PennFuture's E-cubed is a commentary biweekly email publication  concerning 
the current themes and trends in the energy market.
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PennFuture, which has offices in Harrisburg, Philadelphia and  Pittsburgh, is 
a statewide public interest membership organization, which  advances policies 
to protect and improve the state,s environment and economy.  PennFuture,s 
activities include litigating cases before regulatory bodies and in  local, 
state and federal courts, advocating and advancing legislative action on  a 
state and federal level, public education and assisting citizens in public  
advocacy. 


September 27, 2000
Vol. 2, No. 19
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The Answer, My Friend(
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How do we develop a cleaner, sustainable electric industry? The answer is  
literally blowing in the wind. In fact, about 100 MW of new wind generation 
will  be operating in Pennsylvania by 2001 * a small portion of the 
Commonwealth,s  total wind resource, which is enough to produce about 13 
billion kWh or 10% of  Pennsylvania,s total electricity consumption. But 
challenges must be overcome to  keep this crop from fading into thin air. 
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Why are obstacles being overcome to make wind power part of Pennsylvania,s  
energy future? Customers want clean energy, and wind is readily available,  
especially in the northeastern, central and southwestern areas of our state.  
While some other states have better wind resources, Pennsylvania has plenty 
of  Class 3 wind resources and a good bit of Class 4, much of which is 
located in  rural communities. Ironically, sufficient wind resources are also 
often found in  formerly important coal centers that were decimated when 
machines replaced human  labor and mines were emptied of marketable coal. It 
could offer these  communities a sustainable economic future, as the wind is 
never mined out.
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Just one year ago, when E-cubed discussed reasons to &Go With the  Wind,8 
(Vol. I, No. 9, 9/14/99) no commercial wind farms were operating in  
Pennsylvania, but our state had, and still has, the most vibrant customer 
choice  program in America. Today, there are already two new, clean renewable 
wind  generation facilities that were built in direct response to consumer 
demand.  
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The 10.4 MW Green Mountain Farm in Garrett, Somerset County, can produce  
about 25,000 MWh of electricity, enough to serve about 2,500 households each  
year.? The 130 kW Pennsylvania Wind Energy Project in Hazleton, Luzerne  
County, can produce about 200,000 kWh of electricity and will double in size  
this fall. But even when additional 130kW turbines are installed, Community  
Energy,s &wind block8 sales will have served only about half of the small  
commercial customer load that subscribed to its limited &pilot8 marketing  
program. These two operating wind farms avoid 123 tons of S02, 12,000? tons 
of CO2, and 4,700 tons of  NOx.
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Two larger wind farms are expected to be operating next year. Atlantic  
Renewable and International Wind are developing a 15.6 MW Mill Run wind farm 
in  Fayette County, and National Wind Power is developing a facility near 
Scranton,  Lackawanna County, which will produce at least 15 MW initially. 
Although not all  will be completed by the end of 2001, seven other projects 
by five active wind  developers are scheduled to provide an additional 110 MW 
of new wind generation  in Pennsylvania during and after 2001. The wind 
industry expects that about 200  MW could be built in Pennsylvania within two 
to three years. If 100 MW of  additional wind generation replaced system 
power, Pennsylvania would avoid 1,250  tons of SO2, 123,000? tons of CO2  and 
48,000?tons of NOx.
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These new wind developments are fueled not just by wind, but by investment  
dollars and consumer demand as well. The Pennsylvania Wind Development 
Program  recently announced the availability of wind energy production 
incentives, for  new facilities that become operational by the end of 2001, 
of up to 1.5  cents/kwh for five years. The program, operated for the 
Sustainable Development  Fund by The Reinvestment Fund, will receive $12 
million from settlement of the  PECO/Unicom merger, which is expected to 
become final in November. 
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Construction by the end of 2001 is also important because the federal  
Production Tax Credit for new wind development expires at that time, and it 
is  unclear if it will be renewed. 
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Production incentives are crucial for wind power, especially in  
Pennsylvania, where wind resources tend to peak in both the winter and 
during  the late evening hours when the demand for electricity is low. In the 
current  market, the estimated average energy value from wind power is only 
about 1.5 to  2.0 cents/kWh. The &green attribute8 can fetch about another 
2.0 cents/kwh for  total market revenues of around 4.0 cents per 
kilowatt-hour.
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California wind production, on the other hand, generally peaks in the  
afternoon when the demand for electricity is high, resulting in average 
electric  sales value of approximately 3.0 cents/kWh. 
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By comparison, wind costs about 5.0 cents per kilowatt-hour to produce in  
Pennsylvania.? The cost is on the way down, although it could be some time  
before it dips as low as the 3.0 cents and less mark in those areas of the  
country with the very best wind resources. 
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However, total generation costs of Pennsylvania wind compare favorably to  
all-in nuclear generation costs, such as Limerick,s 8.5 cents/kwh and  
Susquehanna's near 7.0 cent all-in cost, but still cost about 33% more than  
total costs of a new fossil fuel plant. Of course, existing nuclear plants 
do  not have to recover the all-in production costs through the market, 
because  those costs are subsidized by stranded costs payments. The $12 
million of  funding in the Pennsylvania Wind Development Program is a drop in 
the bucket  compared to the billions of dollars that subsidize nuclear power 
plants. 
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Another challenge to new wind power is that the exploding demand for wind  
turbines throughout the world and the rush to build American wind farms by  
December 2001 are stressing the capacity of turbine manufacturers to meet  
orders. Only five qualified wind manufacturers do business in the U.S. Of 
the  five, two are taking no new orders through 2001, while two others have 
limited  capacity remaining for additional orders. The leading manufacturers 
are  unfortunately not American but European * many are just beginning to 
have enough  business in the U.S., and Pennsylvania in particular, to 
support? necessary  sales and operating support. 
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If turbines are available to harvest the wind, Pennsylvania,s wind resource  
is sufficient for commercial development, but does not generate as much or 
as  valuable electricity as in other states. For example, some states may 
have Class  5 wind that blows strong and steady during peak electric load 
times. The best  sites in Pennsylvania are only Class 4, and the wind often 
blows intermittently.  In addition to the lower average price for the 
electricity generated at off-peak  times, the resource at a site is crucial 
to project finances and requires  detailed assessment. A site generally must 
be &metered8 for a full year before  investors will make a commitment to a 
project. 
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Although there are no technical barriers to interconnection of wind  
generation to the grids in Pennsylvania, the intermittent nature of wind 
also  makes interconnection with a system based on predictable generation 
more  difficult and less economic. For example, some operating systems still 
have  rules that impose substantial penalties for inaccurate scheduling of 
generation,  even though the real time balancing markets required under FERC 
Order 2000  should eliminate the need for these penalties. The intermittent 
nature of wind  makes such rules especially burdensome for wind projects. 
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On the bright side, some of the early problems with wind generation are  
successfully being overcome. New wind turbines now purr along quietly 
compared  to older technologies. New turbines also turn quite slowly and 
developers are  sensitive to the rights of birds to fly. While wind turbines 
were once  considered eyesores, the sleek postmodern look is increasingly 
found attractive,  especially in comparison to transmission lines, cell 
towers, or the strip mining  that often occurred on the same land upon which 
the turbines are now being  built. 
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Communities also are welcoming wind projects, not just because problems  
related to noise, birds, or view sheds can be minimized, but as important 
rural  economic development and supplementary income to farmers. A farmer can 
receive  rental income of about $2,700 per year per turbine erected on a tiny 
portion of  farmland without significant interference to farming operations. 
A 15-turbine  wind farm could add $40,000 in annual income to a hard-pressed 
small  farmer.
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A rural township can also expect a boost in its tax base.  For example, when 
the wind farm was built, the Garrett tax base increased about  100%. And, 
local construction contracts comprise about 20% of the cost of a new  wind 
development, so that a $15 million wind farm generates about $3 million.  
Conservation Consultants, Wind Farm USA Project works in farming areas with 
the  best wind development potential to help rural communities understand 
the  economic as well as environmental benefits of new wind development. 
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Pennsylvania will never have the best wind resources, but the remaining  
challenges facing its wind industry can readily be overcome. The federal  
Production Tax Credit should be extended for several years, the Pennsylvania  
Wind Development Program should be expanded, and system operators should 
correct  their rules in order to eliminate unnecessary barriers to the 
development of our  burgeoning wind industry. 
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Ultimately, consumer demand may resolve these problems. If consumer demand  
is strong enough, the manufacturers, markets, systems operators and others 
will  find doing business in Pennsylvania wind to be just another day at the 
office,  or should we say, down on the farm.

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Support E-cubed by becoming a  member of PennFuture * visit our secure online 
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 - Vol2No19_92700.doc