Electrical Energy Markets: Electricity is primarily regulated by public utilities commissions at the state level, although the Federal Energy Regulatory Commission has jurisdiction over certain matters such as interstate transmission, wholesale electricity sales and transmission grid interconnection. By Florian Bennhold, Andrew Belden, Wilson Rickerson

Most electricity is generated, transmitted, and sold by investor-owed utilities (IOUs). IOUs accounted for 61,9 % of electricity sales in 2005, while municipal utilities accounted for 15,2 % cooperatives accounted for 9,9 %, and federal power agencies and power marketers accounted for the remainder [3]. The IOU with the largest wind power resource portfolio in 2007 was Xcel Energy with 2'635 MW of installed capacity [4].

In 1978, the US Congress passed the Public Utility Regulatory Policies Act (PURPA), which required utilities to permit independent power producers to connect to the grid and to purchase electricity from these independently owned facilities at “avoided cost.” Some states defined avoided cost at levels high enough to support hundreds of megawatts of renewable energy resources. In California, state incentives and PURPA contracts created a wind boom in the early 1980s which slowly subsided as energy prices declined later in the decade [5, 6].

Many states attempted to restructure (i.e. liberalise) their electricity markets in the early 1990s. Restructuring typically involved unbundling vertically integrated utilities by separating generation from transmission assets These efforts also often include scaling back state regulation and opening electricity markets to retail competition. Restructuring began in California and diffused rapidly across the country. At its peak, all but seven states had either enacted market restructuring legislation or were actively investigating doing so through legislative and regulatory proceedings [7]. There are now seven regional organizations, either Regional Transmission Organizations (RTOs) or Independent System Operators (ISOs) that manage electricity markets [8]. With the onset of California's power crisis in 2001, however, further restructuring was derailed. Although18 states and the District of Columbia had liberalised their markets by 2003, as of January 2009 eight had put their plans on hold and only 16 had moved forward with the introduction of retail market competition [9]. In 2007, Virginia passed legislation to re-regulate its electricity market [10]. Between 2006 and 2007, the average retail price of electricity in the United States rose from 8.9 to 9.1 cents per kWh [2].

Installed capacity of wind energy (end of 2008) : 25'172 MW

There were 25,172 MW of wind generating capacity operational in the US at the end of 2008 [11]. Nearly half of this capacity was located in Texas, Iowa, and California. However, there are commercial-scale wind turbines operating in 35 of the 50 states. Electricity Production from wind power in 2007 and market share of wind energy: In 2007, wind energy generated an estimated 39 billion kilowatt-hours of electricity. This was equivalent to approximately 0,8 % of US retail electricity sales [2]. Preliminary EIA data estimates that 53 billion kilowatt-hours of wind-sourced electricity was produced in 2008 [12].

National Targets: As of January 2009, there was no national renewable energy target. The federal government has a renewable energy procurement goal for its facilities, and 33 states have renewable portfolio standards (RPSs) or goals. However, during the recent presidential campaign, Barrack Obama outlined a federal RPS that would require 10 % of the country's electricity to come from renewable sources by 2012, and 25 % by 2025 [13].

Market Shares of Wind Turbine Manufacturers: During 2007, GE Energy turbines accounted for 44 %, or 2'342 MW, of installed capacity. Siemens and Vestas each supplied slightly less than 20 % of the market, with Gamesa, Mitsubishi and Suzlon each accounting for less than 10 % of the market (see Figure 1, [4]).

In the late 1970s the Department of Energy directed Battelle's Pacific Northwest Laboratory to assess the nation's wind potential [14]. Battelle's wind resource work was eventually merged with that of the National Renewable Energy Laboratory (NREL).

In 1991, the National Renewable Energy Laboratory (NREL) estimated that there were 45'000 square kilometers of land suitable for wind development in the United States. According to this assessment, the US has the potential to produce 700 billion kWh per year from more than 300'000 MW of wind capacity [15]. This would be roughly equivalent to 17 % of total US net electricity generation in 2007 [2].

Beginning in the late 1990s, NREL began reevaluating wind resources in both the US and other countries using modern geographic information system technology. Much of the US has been re-mapped in greater detail using ground truthing of digitally created wind maps. National wind maps and maps for all but four states can be found on the US Department of Energy's Wind Powering America website [16].

Wind Energy Legislation

There is a three-decade history of renewable energy legislation in the US, but policy support has been inconsistent, causing renewable energy development to boom and bust several times in recent years.

Federal Programs

In addition to PURPA, the US Congress has provided support for wind energy through research and development funding, tax subsidies for equipment installation, direct grants and low-cost financing Early investment subsidies were problematic as investors claimed tax credits for wind capacity that did not perform as expected. These subsidies were abandoned with much negative fanfare in 1981, the first year of the Reagan administration [5].

Beginning in the late 1990s Congress introduced the Production Tax Credit (PTC) as a means to support electricity generation, rather than just capacity. The 2.1US¢/kWh PTC has helped drive rapid wind energy growth during the past decade, but it has typically been enacted for only a few years at a time. Each time the PTC expires, it must be extended by Congress with new legislation. Delays between PTC expiration and renewal have created a “boom-and-bust” cycle with declines of 70 % or more in wind energy construction between boom years [17]. The PTC is set to expire again on December 31st 2009. The recent economic downturn has also affected the industry. Many of the tax equity investors who had funded wind energy development over the last decade no longer have the tax appetite required to ake advantage o the PTC In October 2008, the federal government released USD 800 million in Clean Renewable Energy Bonds (CREBs) that can be used by state, local, and tribal governments, as well as electric cooperatives to finance renewable energy projects at a 0 % interest rate. Bondholders can claim federal tax credits in place of interest on these bonds [18]. The US Department of Agriculture periodically makes grants and guaranteed loans available for wind projects owned by farms and rural businesses. In the Energy Policy Act of 2005, Congress directed government agencies to procure 7,5 % of their power from renewable sources by 2013.

State Programs

There are a broad range of state-level policy incentives in place to promote utility-scale and distributed wind energy systems. These include portfolio standards, grants, tax credits, sales and property tax exemptions, manufacturing incentives, net metering, interconnection standards and mandatory green power offerings. An exhaustive catalogue of these policies is beyond the scope of this profile, but updated information regarding state-level incentives can be found in the Database of State Incentives for Renewables and Efficiency (www.dsireusa.org) [19].

One of the primary policy mechanisms driving renewable energy development has been the state­level RPS, under which an increasing fraction of power generation must be derived from renewable sources. As of January 2009, thirty-three states, the District of Columbia, and the Territory of Guam had enacted RPS.

The mechanisms for meeting these targets differ widely from state to state. While many states with restructured electricity markets adopted systems based on tradable renewable energy credits similar to those used in European quota systems, many utilities in regulated states meet their RPS goals through long-term bilateral contracts and other mechanisms. The RPS goals of five states (North Dakota, South Dakota, Utah, Vermont, Virginia) and the Territory of Guam are voluntary and have no formal compliance mechanism. The effectiveness of RPS policies varies as widely as their policy designs. Despite this, RPS policies, in combination with the PTC have driven the majority of recent wind energy development around the country [17].

The Regional Greenhouse Gas Initiative (RGGI) and the Western Climate Initiative (WCI) are both proposing mandatory carbon-trading schemes similar to the European Union's measure. RGGI has been in effect since January Vt 2009 whereas WCI is still in the planning phase [21, 22]. A number of federal carbon­trading laws have been introduced in the Congress in the last several years and support for a national carbon policy has been gaining momentum. Wind, as the most cost-effective renewable resource in many locations, could benefit significantly from any increase in the price of fossil fuels caused by carbon emission regulations.

Wind Energy Projects

For the first time, the installation of 5'186 MW of wind energy provided the majority of the 8'673 MW of new electric generating capacity in the US in 2007 [2]. In addition to the existing 25'170 MW of wind capacity installed by the end of 2008, the American Wind Energy Association reports that there are another 4'451 MW currently under construction in 19 states [11]. In the US market, the average turbine capacity increased in 2007 to 1,65 MW and the averag project size jumpe from roughly 70 MW in 2006 to 120 MW in 2007 [4].

There are no offshore wind projects in the United States, but there have been numerous proposals to build them. The most significant plans for offshore wind energy development continue to move forward off the coasts of Massachusetts, Rhode Island, Delaware, and New Jersey.

The US Department of Energy recently published a study describing a scenario for 2030 in which 20 % of US generation would come from 305 GW of wind power. The study estimated that the scenario would cost USD 46 billion to achieve, or roughly 50 cents per household per month. The study highlighted several barriers to wind energy development including the expansion of the electricity grid, siting and permitting issues and the necessity for continued technical innovation in the wind industry [23].

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References:

1 Central Intelligence Agency, The world fact book :

United States, 2008, Available from: Https://www.cia.gov/library/publications/the­world-factbook/geos/us.html

2   US Energy Information Administration, Electric

Power Annual 2007, 2009. Available from: Http://www.eia.doe.gov/cneaf/electricity/epa/epa_sum.html 

3 American Public Power Association, 2007-08 Annual Directory & Statistical Report. 2007, American Public Power Association:Washington, DC.

4 US Department of Energy, Annual Report on U.S. Wind Power Installation, Cost, and Performance Trends: 2007, 2008. Available from http://eetd.lbl.gov/ea/EMS/reports/lbnl­275e.pdf

5 Gipe, P., Wind energy comes of age, 1995, John Wiley & Sons, Inc.: New York.

6 Hirsh, R. F., PURPA: The Spur to Competition and

Utility Restructuring. The Electricity Journal, 1999, Volume 12, Issue 7, Pages 60-72.

7 Liggett, W.D., et al., The changing structure of the

electric power industry 2000: An update, 2000, US Energy Information Administration, Office of Coal, Nuclear, Electric and Alternative Fuels: Washington, DC.

8 Wellinghoff, J., Creating Regulatory Structures for

Robust Demand Response Participation in Organized Wholesale Electric Markets, 2008. ACEEE Summer Study Article.

9 US Energy Information Administration, Status of

state electric industry restructuring activityas of January 2009. 2009. Available from: http://www.eia.doe.gov/cneaf/electricity/page/restructuring/restructure_elect.html

10 US Energy Information Administration.Retail Unbundling Virginia, 2008. Available from: http://www.eia.doe.gov/oil_gas/natural_gas/restructure/state/va.html

11 American Wind Energy Association, Wind energy projects throughout the United States of America, 2008, Avai lable from:

http://www.awea.org/projects

12 US Energy Information Administration, Annual Energy Outlook 2009 Early Release, 2009. Available from: http://www.eia.doe.gov/oiaf/aeo/aeoref_tab.html 

13 Obama-Biden campaign fact sheet, Barack Obama and Joe Biden: new energy for America, 2008. Available from:

http://www.barackobama.com/pdf/factsheet_energy_speech_080308.pdf

14 Pacific Northwest Laboratory, Wind Energy Resource Atlas of the United States. 1986, Solar Energy Research Institute: Golden, CO.

Available at: http://rredc.nrel.gov/wind/pubs/atlas/

15 Elliott, D. L., et al., An assessment of the available windy land area and wind energy potential in the contiguous United States, 1991, National Renewable Energy Laboratory: Golden, CO.

16 US Department of Energy, Wind PoweringAmerica, www.windpoweringamerica.gov

17 Bird, L., et al., Policies and market factors driving wind power development in the United States, Energy Policy, Volume 33, Issue 11, July 2005, pages 1397-1407.

18 Environmental Law and Policy Center. Clean Renewable Energy Bond Program Revived for 2009, 2008 Available from http://elpc.org/2008/10/24/cleanrenewable-energy-bond-program­revived-for-2009

19 Database of State Incentives for Renewable Energies, www.dsireusa.org.

20 Database of State Incentives for Renewable Energies -summary maps, Renewable Portfolio Standards February 2009, 200 Available from http://www.dsireusa.org/library/includes/topic.cfm?TopicCategoryID=6&CurrentPageID=10&EE=1&RE=1

21 Regional Greenhouse Gas Initiative, RGGI Fact Sheet, 2008. Avai lable from: http://www.rggi.org/docs/RGGI_Executive_Summary.pdf

22 Western Climate Initiative, Design Recommendations for the WCI Regional Cap­and-Trade, 2008. Available from: http://www.westernclimateinitiative.org/ewebeditpro/items/O104F20432.PDF

23 US Department of Energy. 20% Wind Energy by 2030, 2008. Avai lable from: http://www.20percentwind.org/20percent_wind_energy_report_revOct08.pdf

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Florian Bennhold is Director of Regulatory Affairs at Wilson TurboPower and an independen energy policy consultant.

E-Mail: Florian.Bennhold@wilsonturbopower.com

Andrew Belden is a consultant specializing in renewable energy policy and water sustainability. He currently works in the Boston office of Meister Consultants Group, Inc.

E-Mail: andy.belden@mc-group.com

Wilson Rickerson is Senior Vice President for Meister Consultants Group, Inc., where he focuses on renewable energy policy and markets. He holds a Masters in Energy and Environmental Policy from theUniversity of Delaware.

E-Mail: wilson@rickersonenergy.com

World Wind Energy Association 2009