Renewables:

Wind Capital Group's Carnahan discusses expansion of wind power in U.S.

Despite frozen credit markets and slowed financing from the federal government, Missouri-based Wind Capital Group has managed to continue expanding through the economic downturn. What are the prospects for wind power in the United States as financing picks up? How does the United States compare to other countries on renewables? During today's OnPoint, Tom Carnahan, CEO of the Wind Capital Group, discusses his company's growth and explains why he believes Missouri has long-term potential in the wind industry. Carnahan also discusses prospects for passage of a renewable electricity standard this year.

Transcript

Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. Joining me today is Tom Carnahan, president and CEO of the Wind Capital Group. Tom, thanks for coming on the show.

Tom Carnahan: Thanks for having me, Monica.

Monica Trauzzi: Tom, you run a Missouri-based wind energy company which has seen dramatic growth since it was founded five years ago. People who are familiar with wind power might not necessarily think of Missouri as the first place to develop wind power. Why do you believe that Missouri has some real, long-term potential in this field?

Tom Carnahan: It's a great question, because when I started the company in 2005 nobody else thought that Missouri was a good place to do wind energy projects either. In fact, every state that touched Missouri had done something like this, but not Missouri and so that's what made me think maybe there's something to this and I should take a look. There was a view that the winds weren't good and that because it was a heavy coal state that power prices wouldn't justify it. As it turns out, both of those things were wrong and northwest Missouri actually has winds and a wind regime that's similar to what you'd see in the Great Plains states. There's also robust transmission and utilities that are interested in doing this thing, so it was good to exploit that first-mover advantage and that's something that we keep with us to this day.

Monica Trauzzi: Your firm has been aggressive in opening new wind farms, even in a down economy. How are you doing that? I mean where is your financing coming from?

Tom Carnahan: Throughout this last year we kept our heads down and kept on driving forward with our business plan. We had a turbine position, a 150 MW GE turbine position that we took in 2008. We proceeded to sell the power for the project and decided that we were going to go forward and build that. The problem was, if you look back to December of this year, we thought where is the financing going to come from? We went to the banks that finance wind projects and they said they were closed. We love your project. This is the kind of stuff that we would have done in a heartbeat six months ago, but, I'm sorry, we're not lending money. On top of that, the PTC, the production tax credit was set to expire at the end of 2009 and, even if there was an extension, there was nobody left to buy it. There weren't folks investing in the production tax credit. So the project was in risk back in January. Luckily, the stimulus passed, that gave us the confidence to go forward and culminated actually last week with us securing a $240 million loan on the project. And so that happened last Thursday and we're very pleased to announce that.

Monica Trauzzi: China has really begun taking the reins on renewable energy development. The turbines that you guys use, in fact, come from India. So how does the U.S. sort of stay competitive in this global renewable energy market and have we already fallen behind some of these countries who are taking the lead?

Tom Carnahan: Furs, just to make a clarification, we did some early projects with Suzlon, which is an Indian-based manufacturer, who is actually manufacturing in Minnesota right now, but our original projects had turbines that largely came from India. The project that I just described the financial closing on that we're building right now is using 150 MW of GE turbines that are American made and so I'm glad that we are doing that and it's important to us. As far as competition, you're right, I think that we are falling behind and China continues to make big advances in renewable energy. Not a day goes by where I'm not reading articles about new wind farms popping up there. So when I assess the risks to our business model and to our business, one of the things that I consider is the lack of a consistent federal policy here and that would lead me, if I wanted to hedge that risk, to go look at a place like China. So, I think that we are at risk there.

Monica Trauzzi: If/when a federal policy comes into play are we going to be able to meet the new demands for renewable energy domestically or will we need to go overseas to get some of that power?

Tom Carnahan: No, we have abundant renewable resources right here in the United States. There's abundant wind that is local and free all throughout the Midwest where we do business and so we will be there and other developers will be there to supply that. And I think that the wind industry has shown that when there is a policy that supports wind energy that we are able to produce. Last year wind accounted for 42 percent of all the new generation that came online. I mean that is an industry that's becoming mainstream.

Monica Trauzzi: So, we've talked about the renewable electricity standard, the Senate is beginning deliberations on the climate and energy package that the House already passed. Do you think Democrats will take up energy separately if it looks like cap and trade doesn't have the votes and will they try to get the RES through even if the cap and trade is not passing?

Tom Carnahan: I don't know the answer to that. I can tell you that we're watching it very closely. As far as my business and from the perspective of the wind industry, we want to see a strong RES go forward and that is the most important priority for us. If we have a strong RES you will see quite a bit of investment into this space, new manufacturing, the jobs it creates, and new projects. So that is where we're going to be very focused. I don't know how the horse trading is going to go as far as what sort of a bill comes out, but we will continue to advocate for a strong RES. By strong I mean something that is aggressive, but also attainable. I would like to ...

Monica Trauzzi: So, what's the number there?

Tom Carnahan: It's a good question. I think that it is reasonable for us to think that we can do 25 percent and we should push 25 percent in the next decade. However, any RES also needs to have an interim component. We need to have some sort of a signal just here in the next couple of years to lock in the progress that the industry has made over the last couple of years. And so there's been a lot of numbers thrown around with that, but I would say 10 percent by 2012, something in that area, would make sure that we've locked in the progress.

Monica Trauzzi: Final question here, you've managed to harness wind power in an area that many did not think was viable. Are there other regions of the country that you think could potentially be strong places for developing wind power?

Tom Carnahan: Without divulging any secrets, the answer is yes, and we are looking at new places all of the time and I think that that's a matter of time and we hope to lead the way in some new regions.

Monica Trauzzi: All right, we'll be watching. Thanks for coming on the show.

Tom Carnahan: OK, thanks Monica.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

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