Renewable Energy:

Wind energy trade group head discusses Pickens plan, transmission obstacles

With both former Vice President Al Gore and oilman T. Boone Pickens backing wind energy as a major part of the United States' future energy policy, Congress continues to debate how to pay for renewable energy tax credit extensions that would aid in the development of wind power. How is the wind industry being affected by the uncertainty created by the tax credit debate? What are some of the major hurdles the industry will have to overcome in order to meet the standards set out in T. Boone Pickens' plan? During today's OnPoint, Randall Swisher, executive director of the American Wind Energy Association, gives his industry's perspective on Pickens' aggressive plan and addresses the main obstacles facing his industry as it rapidly expands.

Transcript

Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Randall Swisher, executive director of the American Wind Energy Association. Randall, thanks for coming on the show.

Randall Swisher: Thanks very much for the opportunity, Monica.

Monica Trauzzi: Randall, as we rethink our nation's energy policy, oilman T. Boone Pickens recently came out and made a very public plea to lawmakers to focus on wind energy and natural gas for electricity and transportation. Obviously, your industry has come out and fully supported and appreciated his plea.

Randall Swisher: Absolutely.

Monica Trauzzi: But are you up for the challenge? He's calling for 20 percent of electricity to be provided by wind. How feasible is that?

Randall Swisher: Well, when you combine the Pickens' plan with the Al Gore speech last week, it's very clear there's a growing consensus that we need to make a fundamental change in direction. And to fully appreciate the Pickens' plan, I think you need to look at the analysis that DOE published in May, which over a year worth of analysis demonstrated very clearly that 20 percent wind, for this country, is feasible. The resource is there. It looks very cost competitive over time with other fuels and technologies. So, it's really a question of understanding what are the barriers, what do we need to do in a systematic way to make that happen? But it's very feasible and our industry is very focused on what we need to do as an industry to make that happen.

Monica Trauzzi: All right, let's discuss some of the barriers because Pickens himself admitted that transmission is a big obstacle and it's something that's been up for debate even before Pickens came out, before Gore had his speech last week. Where do you get the money to essentially rebuild the power grid?

Randall Swisher: The money really is not the problem. There are a growing number of companies that are very interested in building transmission. They are well capitalized. The issue is more the institutional barriers. If you look at what the 20 percent plan requires, which is a nationwide, high-voltage transmission system that American Electric Power actually did an analysis for as part of the DOE plan, the capital is there. That really isn't the issue. The issue is how do we get various utilities and various states cooperating in such a way as to actually move it forward, get it done. And I think we need to look, and a fundamental way, at how does transmission get built in this country specifically for these kinds of national benefit, national security really, transmission lines that are so important both to the reliability of the system, as well as accessing the very important, strategically, renewable resources such as wind, solar, geothermal that are often at a distance from where the energy is actually being used.

Monica Trauzzi: And one of the issues we've heard discussed is the siting issue, that some people don't want transmission lines in their area. How do you overcome that?

Randall Swisher: Well, this is something the nation is going to have to face. The electric industry is terribly under-built in terms of transmission infrastructure simply to serve the needs of the electric industry today. It was not designed to serve all of the wholesale activity in the electric industry today. I mean regardless of when, this is something that we need to face. You talk to any of the CEOs from the major electric trade associations in town and they're united in their concern about we need to find a way of dealing with this. A growing number of governors are sharing that perspective as well and we're seeing states start to take action with their own state transmission authorities, states like Colorado, Kansas. Texas is really the model at this point. Texas has a whole system in which they've identified where is the wind resource in the state, where is the energy needed? They have procedures through which those lines are planned, financed, and built. And they just made a decision within the last two weeks to move forward with almost 12,000 megawatts worth of transmission that will really keep the Texas market rolling. And the thing that's important to note about it, you don't build transmission unless there's economic value. The transmission in Texas will cost about $4.9 billion, but it'll save ratepayers $1.7 billion per year simply in reduced fuel costs. So this is a bargain for consumers in terms of the benefits that expanded transmission infrastructure would bring.

Monica Trauzzi: It does sound like you have a ways to go before wind energy can be completely viable to meet that 20 percent target.

Randall Swisher: Well, I'm now sure what that means. The resource is certainly viable. The industry expanded 45 percent last year. Wind actually provided 35 percent of all the new electric generating capacity in this country last year. So the industry, you know, this is no longer a marginal player. This is no longer really even alternative energy. Wind is one of the major resources available to electric utilities today and for the last three years has been number two behind natural gas. So, I think the industry is ready for this challenge. There's no question that it will require a focused plan to deliver on that potential, but we have the plan. We have the roadmap to get there and I think the benefits of moving in that direction are just overwhelming. I mean if the nation were to move to 20 percent wind, we're talking about virtually flat lining the emissions from the electric sector, reducing CO2 emissions from the electric sector by about 85 percent by 2030. We're talking about a half a million new jobs. GE has testified to the Senate that wind will be one of the leading sources of new manufacturing jobs in the 21st century. We're talking about reducing demand for natural gas by 11 percent across the entire economy, which has tremendous benefits to consumers, both residential and industrial. We're talking about reducing water use for a trillion gallons, so the benefits are just overwhelming. It's there for this nation to seize if we can simply get our act together and put in place the kind of policy needed to help move this forward. And the first step in that, as you know, is getting an extension of the wind production tax credit.

Monica Trauzzi: And I want to talk to you about that right now.

Randall Swisher: Great!

Monica Trauzzi: How has the debate over the renewable energy tax incentives affected your member companies? Is there this uncertainty now? Are we seeing companies scaling back, jobs lost, things of that nature?

Randall Swisher: It's a tremendous disincentive for companies to get involved in this industry. I mean if you look at the future, there's no question the future for wind is very, very bright. But the thing that concerns me the most is that this will be a source, one of the leading sources of new manufacturing jobs. These turbines will be manufactured somewhere, but increasingly companies are going to China, going to other countries which actually have more stable policy in terms of renewable energy than the U.S. We've got a whole bunch of governors and a whole bunch of manufacturing companies that are interested in coming to the U.S. If we put in place even a five-year extension of the production tax credit, you would see literally billions of dollars of investment flood into this nation. And the boom, in terms of manufacturing jobs, would be unbelievable.

Monica Trauzzi: Are you surprised by the path that this debate over the PTC has taken?

Randall Swisher: Sure, I mean it's really scary when you have, I'd say, 90 percent of the Congress agreeing to this is a good thing to do, the fact that they cannot come together and compromise on how to pay for it, it just boggles the mind.

Monica Trauzzi: Chairman Baucus has signaled that he'd like to take this up before August recess ...

Randall Swisher: That's right.

Monica Trauzzi: ... and pass it. What are you hearing in terms of when this might happen, when passage of this might happen?

Randall Swisher: Well, the plan is to bring it up within the next week and, yes, we are very, very, it's very important that this move as quickly as possible. We have companies that have millions of dollars on the line and, let me tell you, they are exceedingly nervous.

Monica Trauzzi: Explain the idea of national renewable energy zones, because I know that that's something that your organization has come out and spoken about. How would that help reduce congestion and make it easier to transport the synergy?

Randall Swisher: This is really based on the Texas model, what they called their competitive renewable energies zones. It's simply a matter of identifying where the energy resource is and plotting where the transmission needs to go to get it to the load centers, you know, the cities where the demand is. It's worked very well in Texas. We see the process as a model that can be applied on a national basis, not simply in accessing wind, but geothermal and solar and other energy resources that are remotely located. It makes great sense. We think it works in Texas, we think, and we're very pleased that both Senate Majority Leader Harry Reid and Congressman Jay Inslee have picked up on that concept and are taking that debate to the Congress.

Monica Trauzzi: Final question here, are there reliability issues that we need to be concerned about? If the wind doesn't blow, what do we do? I mean are these valid concerns to be thinking about?

Randall Swisher: It's very interesting to me the number of times that comes up and maybe it's sort of intuitive. People think of the wind doesn't blow all the time, well, it can't be a resource we can really depend upon. Wind is an energy resource as opposed to what we call a capacity resource. What that means is you take the wind when it's available and you rely upon the other resources in your system, the gas, whatever other generators you have for the 70 or 80 percent of the system. Excel, one of the leading private utilities in the country, will be dependent upon wind for most of the new energy coming on to its system. They understand that wind could provide 30 percent of the energy for their system. I know for some that are sort of naïve or uninformed about how to deal with a variable resource like wind, it may seem daunting, but take the wind when it's available, rely on your other resources when it isn't. It's not hard to manage that kind of variability, just as it's not hard for an electric system to manage the variability of demand.

Monica Trauzzi: All right, we're going to end it right there on that note. Thanks for coming on the show.

Randall Swisher: Thanks very much Monica.

Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.

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