United States

United States

Development doubts over auction winners -- Shadow lies over wind's scoring of lion's share of incentives

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Wind power projects breezed to the finish line again in the second California auction for new renewables by winning almost all of $40 million in state incentives. A total of nine proposed wind plants with an installed capacity of 439.05 MW cornered 93% of the funds -- $33.7 million -- in the second New Renewables Resource Account auction.

But despite the auction results, which confirm wind's competitiveness with other renewable energy technologies, the projects may not be built any time soon. In the first bidding round for incentives in June 1998 wind also won big -- yet today only 18.6 MW in two projects have been built out of the 13 wind projects totalling about 300 MW in installed capacity that were awarded $49.6 million in subsidies two years ago (Windpower Monthly, March 1999), according to the California Energy Commission's (CEC) records.

Moreover, given the current uncertainty created by the state's electricity crisis, it is not clear whether much wind at all will be installed in California until there is a fix for the electricity market (story page 34). The successful bidders have four years in which to build the projects in order to receive the funds.

Still, the size of wind's win in the second auction is significant. This latest round of projects would alone boost the state's installed wind capacity of 1604 MW by more than a quarter, or 27%. "The bottom line from this auction is that for a total extra cost of about $37 million, or a little more than $1 per person, Californians will see enough new wind power plants on-line within the next 18 months to meet the daily needs of more than a quarter of a million people," says a pleased Randy Swisher of the American Wind Energy Association (AWEA).

FPL dominant

The lion's share of funding was won by FPL Energy, the largest operator of wind farms in the United States. FPL, based in Florida, clocked up a total of $30.2 million in incentives for 410 MW in four different wind plants. SeaWest, a veteran wind developer based in San Diego, won incentives for two wind farms of $726,700.

Energy Unlimited, of Pennsylvania, had a 16.9 MW project in Riverside County that was awarded $2.3 million. And Wintec, based in the San Gorgonio area, has 6.75 MW in wind capacity in two adjacent projects funded. Most of the projects are to be installed this year, although FPL's 70 MW plant in Solano County, north of the Altamont wind resource area, has an on-line date of March 15, 2002.

The tight deadlines for the latest round of proposed projects are at least in part because the federal Production Tax Credit (PTC) for wind is currently available only for projects completed up to December 31, 2001. Worth $0.015/kWh adjusted for inflation for the first ten years of a project's life, the credit may or may not be extended.

The non-wind winners were three small hydro projects, four landfill gas and one biomass plant. A total of 742 MW in capacity was bid in the auction, which had a closing date of November 15, 2000. Of that, 471.339 MW was selected, including the 439.05 MW of wind. Non-wind projects awarded incentives in the first California auction have also not been built. In all, 33 projects are scheduled to come on-line this year from the 1998 auction, of which 279.23 MW is wind and 25.42 MW is other renewables.

Modest incentive

To the surprise of many, FPL requested -- and thus was given -- a modest incentive of just over one quarter of a cent, $0.0026/kWh, for its largest project, the 200 MW Southern Sierra Power LLC proposal to be built near Mojave. "That's much smaller than we expected," said an insider at the CEC. The proposal is the largest that secured an incentive. The other wind projects asked for -- and were awarded -- incentives of between $0.0071/kWh and $0.0112/kWh. The CEC funds eligible projects that request the lowest incentive. Bidders were limited to a maximum incentive of $0.015/kWh.

The wind projects from the first auction round that have not been built include two medium-sized Enron Wind proposals, 40 MW for Gorman and 30 MW at Victory Garden. Also stalled is a slew of small projects totalling 64.4 MW proposed by SeaWest Windpower Inc. Enron Wind Development's 16.5 project in San Gorgonio, which has been bought by PG&E's national energy group, is the lone of the two projects that has been installed. The other is SeaWest's 2.1 Phoenix 1 project in San Gorgonio.

The incentives, raised from the rates paid by customers of the state's investor owned utilities, are available for the first five years of a project's life. The account, created by California's 1997 restructuring legislation, originally consisted of $162 million. The funding was to have lasted for four years, from ratepayer returns collected from January 1998 until March of 2002. But the legislature granted an extension for the program for ten more years.

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