Illinois could benefit from tax credit's renewal with added jobs, dollars
Monday, August 8, 2005
BY JESSICA L. ABERLE
OF THE JOURNAL STARAmeren Corp. and Commonwealth Edison agree to buy. Developers agree to expand and build. Federal legislators agree to subsidize. The state commerce commission agrees to require and regulate. Environmentalists agree the news is good.
And all are talking about wind energy.
Within the last few weeks, years of negotiations fell into place, positioning the wind industry to explode and bring some 8,000 jobs and $7 billion to the Illinois economy by 2012.
"We've passed the point on if (wind energy) is a feasible technology," Lt. Gov. Pat Quinn told the Journal Star. "The question is how fast will Illinois join the rest of the country."
Proponents of wind energy long have said an extension of the federal production tax credit (PTC) for developers and a renewable portfolio standard (RPS) for utilities could vault Illinois into the forefront of green energy producing states with 9,000 megawatts of potential wind energy production.
Federal legislators approved a broad energy bill earlier last month that includes an extension of the PTC, offering millions of dollars in tax credits to developers through 2007. President Bush is expected to sign the bill today. On July 19, the Illinois Commerce Commission approved a voluntary RPS that calls for 2 percent of the state's energy supply to come from renewable sources by 2006, increasing each year to 8 percent by 2012.
With about a dozen utility-scale wind projects in activedevelopment stages in Illinois and new interests growing daily since the ICC unanimously approved the governor's Renewable Energy Plan, developers of the giant wind machine farms are optimistic.
Stefan Noe, president of Midwest Wind Energy and co-developer of the 50 megawatt Crescent Ridge wind project near Tiskilwa, said the incentives will push forward the planned second phase of the Bureau County installation before the close of 2007.
"I do believe that the utilities will be buying some wind," Noe said. "I guess time will tell if they are as aggressive with that mandate, as are aggressive the goals set by the governor."
ComEd and Ameren, the state's two largest utility companies, both support the guidelines set forth by the RPS.
Both companies have said they will submit public requests for proposals in a formal bidding process for the renewable energy by the middle of this month.
"We support the governor's initiative," said Arlene Juracek, vice president for energy acquisition with ComEd. "We'll make a filing by mid August (to the ICC) on how we propose to purchase these resources and how we propose to achieve the cost recovery with them."
Currently ComEd has about 100 megawatts of landfill methane generation in its energy supply portfolio, as well as a power purchase agreement for Crescent Ridge's 50 megawatts. But the company still will need to purchase more wind energy to meet the 2 percent renewable ICC requirement, of which 75 percent must come from wind.
"We are currently soliciting requests for information from wind generators," Juracek said, adding that a request for proposals from wind developers will coincide with ComEd's Renewable Energy Plan filing with the ICC. ComEd hopes to secure the necessary power purchase agreements with wind generators before the end of the year.
"We recognize that global warming is a serious concern and there are things we can all do to reduce the carbon impact on the environment," Juracek said. "One of the ways we can do that is by encouraging non-carbon generation ... like wind."
Wind also can provide a long-term price hedge for customers in that wind operating costs are not subject to the same cost escalation as fossil fuels, Juracek said. "It is really important to get these contracts signed by the end of the year," so developers can take those contracts to the bank. It would be at least 2007 before consumers would see any impact on rates from the use of wind energy.
"Investing in a wind farm is like locking in a fixed-rate mortgage," said Christine Real de Azua, spokeswoman for the American Wind Energy Association. "The big advantage is the stability of costs over time. The cost of natural gas is volatile and has been going up, and other fuels tend to go up."
It costs between 3 cents and 7 cents per kilowatt hour to produce wind energy. Those figures compare to 4.8 cents to 5.5 cents per kilowatt hour for energy produced by coal; 3.9 cents to 20 cents per kilowatt hour for natural gas because of the volatile market; 5.1 cents to 11.3 cents per kilowatt hour for hydroelectric; and 11.1 cents to 14.5 cents per kilowatt hour by nuclear power, according to AWEA.
While Ameren Corp. declined to confirm its efforts to solicit proposals from wind developers, spokesman Leigh Morris said the company has pledged to meet the ICC goals.
"Our position on it is real short, simple and to the point. We believe the governor's plan will bring renewable energy resources to Illinois, and Ameren has pledged to take the necessary steps to implement the governor's sustainable energy plan."
Morris said Ameren does have some renewable sources in its supply system in Illinois and Missouri, but that percentage is well below the required 2 percent by 2006. Excluding hydroelectric power, renewable sources account for less than 1 percent of the power supplied by Ameren in Illinois and Missouri, he said.
"Ameren has long been a supporter of renewable energy resources, and this is just consistent with the position Ameren has had for a long time," Morris said. "We want to produce reliable power, safe power and clean power."
Morris said cost recovery also influences Ameren's ability to buy wind power. "We have to absorb that higher cost," he said.
"We're going to have to buy the power. And as I said, in the beginning it's going to take the construction of the wind farms and then they'll have to go operational. And until that happens there's no wind power to purchase."
Plenty of wind power
With 1,700 megawatts of wind energy installations in Illinois already under development and dozens of other projects proposed or under consideration, Hans Detweiler, deputy director for energy and recycling with the Department of Commerce and Economic Opportunity, believes the utilities will have plenty of power to purchase.
About 104 megawatts of wind energy-producing facilities are operating in Illinois. And even with all 9,000 megawatts constructed, turbines would occupy only 1.2 percent of Illinois' available (non-environmentally sensitive) land. The U.S. Department of Energy has said the 9,000 megawatts is likely an underestimate and increasing technology continues to raise the maximum potential. About 250 megawatts of energy is enough to power 100,000 Illinois homes annually.
Developers have proposed the world's largest land-based wind turbine installation in McLean County with upwards of 260 giant windmills producing some 400 megawatts of energy. And Bob Crowell, director of business development for Houston-based Zilkha said he's pleased to see the incentives pass. "It's very good news, and although the RPS is a voluntary structure, the utilities, being Ameren and ComEd, seem to be very much on board with it. We are expecting requests for proposals."
Crowell also echoed other developers in saying the extension of the federal tax credit was a requirement for the project to move forward. Crowell said construction on the first phase of the Zilkha project is slated to begin next spring and be completed before the end of 2006.
With the extension of the production tax credit, Detweiler said the DCEO is expecting at least 2,000 megawatts of wind energy development by 2012. And Quinn said it will be in the utilities' best interest to arrange purchase agreements with those developers.
"Just from the portfolio perspective, any utility company in America in the 21st century should want diversity of supply, and not put all your eggs in one basket," Quinn said, adding that currently Illinois gets only half of 1 percent of its energy from renewables. The remainder is split almost 50/50 coal and nuclear.
Making it happen
Quinn said the utilities that work on numerous issues with the ICC know how important the Renewable Energy Plan is to the commissioners. "I think it was made clear to them by each individual commissioner and the commission as a whole that this has to happen now."
Also, Quinn said Illinois consumers, looking toward a deregulated market in 2007, also want the utilities to purchase renewable resources.
"Sometimes to get the utilities to do the right thing you have to lean on them from a lot of different directions," said Quinn. "Outcome is the only way to evaluate ultimate success here.
"I prefer a legislative mandate. I would prefer everything talked about so far to be in legislative form. But we had to do something to get this ball rolling."
The Renewable Energy Plan also includes an energy efficiency portfolio that sets guidelines for increased efficiency. This goal specifies that utilities should reduce load growth by increasing percentages, starting with a 10 percent reduction for 2007-08 to a 25 percent reduction by 2015-17.
John Moore, a senior attorney with the Environmental Law and Policy Center, said a lot of the wind industry growth in Illinois will depend on what the utilities actually do.
"They're talking the talk, now they've got to walk that talk," Moore said. "I think Illinois will succeed, and Illinois will be a center for renewable energy - in the country actually.
"All that remains is for the utilities to aggressively buy the wind power pursuant to the commerce commission's order."
Illinois is among the leading states in the nation for capacity to produce wind energy. Moore and Quinn both said they'd like to see the utilities go beyond the 8 percent goal by 2012.
"The success of the clean energy standard depends on the strength of the utilities' plan to buy wind power," Moore said. "This and the (production tax credit) are the two biggest factors that will move these wind farms toward completion and expansion."