per year, depending upon whether a company is actually recouping the full value of the tax credit -- taxes not paid -- or not. Realising the full value is more likely to be the case for the largest energy companies involved in wind -- the very companies that are now at full steam ahead.

California pipeline

In California it is the lucrative market for repowering -- the replacement of old wind turbines with state-of-the-art technology -- which is fuelling the fires of the 1999 wind rush. FPL Energy, part of the huge FPL Group of Florida, is starting more repowering on Cameron Ridge in Tehachapi, a site formerly owned by Cannon Energy Corporation. An order for 45 MW of Vestas was still being negotiated for the site, known as Pacific Crest, last month, confirmed Søren Christiansen of Vestas American Wind Technology. He said construction would have to start by January to make the deadline because of tricky weather. The project is in addition to 80 NEG Micon machines -- a total of 56 MW -- that are almost fully installed on Cameron Ridge in a development by international consortium WindCo. The turbines, made by Danish NEG Micon, are for repowering an old FloWind site. They are to be operating by December 15. WindCo consists of M&N Windpower -- backed by Nichimen Corporation of Japan and NEG Micon -- FPL Energy, and Renewable Energy Systems of the UK.

In Palm Springs SeaWest Energy Systems of San Diego is also busy. The company has ordered 45 MW of NEG Micon turbines -- 62 NEG Micon 600 units -- for its West Winds repowering project. SeaWest may end up repowering further wind farms in the area -- an additional 14-40 MW of capacity.

In the same wind resource area, Enron Wind is repowering the Cabazon site with 53 of its Z-Series turbines. In addition, retail sales of green electricity are behind a plan by PacifiCorp of Portland, the energy company involved in the Foote Creek, Wyoming, project, to install two NEG Micon 700 kW units near the San Gorgonio Pass. The electricity will be sold to the homes of Californians by Green Mountain Energy Resources. The company says that some 10,000 of its customers have signed up for wind, its most popular and highest priced electricity package.

Over 100 MW of repowering is also planned for the Altamont Pass by two major development companies, but these projects became uncertain last month as the owners of existing wind plant downwind of the new plants lodged objections, fearing the output from their turbines would be curtailed (following story).

Texas and Midwest

In Texas, FPL will install 75 MW of NEG Micon turbines -- not Vestas as originally planned -- at the McCamey site. The power will be sold to utility Central and South West Services of Dallas. Also in Texas, York Power Corporation's 35 MW project at Big Springs, which consists of Vestas turbines, will be completed by late February. The wind power is to be sold to Texas Utilities.

As in California and Texas, developers and utilities in the Midwest also say they face "tight construction schedules" and are "under the whip in terms of time" as they race to complete projects. As well as some major wind farms, development in the Midwest includes three relatively small projects. Woodstock Hills LLC, run by long time wind man Dan Juhl, has ordered 17 Vestas V44 units -- a total of 10.2 MW -- for a site at Woodstock in Minnesota by June 30, 1999. Construction work started early November, said Christiansen. Just a few miles away, Northern Alternative Energy (NAE), based in Minneapolis, is pushing ahead with an 11.9 MW wind plant of 18 Danish made Vestas 660 kW turbines. The development, at Shaokatan, is to be on-line in April. The order for turbines was signed in late September and the work on the foundations was under way last month. The very same week in September, NAE signed another order for the Shaokatan site -- for 11.25 MW of NEG Micon 750 units for a project known as Dakota Ridge LLC.

In a new twist on the development front, NAE is teaming up for the first time with Enron Wind to install 10 MW in Buena Vista County in Iowa, adjacent to Enron Wind's planned 112 MW wind plant. "It was a question of economies of scale," says NAE's Greg Jaunich. It will sell electricity to the new energy company Alliant, a conglomerate formed by mergers between the two Iowa utilities IES Utilities and Interstate Power, and one from Wisconsin. The 10 MW wind farm was originally to have been installed near Sibley, also in Iowa.

In Wisconsin, community opposition and winter weather could have created costly delays for another NAE project. Madison Gas and Electric's 11 MW wind farm was encountering resistance from local residents. But in mid November the utility secured project approval for 10.6 MW (story page 37). NAE was expecting to start construction soon. "We're hopeful of qualifying for the production tax credit. If we can come to mutually agreeable solutions with the landowners, everyone will be happy," says Jeff Ford of Madison Gas and Electric. The project will consist of 17 Vestas V 47 660 kW turbines. Nearby, another 7.9 MW of Vestas turbines for the utility Wisconsin Public Service were also approved, again using Vestas turbines.

In addition, the fate of the credit may determine whether Northern States Power is required to develop an additional 400 MW of wind power. The 400 MW would be less expensive than gas, if the credit is available, says the Minnesota Department of Public Service in a recommendation to state regulators. Izaac Walton League of America (IWLA) argues that new wind plants would be less costly than gas-fired plants even without the tax credit. A state law requires Northern States to acquire the additional 400 MW if it is in the public interest.

Enron and FPL

Enron is installing two large projects in Iowa, one in Buena Vista County with a generating capacity of 112 MW, and the other with a capacity of 76 MW. The larger one will sell electricity to MidAmerican Energy Co of Des Moines. And the 76 MW plant, also in northwest Iowa, will sell power to IES Utilities of Cedar Rapids. In Minnesota, Enron's second Lake Benton project is under construction. This project has an installed capacity of 103.5 MW and follows the 107 MW already operating on Buffalo Ridge. Enron Wind's Mary McCann says the company planned long in advance to meet the June 30 deadline. "Our schedule has always been to have all our projects completed by the end of the tax credit," she stresses.

Also in the Midwest, FORAS, FPL and NEG Micon hope to have 56, 750 kW NEG Micon turbines installed by February or March. The project is at Clear Lake, Iowa. And in Colorado, the second phase of the Ponnequin wind farm -- 10 MW of NEG Micon turbines -- should be completed this month. The first phase, also for Public Service Co (PSCo) of Denver and also consisting of NEG Micons, went on-line in early November.

In the northwestern US, FPL's completed Vansycle Ridge project in Oregon was being inaugurated on December 3. The 29.4 MW plant, which consists of 38 Vestas turbines, is the first modern wind farm in the state. Power will be sold to Portland General Electric. And near the 41.4 MW wind farm at Foote Creek in Wyoming, developed by SeaWest and Tomen Power Corp and expected to begin commercial operation December 15, three additional 300 kW Mitsubishi turbines are to be installed by SeaWest by June 30. The power will be sold to Bonneville Power Administration, a large semi-government owned utility in Portland. The foundations had already been poured in mid November. More wind capacity developed by SeaWest could also be on the way in Wyoming although nothing is yet firm.

new england

In New England a 5 MW project is now on a fast track too. Endless Energy Corp in Maine hopes to install seven medium sized turbines--probably 660 kW models from Denmark--on Little Equinox Mountain in Vermont. Instead of gathering its own wind data, it is now in the process of buying it from Green Mountain Power. Green Mountain had a small wind installation at the site in the 1980s. Harley Lee of Endless Energy says the firm is also hoping to cut corners for the project, dubbed "Little Equinox," by using the concrete foundations on which the utility's two turbines were once installed. Endless Energy's first two turbines would cost some $1.5 million to install, estimates Lee. A further five would make up the second and final phase. It would be the firm's first wind project.

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