In "The Tipping Point," Malcolm Gladwell posits that small things at critical times can ignite markets, tipping them into the mainstream. With the right conditions, an apparently insignificant factor can spark the fire and lead to market acceptance.
There is so much action these days in the burgeoning AEPS and Industry Dynamics
Passage of the Alternative Energy Portfolio Standard (AEPS) of 2004 was a big thing and by itself might be spark enough. Platts Analytics, a division of McGraw Hill, forecasts 3600 MW of wind generation capacity will result. That is enough to power a million and a quarter homes, equivalent to the residential customers of PPL, How the rules implementing the Act are developed by the Pennsylvania Public Utility Commission (PUC) and the Department of Environmental Protection (DEP) can be viewed as a small thing, a bureaucratic detail. But in real terms, these rules could be decisive - the tipping point. (See "Keeping the Portfolio Standard Promise," for our take on good rulemaking.)
But good regulations alone probably won't be enough. The dynamics of the market place are also important. And looming ahead, there are two factors that could tip the balance the wrong way: a regulatory driver that inadvertently damages the voluntary market and the emergence of local opposition to wind farm siting.
Where's the Action?
Seems like everywhere. A total of 6740 MW of wind is installed across the country but the American Wind Energy Association is forecasting 2000 MW of new capacity by the end of 2005. That's a big jump from the 389 MW built in 2004. But of course, last year was most noted for poor public policy, thanks to an on-again off-again Production Tax Credit (PTC). It was a great lesson in how poorly executed policy can destabilize a market and damage a young industry.
And the field is expanding. In September, AES, the $8 Billion global power producer, made its entry into the market with an equity investment in US WindForce, a developer active in The Spanish wind-energy company Gamesa Corp. announced in January that it would manufacture wind turbine blades from a facility to be built in Ebensburg, 20 miles from The Gamesa investments would not have happened without the active support of Kathleen McGinty, Secretary McGinty also managed to redirect $10 Million in alternative fuels money as seed capital into the Pennsylvania Energy Development Authority and to announce another round of Energy Harvest Grants.
On the consumer front, the PECO Wind product completed its first nine months in the market. According to the National Renewable Energy Laboratory of the US Department of Energy, this program, jointly managed by Exelon and Community Energy, immediately became one of the top in the country, with 10,000 customers. And they hope to sign up as many as 40,000 customers.
Institutional buyers, including colleges, government buildings and businesses, are even greater buyers of wind energy. Their voluntary purchases were essential to making On a broader front, the biggest power market move is Exelon's filing on When PECO merged with Thus is the state of wind power development in
Transforming Market confusion is a considerable threat. If institutional buyers believe their purchases do not encourage any more generation than that required by law, especially if they are paying a premium price, they will likely discontinue voluntary purchases. The AEPS has penalty provisions, but they do not take effect until the rate caps are removed from the various electric distribution companies, which for most occur at the end of this decade. Until that time, the voluntary market provides the only reliable driver.
If the utilities take a wait-and-see position, quite possible for some, they will not contract for long-term power purchase agreements, and the market for new wind farms will go on hold. This can be followed by a rush to market towards the end of the decade, supply and demand imbalances, and pricing chaos. Orderly market development is needed, not chaos.
The voluntary market will foster an orderly development and can assure that wind power in Birds, Bats and Not In My Backyard
The wind farm poster child for NIMBY (Not in My Back Yard) is the
Recent news articles have pointed out other local concerns, including potential and actual bird kills, noise, visual, property values and more. While most bird problems have been solved with new designs and technology, surprising large bat kills at the Mountaineer project in PennFuture takes seriously concerns about wind power development. All parties need to act responsibly. The wind industry and clean energy advocates must choose and support good sites, provide accurate information to the public, and be prepared to mitigate impacts. Projects bringing societal good usually have local costs. Those costs may be far less than the alternative technologies, but those technologies have the comfort of the known and accepted. While every means of generating electricity impacts the environment and local communities that host facilities, clean, fuel-less wind power is on balance far superior to conventional generation technology.
Local opposition can, in many cases, be prevented or diminished. When opposition has taken hold, too often one or more of the following mistakes has been made:
Inadequate, poorly presented, and/or incomplete information was provided to the local community. At present, there is no approved Pennsylvania Technical Guidance for evaluating wind farms. PennFuture intends to work with the regulators and industry to develop Societal benefits are publicized, but local costs are not recognized. In cases where the local community pays the costs for delivering benefits to the greater public benefit, it should receive adequate compensation. This can be financial or as measures taken to mitigate impact to a more acceptable level.
Failure to counter the Not in My Back Yard argument. Here there are several approaches. The first is better communication to consider the impacts of the alternative sources of power. Second is passage of time to allow the unknown to become in vogue, or at least accepted. Beauty is in the eye of the beholder, and many consider wind towers breathtakingly beautiful icons for a clean energy society. Last, and the toughest, regulators and community leaders must be willing to stand up for the common good.
So 2005 will be the tipping point if the AEPS is fully implemented so that it works synergistically with the voluntary green power market; if
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