Cash Blowing in All Directions

How much money is in wind energy? As much as anyone with a green soul might wish that renewable energy be solely about environmental sustainability, the true determinant of wind’s success is its economics, and right now there’s a tornado of money whirling through the industry. It is an inexhaustible energy source for utility companies and their customers, and it provides income to landowners; turbine-parts manufacturers; the construction companies and workers who build the 80-meter-tall, modern-day windmills; and the operational-support teams that remain on-site. According to the American Wind Energy Association (AWEA), more than 75,000 wind-industry employees currently generate power equivalent to the amount used in 10 million average homes.

The fact that established fossil-fuel companies such as BP are developing wind farms is further evidence of the energy source’s long-term economic potential. To learn more about where the money from wind goes, American Builders Quarterly was able to speak with key players at BP Wind Energy: John Graham, president and CEO, oversees the $5 billion business, and Kimberly Randolph, vice president of projects and development engineering, has overseen construction of several of the company’s 15 wind farms. They say the money is there and that with it come jobs—but they’re also quick to note that the uncertain nature of government policy spells an unclear future for the industry unless voters and lobbyists act fast.

Wind has become more cost-competitive. What are the factors that led to that?
John Graham: The growing scale of the industry is bringing down the costs of components. Also, investment in R&D by the turbine manufacturers has created technological efficiencies. The Production Tax Credit was put into place as part of the Energy Policy Act of 1992 to incentivize all forms of renewable energy, and wind has been the biggest winner, which has created a resurgence in US manufacturing jobs in wind energy.

So most of the manufacturing for American wind farms is also done in the US?
JG: Since 2002, the growth in US wind manufacturing has increased local content in wind turbines to more than 65 percent. The cost of … transporting components to wind-farm sites is falling, and we are developing more sophisticated ways to measure the available wind energy, allowing us to site turbines in the best places. Added together, these improvements are bringing down the cost of wind energy [and putting it] closer in line with natural gas and coal.

Let’s talk about the impact on local economies. Kimberly Randolph, what is your role in the development of individual wind farms?
Kimberly Randolph: I am responsible for the engineering and construction of the wind farms, which [happens after] a two- to three-year development project to gather the necessary approvals and permits that are required at each site.

All BP wind farms in America are on land, not water. What is the reason for this?
KR: The US is blessed with significant amounts of wind energy on land, the support of public policy, and landowners who can benefit from harvesting the wind. Our US strategy is focused onshore.

So a landowner, who is typically a farmer or rancher, will give up a portion of property for the wind turbines to be built and to operate on. What’s the trade-off in this deal for them?
KR: The majority of our land leases are for a 40-year term, and in exchange landowners receive a regular income. Farmers and ranchers keep most of their land in productive use around the turbines; each turbine only requires about a 40-foot-diameter space, enough to turn a truck around after construction.

JG: Many wind farms are located in the central farming belt of the US. Agriculture is a cyclical business, so by harvesting the ever-blowing wind, landowners can offset the economic cycles of agriculture. Wind farms provide them with a new income source from the land.

But there must be some disruption during construction.
KR: We work closely with the landowners to minimize the impact on the landowner during construction. The build process is quite fast; it takes about eight months to a year to complete. We hire a crop adjuster, a consultant who carries out an independent verification of the economic impact during the construction period, by which we determine how much to compensate that landowner for any impact to their crops.

How do you determine the precise siting of the turbines?
KR: A thorough analysis is done to determine the turbulence and wake profile of a site. Every site is unique, and all the landscape factors are taken into account in siting the turbines to catch the wind in the best way.

And how do you explain your approach to the local community? There can be public concern, and sometimes opposition, to the establishment of a wind farm, right?
KR: From the start of a project, we reach out to landowners, community groups, and regulatory agencies and regularly hold public meetings. During construction we strive to behave in a neighborly fashion because we are neighbors now and will be part of the local community for many years.

Can you give us a sense of the jobs impact on local communities where you develop wind farms?
JG: We are building two farms this year. We will employ some 250 people building the Mehoopany, Pennsylvania, site, which has 88 turbines. At Flat Ridge 2 [in Kansas], we are employing 500 construction workers to build 294 turbines. When the farms are in operation at the end of the year, we will employ about 20–30 people who will work full-time in operations and maintenance jobs. These are people with technical skills in engineering and electrical maintenance. We are working with local technical colleges to develop training courses for technicians.

KR: Turbine manufacturers carry out most of the maintenance. The wind-farm manager and deputy wind-farm manager are BP staff and usually people we find locally.

Do you work with the same construction firms for all the work?
KR: For each wind-farm project, we go through a competitive bidding process, where we look for construction companies with good experience in renewable-energy construction, particularly wind, and [determine whether] they have relevant, local site experience.

We also consider carefully their safety performance—including OSHA and non-OSHA recordable accidents—and their plans for how they would build the wind farm safely.

Our three most recent general contractors are Blattner Energy, out of Avon, Minnesota, which is building Flat Ridge 2 in Kansas; RES Americas, based in Broomfield, Colorado, and responsible for the Mehoopany site in Pennsylvania; and Mortenson Construction, out of Minneapolis, Minnesota, which built Sherbino 2 in Texas.

One might expect that the larger, multinational construction companies would do this work.
KR: The companies we are working with are companies that got started early in the renewable-energy construction industry and have established a strong track record to show for it. All have excellent capabilities in building wind-energy farms.

What about subcontractors? Who gets hired and why?
KR: Some of the sites are very remote, so the answer depends somewhat on where the wind farm is located. Local subcontractors can be very helpful when we can capitalize on their area knowledge and experience. We often hire them to build the roads and for tree clearing when building on a wooded site.

We hear so much about the grid, the electrical delivery system that’s aging in America. Because it is out of date and geographically oriented to other energy sources, it impairs alternative development. Is BP involved in that?
JG: The American grid is 100 years old and very regional in nature. As a wind-farm developer, we can be proactive in constructing short transmission lines to connect with the local grid. At the Cedar Creek 1 wind farm [in Weld County, Colorado], we built 76 miles of transmission lines to make that connection.

You have wind farms in places that are historically associated with fossil fuels, including four in Texas. What kind of reaction do you get to an alternative-energy installation there?
JG: When Texans consider their history, they are mindful of change. We are developing the future with them, adding renewable wind energy to the mix of other energy resources they have in the state. This interest in the future is present in every state we work in.

Is there an educational function to a wind farm, something that helps the public envision this future?
KR: Indeed. We reach out to local schools, providing speakers to school classes on renewable energy. We can also host field trips. Our Silver Star I facility [about 80 miles southwest of Dallas–Fort Worth] hosts around 80 university students every year.

BP clearly is invested in wind but recently closed its solar program. Is wind where you see the long-term future?
JG: The US has a huge amount of wind, and we have the ability to capture and grow this resource significantly. Wind energy will likely constitute up to 20 percent of the energy mix in the next 20–30 years. In the US, we can build large wind farms on land whereas in Europe most of the wind is being built offshore. We’ve developed good capabilities for constructing and managing wind energy.

Over the long-term, however, I think future generations around the world will figure out how to harness more energy from the sun. Wind will be a source as well, but both have challenges and opportunities being intermittent sources of energy.

But a lot of it comes down to government policy. The Production Tax Credit will expire at the end of 2012 unless Congress renews it. We need to continue nurturing the renewable-energy technologies to continue building up the economies of scale to compete with traditional sources of hydrocarbon energy. We are very close to being able to compete consistently with natural gas, but in the short term it will only work if the tax credit is extended. ABQ

Editor’s note: The alternative energy sector, including the AWEA, is actively lobbying for continued tax incentives that currently support utility-scale wind-power generation through the Production Tax Credit (PTC). They argue the consistency and market certainty from a multiyear extension of the PTC attracts lenders and prevents boom-bust cycles and higher overall costs that otherwise result from short-term planning. Under the current program, the wind industry has been growing at a rate of about 35 percent annually. Currently, more than 52,000 mW of wind energy is produced in the United States. To learn more, visit awea.org.