Visit windpowermonthlyevents.com for the latest on our upcoming conferences and webcasts

United States

United States

OVER THE CLIFF AND ON TO THE THIRD WORLD, UNPROFITABLE WIND FARMS UPROOTED AND SOLD OFF

Significant numbers of turbines are being uprooted in California and shipped to India or other foreign countries for installation because of diminishing financial returns in the US and the country's bleak economic outlook for wind. Operating turbines are also being shut off as they are not making enough money. The article details which companies are part of this trend and the economic difficulties their projects face. Installed capacity has steadily declined in California over the last three years or so, with most wind farms toppling over the so-called "year 11" cliff. The loss of SO4 contracts is also being blamed by New World Power for at least some of its downsizing.

A worrying new trend is taking shape in California, the cradle of the US wind industry. Significant numbers of turbines are being uprooted and shipped to India or other foreign countries for installation because of diminishing financial returns in the US and the country's bleak economic outlook for wind. Operating turbines are also being shut off as they are not making enough money -- with no immediate hope of reselling the equipment.

In Palm Springs, Difko is taking down 132 Micon 108 units for shipment in containers to India and installation by a tax deadline of March 31. Since that deal was inked, wind companies in California have been getting many inquiries from India. Meanwhile another firm in the San Gorgonio area has sold six turbines to Canada, although it does not want details publicised for business reasons.

To the north, hundreds of turbines in the Altamont Pass will be closed down in early 1996 as they are no longer profitable, says consultant Don Smith. In one case, a wind farm is to shut down shortly after January 1 as the operator had only received $0.021/kWh from Pacific Gas & Electric for some months in 1995, compared with a previous rate of $0.12-0.14/kWh. After charges for stand-by, transmission loss and a bad "power factor," this operator appears to be netting an astonishingly low $0.015/kWh, says Smith.

The trend will likely accelerate; several more companies are apparently considering moving equipment overseas or to the Midwest. Previously, only marginal turbines had been moved out of California. But now fully operational projects are being taken down for shipment, a powerful gauge the US market's weakness. Financial returns are so low for many California wind farms, especially those over the Standard Offer 4 "price cliff" because their ten year SO4 contracts with utilities have expired. Without the more lucrative SO4 contracts, operators are getting just $0.035/kWh, or less.

The 132 Micon units in Palm Springs are being sold to Pearl Securities, Cannon Energy's India partner in Ahmadabad, Gujarat. The turbines -- already shipped out via San Diego last month -- will be installed near Dhank, says Cannon's Dennis Scullion, who put the deal together. He hopes for further sales. Others may follow suit soon. Peter Banner of Support Resources Inc may sell his 20 Windmatic 65 units, which are adjacent to the Difko site. "I'm looking to sell them anywhere," he says. Even so, he questions re-selling older equipment overseas, and wonders how easily it can be maintained, since the typical $30,000-40,000 price does not include parts or service.

Miles Barrett of Wintec says his company is not ready to move turbines -- their projects have not fallen over the SO4 "price cliff" yet -- but it may happen. "If energy prices don't come upÉ it may be something we have to address," he says. "But luckily this is not a battle we have to lead."

Declining capacity

Installed capacity has steadily declined in California over the last three years or so, although the trend of uprooting operational equipment is more recent. In 1995, capacity dropped significantly, estimates consultant Paul Gipe. Final figures were, however, not out in early December. In northern California, utility Pacific Gas & Electric bought power from only 687 MW of wind projects in the first quarter of 1995, compared with 804 MW in the same period in 1992. Gipe also notes that, in southern California in 1995, the increased capacity from the Vestas V27 units installed at Alta Mesa would be offset by 14 MW taken out in Palm Springs. Even so, he says overall US capacity increased in 1995, with the focus shifting to Texas with the 35 MW of Kenetech turbines and Zond's 6 MW.

Most wind farms in California are now toppling over the so-called "year 11" cliff from 1994 to 1997, as their utility contracts expire. About 1570 MW of California's installed capacity will be affected overall. To avert disaster, independent power producers had tried negotiating with the utilities for less-devastating cuts in payments, possibly for the "marginal" or "incremental" cost of the next unit of power, but little has apparently been secured.

Added to the worrying state of affairs in California is uncertainty about the shape of the market ahead. The survival of the federal production tax credit is still not assured, changes are possible in the Public Utility Regulatory Policies Act (PURPA) of 1978 -- and the whole electricity market is in a state of upheaval as deregulation of the power industry takes hold.

Even so, some are still hanging on. All the turbines at San Gorgonio Farms now have less favourable contracts with the utility, mostly since early 1995, says the company's Bill Adams. Now he gets just $0.021/kWh from Southern California Edison (SCE), compared with a selling price of $0.12-14/kWh for residents in Palm Springs. In 1994, Adams' wind electricity was commanding $0.10-0.14/kWh.

"SCE can't compete and stay in business for two point one, but they're asking us to do it," says Adams. "I think they're trying to put us out of business." As much as 55% of his gross now goes to maintenance and labour. Parts, insurance, property taxes and general administration come from the balance. "Those of us who can will tread water," he says. Adams hopes that in two years, with deregulation in the state, he will have a more even playing field -- with the utilities having to include their total business costs for generation when they compete in the power pool. An adequate return would be $0.035. Until then, how will he survive? "With a great deal of difficulty."

¥ The loss of SO4 contracts is also being blamed by New World Power for at least some of its downsizing. Most recently the firm 's grid power division in Palm Springs appears to be closing down. The site's 12 technicians and major clients were informed last month the division was closing at the end of December. New World had taken over the firm, Field Service and Maintenance, located near the San Gorgonio Pass wind area. Senior employees at the company were let go in the autumn (Windpower Monthly, November 1995).

Have you registered with us yet?

Register now to enjoy more articles
and free email bulletins.

Sign up now
Already registered?
Sign in

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus

Windpower Monthly Events

Latest Jobs