United States Incentive Policies

According to the American Wind Energy Association's Wind Power Outlook 2003, wind is a "clean, competitive energy source that will help power the 21st century."  The American Wind Energy Association (AWEA) estimates that, with steady supportive policies including proactive regional transmission planning, wind power can provide at least 6% of U.S. electricity by 2020.  The baseline price for electricity, against which wind energy has to compete, unfortunately continues to be distorted by fossil fuel subsidies.  However, increasingly utilities around the country are being pressured by consumers, the government, and public interest groups to be involved in purchasing and offering 'green' energy. 

An important part of the wind power market achieving this AWEA estimated 6% goal is public policy. More states are adopting Renewable Portfolio Standards (RPS) in an effort to diversify energy portfolios and increase the share of renewable sources utilized by both public and private utilities.  RPS is essentially a public policy tool that requires an increasing share of states’ electricity to be produced by renewable energy technologies. The state requires generators or retailers to possess a number of renewable energy credits determined as a percentage of kWhs sold.

Describe a kWh???  Alice does describe  Megawatts in the tech section, but we discuss  kWh in a few places before Alices’s description.  Also, kWh aren’t explained anywhere and I don’t understand them .
Since the kWh will be used frequently in the paper, the abbreviation will be explained.  The abbreviation kWh refers to the amount of kilowatts produced per hour.  The abbreviation mWh is also used often and it refers to megawatts produced per hour.  One megawatt is equal to a thousand kilowatts.  To put these measurements in context, an average home consumes find numbers and explain

A second driver in the U.S. market for wind power is the tax credit offered by federal and state governments. The federal government's Production Tax Credit (PTC) has been offered in two-year cycles since 1993.  The PTC offers from 1.5 to 1.8 cents/kWh for 10 years of the project life of turbines placed in service.  According to Karen Conover, an expert developer in the industry, the PTC is significant enough to cause a boom-bust cycle in the wind turbine industry in the United States.  If it were to be extended for a minimum period of 5 years, Conover projects that demand for turbines would cause the cost of the systems to lower competitively with the coal/natural gas baseline price for electricity. 

Another significant driver in the greening of power purchases by utilities is the preference of customers for clean power. For example in the Pacific Northwest, Bonneville Environmental Foundation bundles power produced from renewable sources and markets it to customers through two programs, green pricing and green tags. Both offer clean energy for a slightly higher price to both residential and corporate consumers. According to Mark Aalfs of Tacoma Power and Light, green power marketing shows results. Many experts in the field believe that the potential of green power marketing to drive up demand for wind turbines should be recognized as a key future driver for the wind industry.

While the foregoing explanations of tax credits and green power purchasing show promise for the penetration of the WTC turbine in an expanding market, the U.S. policy environment for wind at the federal level is far from rosy, although there are recent signs of improvement.  Deregulation of energy markets of U.S. energy markets during the 1990s precipitated a supply crisis in 2000-2001.  The high price of fossil fuel power during this crisis caused many utilities to gain interest in wind power as a hedge.  The Federal Energy Regulatory Commission (FERC) is currently in a process to exert more regulatory control over regional organizations to change the rules of the game to avert future crises. This is important to the wind industry because it represents a shaking up of the old order and a new design for the market.  However, it remains to be seen if this federal initiative will help or hinder the wind industry.

AWEA recognizes the political challenges the wind industry faces to break into a regulatory system designed with fossil fuel power plants in mind. One major challenge for the wind industry is to level the playing field in the wholesale power market between wind energy producers and fossil fuel energy producers.  Just as policy and fuel prices affect incentives to invest in wind energy, tariffs placed on electricity generated from wind farms can have a significant impact on the economics of a project. The tariffs are part of an intricate rule structure designed to favor large coal fired or natural gas power plants within a centralized grid power system.

AWEA has lobbied consistently at the federal level to force regional transmission organizations to eliminate cost barriers that make wind power more expensive.  These tariff costs are higher for wind energy producers due to penalties levied on them when the intermittency of the resource interrupts scheduled deliveries of power through transmission lines. One sign of hope in this area is that the Bonneville Power Administration decided in July 2002 to eliminate these penalties.  Other utilities and transmission organizations, under less pressure from environmentalists, may take more time to develop the internal administrative processes and procedures to fairly assess the costs involved with green power purchasing.