Different players are responding in different ways. Last year saw more mergers in US business than at any time since the go-go 1980s, with the utility sector the second busiest. With more than $41 billion of merger deals announced in 1996, only telecommunications had more. The acceleration of utility "merger mania" is a gauge of how much the electricity industry is being transformed. More than 50 utility mergers were announced last year, a far higher number than the 13 of 1991, worth a paltry $806.5 million. And in the last two years, it is estimated that more than 25% of the 100 largest utilities were party to a merger.
With such metamorphosis in the US electricity industry, instability was sure to push a newcomer technology without much clout like wind to the sidelines, for a while at least. But we've also seen that deregulation brings with it great opportunities for wind to finally get access to rising consumer demand for cleaner electricity. Green pricing schemes are opening new doors in a string of states -- and in California, part of the deregulation deal has been the allocation of a large sum of cash to renewables.
But who would have expected, also as a spin-off to deregulation, that wind might become a bargaining device for those seeking support for mega-mergers? That is what appears to have happened in the Pacific Northwest, according to the environmental and consumer groups who got Enron and PGE to agree to develop renewables -- namely the 24.9 MW Vansycle wind project -- in return for support for their corporate marriage (page 18). Another key element of the deal is PGE's promise to support a 3% charge on its electric service revenues for a decade to fund renewables, conservation and home insulation programmes.
It is hard to know how good all of this is for wind in the long term. PGE had already promised to buy power anyway from a Vansycle project before Enron muscled its way onto the scene. But it is not inconceivable that a wind project or two might again be used to make corporate deals green enough to be palatable. There may not be many wind companies left in the US to pull off a "Zond" and elope with a capital rich Enron. But the terms secured for the Enron-PGE merger do suggest that wind projects may more often become negotiating chips when approval from regulatory, political or advocacy groups is uncertain.
There are questions, however, about the nature of the takeover. Will Zond and its wind activities disappear under the Enron wing? After all the parent company of America's largest wind firm is deeply into natural gas that will become even cheaper by comparison once wind's production incentives disappear. Nonetheless, it seems that Zond is to keep its name, its Tehachapi headquarters and its 200 or so jobs. Nobody seems to doubt either that Enron's agenda is to become more green.
market incentives or industry subsidies?
Meantime another major spin-off from deregulation is in the works in California where as much as $540 million is being recommended for renewable energy subsidies (page 34). Once again, Zond, as the leading US wind company and most powerful member of the American Wind Energy Association, is at the centre of the debate, this time on how best to spend the money. AWEA is arguing that the proposal to reserve 17% for building consumer demand -- via financial incentives such as rebates to encourage "green buying" -- is misplaced, even though most of the remainder would go straight to suppliers in the renewables industry.
AWEA claims that rebates of public money to individual consumers are costly, too uncertain, and the funds are more likely to end up in the pockets of green marketers than green power producers. But by taking this stance AWEA is flying in the face of the wishes of environmental groups. Instead of immediate subsidies to industry that are as big as possible, these groups are advocating the European route of stimulating consumer demand with market incentives aimed at encouraging a greener electricity profile.
It might mean having confidence in long term consumer preferences, but the idea of rebates, or of consumer tax credits, is growing in popularity in the US along with the start of what may be a rush to green pricing. In addition, wind's stance in California is becoming increasingly tiresome to those representing other interests, especially now the largest wind company is part of a huge corporation that can well afford to think farther ahead. As one long time industry observer wearily commented about the wind lobby: "Never has one group of people been so adept at grabbing defeat from the jaws of victory."