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Wednesday, June 3, 2009

Windpower: A Stabilizing Force in an Economic Downturn

Commentary by
Michael Vickerman
Executive Director, RENEW Wisconsin
June 2, 2009

Much to no one’s surprise, energy-related carbon dioxide emissions fell sharply in 2008 from previous year levels. The U.S. Energy Information Agency (EIA), which has been tracking greenhouse gas emissions since 1990, attributes the 2.8% decline to a combination of high energy prices in spring 2008 and the global economic contraction that picked up strength during the second half of the year.

This was certainly the largest year-over-year decline ever reported by the agency. However, even with 2008’s substantial decline, greenhouse gas emissions from U.S. sources have risen 16.9% since 2000. The results, which are preliminary and are likely to be adjusted this fall, can be viewed at http://www.eia.doe.gov/oiaf/1605/flash/flash.html.

The most dramatic reductions occurred in the transportation sector, which fell by more than 5%. Jet fuel consumption is down 9.1%, from this time last year, while demand for diesel fuel consumption is off by 9.9%, reflecting a substantial reduction in truck traffic and rail tonnage. Though it seems like ancient history, the price of diesel fuel on Memorial Day 2008 was $4.72 per gallon, $2.45 higher than current prices.

Even the electric power sector, one of the faster-growing sources of emissions in recent years, was not spared from this trend. According to EIA, about half of the 2.1% reduction in CO2 emissions in the electric power sector can be attributed to declining electricity output. But another contributing factor was the extraordinary growth in installed wind generation capacity last year. A record-shattering 8,500 MW of new wind projects was placed in service in 2008, capping a four-year boom that has nearly quadrupled total installed capacity in the United States.

Bucking the downturn, wind project construction has been one of the very few bright spots in the domestic economy. Nowhere was the pace of activity more feverish than in Iowa, now the No. 2 state in installed wind capacity, trailing only Texas. More than 900 utility-scale turbines started operation in 2008, doubling the state’s wind generating capacity. This year, the Iowa Policy Project expects wind energy to account for 15% of the state’s total generation. In no other state has wind energy penetration even reached double-digit figures.

Last year’s frenetic construction pace is starting to ebb, however, as wholesale electric prices sink to historic lows. As declining demand for electricity exerts downward pressure on coal and natural gas prices, wind energy developers will struggle to attract financing for their projects. Right now, the signals from the power markets strongly discourage new plant construction of any type, be it wind, coal or natural gas.

The pain administered by the economic downdraft has been especially acute at Alliant Energy, whose Wisconsin subsidiary is located in Madison. Having lost two very large customers due to plant closures, including the mammoth General Motors plant in Janesville, Alliant is aggressively cutting costs to prepare for a forecasted 10% decline in sales to industrial customers. These measures include a suspension of contributions to employee 401(k) plans, layoffs affecting all management levels, the closure of redundant power stations and the postponement of planned power plant upgrades.

Ironically, even though it is scaling back operations elsewhere, Alliant’s Wisconsin subsidiary is moving forward with a 200 MW (133 turbine) wind project in southern Minnesota called Bent Tree. If approved, Bent Tree would be the largest wind project owned by a Wisconsin utility.

Alliant’s desire to build Bent Tree is a direct consequence of Wisconsin’s energy policy, the centerpiece of which is a requirement on utilities to increase the renewable energy content of electricity sold to their customers. Between now and 2015, Alliant must acquire additional sources of renewable energy to satisfy that mandate. Given where the economy is headed, Wisconsin’s renewable electricity standard may be the only thing that’s keeping Alliant in the power plant building business.

If Alliant’s windpower plans stay on track, the utility will meet its 2015 target several years in advance. Last December, Alliant commenced operations at its 68 MW (41 turbine) Cedar Ridge plant southeast of Fond du Lac, in the heart of Wisconsin’s wind belt.

Between the nasty economic weather out there and the state’s pro-renewable energy policy, I expect greenhouse gas emissions here to fall even more dramatically in 2009.

Sources:

“Alliant eliminates 60 jobs in state” (May 28, 2009)
“Beloit power plant to shut down by year-end” (May 26, 2009)
“Alliant decisions on plants on hold” (May 24, 2009)
“Like economy, greenhouse has emissions fell in ‘08” (May 22, 2009)
“Rate watch: CEO calls rate hikes ‘most unwelcome’ (May 14, 2009)
http://www.jsonline.com/blogs/business/pluggedin.html (Tom Content’s blog for the Milwaukee Journal Sentinel)


Michael Vickerman is the executive director of RENEW Wisconsin, a sustainable energy advocacy organization headquartered in Madison. For more information on what Wisconsin is doing to advance sustainable energy, visit RENEW’s web site at: www.renewwisconsin.org and RENEW’s blog at: http://renewwisconsinblog.org. RENEW also operates Madison Peak Oil Group’s blog: http://www.madisonpeakoil-blog.blogspot.com

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