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What is Wind Power? Wind power is the energy sector that focuses on electricity produced by large wind turbines. Unlike natural gas, which is a resource that is sold to and priced directly by markets, wind must first be converted to electricity to have any marketable value.

Wind is a key source of renewable energy—no pollution, free fuel and minimal environmental impacts (primarily land use and avian safety issues). Turbines and towers are expensive pieces of capital equipment with high up-front costs but reliable long-term operation. The wind power industry has seen tremendous growth during the last five years and continues to expand rapidly, providing entry points for opportunistic capital. Installed capacity increased in the US 35% between 2004 and 2005.

Although wind power experienced a mini-boom in the 1980s (largely driven by investment tax credits in the wake of the oil shocks of the 1970s) the quality of the technology at that time was insufficient for competitive power generation. In the 1990s European firms aggressively invested in R&D and successfully rebuilt the industry—aided by many European governments that guaranteed stable and generous prices for wind-generated electricity. As production costs have continued to decline, wind power technology today provides a proven, robust, and economically viable source of clean power generation that offers utilities and their consumers a hedge against the risk of the price volatility recently seen in fossil fuels.

Advantages	Challenges

Modular: —Work on One Turbine Doesn't Affect Others —Allows Gradual Capacity Expansion —Quick to Install	Limitations in Storage Technologies

Cost-Competitive Where Wind and Market Exist	Transmission Access is Not Always Readily Available

Windy Periods of Day and Year Often Coincide Peak Loads	High Capital Cost

Land Use Impact Small (compatible with other uses)	Erratic Public Policies to Support Wind Power

Local Energy Source Benefiting the Local Economy (often rural)	Environmental—Impact: —Visual —Noise —Avian NIMBY: Cape Wind

What's Happening in Wind Power?

Several factors drive the substantial growth in wind power in the US:

1) Technology improvements have driven the average cost/kWh of generation down enough to be competitive with fossil fuel alternatives. Better operational practices have also mitigated the uncertainty of the wind resource.

As a result, wind has finally emerged as a predictable, mainstream, utility-scale source of renewable electricity.




2) Renewable Portfolio Standards—statewide mandates requiring that increasing amounts of electricity be generated by renewable sources—are implemented in 21 states. Expansion to higher requirements and additional states is underway. 3) An increasing number of utilities are offering Green Power programs, wherein customers pay a premium for wind power and are guaranteed future electricity pricing. Customers in states such as Oklahoma and Colorado now sometimes pay less than standard utility customers because of the recent increases in the price of coal and natural gas. 4) The rise in natural gas prices over recent years has increased wind power’s competitiveness. At current natural gas prices wind power is the cheapest source of new power in some parts of the country. 5) Utilities with large portfolios of coal and natural gas-fired power plants are preparing for future carbon pricing and restrictions on CO2. These utilities are diversifying their generation sources. The high growth potential of the wind industry has caught the attention of independent power producers and investment banks. In 2005 the wind power industry continued to consolidate as large, well-capitalized entrants such as Goldman Sachs and AES bought up smaller development companies. Soaring demand for turbines has sold all available capacity from manufacturers through 2007.