RENEWABLE ENERGY

Desert project shows wind's challenges -- and opportunities

ELY, Nev. -- It was an item in the local paper that started Tom Ashby on his journey home a few years back -- a new wind farm was being planned just a few miles from where he grew up.

After more than 15 years away from home, Ashby hoped the chance to join the growing renewable energy sector would present his next opportunity. He sent a résumé to Pattern Energy, which was developing the wind farm, and with some perseverance and a little luck ended up being hired as the assistant facility manager at the Spring Valley Wind project.

Ashby, 53, moved to Idaho, where he found work in the state's gold and silver mines, in 1994, and he left the mining industry in 2001 to take a job in a coal-fired power plant in Colorado operated by Xcel Energy Inc.

But he never forgot his roots in rural east-central Nevada's White Pine County, population 10,000. He kept up with news from home on the Ely Times' website, where he first learned of the Spring Valley Wind project that now employs him.

"So 18 years later, I'm back in White Pine County -- been here since the middle of May and just thrilled to be back," Ashby said in an interview last week, following the ribbon-cutting at the facility. "My parents still live here; my brother lives here. Of course, any Ashby you run into in Ely is related."

The Spring Valley project -- its rows of turbines nestled between two low mountain ranges in a remote part of the state -- is a microcosm of the issues facing the wind industry today.

It sits on federal land and relied on financial support from the American Recovery and Reinvestment Act -- making government support vital to get the project off the ground. It wouldn't be feasible without an upcoming transmission line to ship the electricity to Las Vegas.

Pattern had to modify plans to stave off a lawsuit from environmental groups concerned about nearby wildlife. Its turbines were supplied by the growing network of domestic manufacturers that industry backers say would shrink dramatically without continued government support. And the project has been supported by Democratic and Republican lawmakers, demonstrating the ability for wind to generate bipartisan support even as the industry struggles for wins in Congress.

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Ashby's is one of about a dozen permanent jobs created by Spring Valley, the first utility-scale wind farm in Nevada, and his story provides a ground-level view of the ongoing debate over how much state and federal support is still needed for the fast-growing wind industry, which has taken a central role in Congress and on the presidential campaign trail.

The 150-megawatt Spring Valley Wind project's 66 turbines began spinning last week, about 30 miles from Ely, and project developers say it couldn't have happened without bipartisan support from federal, state and local lawmakers. The project benefited from a grant to cover 30 percent of its costs in lieu of federal tax credits, and it won enthusiastic support from White Pine County officials.

While the number of permanent employees on site is relatively small, up to 225 people were put to work building it over the past year, including qualified local workers and out-of-towners who spurred the local economy while they were on site.

"Our county has greatly benefited from the economic multiplier, by having employees rent our homes, stay in our motels, our hotels, our restaurants, use our gas stations and our stores and enjoy libations at our various watering holes," White Pine County Commissioner Laurie Carson told the assembled crowd last week.

The project is estimated to generate up to $20 million in state and local tax revenue over the next two decades, according to Pattern. The company also agreed to donate to several local causes, including $250,000 to emergency medical services and $50,000 to the local library, Carson said.

Project backers also pointed to manufacturing jobs created by the factory. Siemens AG supplied the 2.3 MW turbines for the site, which were constructed at facilities in Fort Madison, Iowa, and Hutchinson, Kan.

"When you look at this, all the clean energy generated here is homegrown here in the U.S., delivered in the U.S. and being used in the U.S.," said Michael Revak, a Siemens executive who appeared at last week's ribbon-cutting ceremony.

Years of environmental review

The road to last week's opening of Nevada's first commercial-scale wind farm was a long one, stretching back about seven years, Pattern CEO Mike Garland said in an interview last week. The project's lead developer began evaluating the site in 2005, and Pattern accelerated its efforts in 2007, launching three years of wildlife studies as it gathered wind data at the site.

The project sits on 7,673 acres of public land, requiring Pattern to receive approval from the Bureau of Land Management and complete environmental reviews required by the National Environmental Policy Act before construction could begin. BLM said early on that it wanted to "fast track" the approval process (Land Letter, Jan. 14, 2010).

That review did not satisfy environmental groups such as the Center for Biological Diversity, which filed a lawsuit in early 2011 seeking to halt the project, arguing it would be harmful to bats that roost in the area. Pattern and the environmentalists settled the lawsuit earlier this year, with the company agreeing to undertake additional mitigation measures and pay up to $50,000 for a study on bat roosting habits (Greenwire, April 18).

Garland said he was satisfied that the lawsuit could be settled and stressed that the company took seriously its obligation to protect wildlife. But he questioned whether three years of review should really be considered a "fast track" to regulatory approval and suggested that such legal challenges should be able to move through courts more quickly to cut down on the uncertainty they create.

"I think the main thing you could do that would help companies like ours is figure out a way to expedite the legal process, because the problem with it is anybody can sue in the U.S. without it costing them much, and all of a sudden now you've got uncertainty around your project, and it can get dragged out for months if not years," he said.

Federal financial assistance

Construction on the project began about a year ago, even as the lawsuit was still pending. But by starting the construction last year and placing the project in service before the current fiscal year ends Sept. 30, the project is eligible for a grant under the so-called Section 1603 program created by the 2009 economic stimulus law.

Pattern's 1603 application is still being processed, and once approved the grant would cover up to 30 percent of eligible costs for a renewable energy project and can be claimed in lieu of an investment tax credit for the equivalent amount. The Spring Valley project carries a price tag of about $225 million, according to local media reports. The company does not divulge the costs of its projects, but a Pattern spokesman says that figure is not accurate, saying such projects cost more than $300 million on average.

The investment tax credit (ITC) is separate from but related to the production tax credit (PTC), which expires for wind energy at the end of this year unless Congress acts. The PTC provides a 2.2-cent tax credit for every kilowatt-hour of electricity generated by a project.

Garland said a project's "capacity factor" -- essentially the amount of time electricity is being produced -- generally determines whether a developer would be better off claiming the ITC or PTC, with the production credit favoring higher-capacity projects.

Although eligibility for the 1603 program has largely dried up, the wind industry and its allies continue to lobby heavily for an extension of the PTC and ITC. A tax package that recently passed the Senate Finance Committee included a PTC extension and continued to give wind developers the option to claim the ITC instead (E&E Daily, Aug. 3).

Without an extension to the credit, Garland said Pattern would turn its focus to projects in countries such as Canada and Chile, although he suggested the company was examining a few U.S. projects that could be feasible regardless of what happens to the credit. However, he said that domestic turbine manufacturers would be hit hardest, a scenario that has been playing out with reported layoffs across the country in recent weeks.

"Finally we get a manufacturing business in this country, and what do we do? Shut it down," he lamented in the interview.

Nevada's senior senator, Majority Leader Harry Reid (D), predicted last week that the credit would be renewed before the end of this year. The state's junior senator, Republican Dean Heller, earlier this year signed on as a co-sponsor to legislation that would extend the PTC for two years. While neither senator attended last week's Spring Valley ribbon-cutting, both sent aides to the event, and Reid recorded a brief video addressing the attendees.

Speaking to the crowd at Spring Valley, Garland recalled Heller sharing stories about his brother who has worked in the wind business and said it is a recent anomaly that the credit has been bogged down by partisan squabbling.

"This is a change in the last few years that we've experienced some resistance in Congress," he said.

Isolation poses challenges

Inadequate transmission from remote, windy areas to population centers has long bedeviled the wind industry, and the Spring Valley project faced similar hurdles.

Because of its remote location -- about 240 miles northwest of Las Vegas, whose residents will ultimately receive the electricity -- the Spring Valley project required a buyer for the electricity and a way to get it to Nevada's population centers.

That's where NV Energy Inc., the state's main utility, came in. The two parties inked a 20-year power purchase agreement, under which NV will buy power for 9.8 cents per kilowatt-hour, and the utility's soon-to-be-completed One Nevada transmission line will bring the electricity to homes in the southern part of the state. The project's capacity will be able to power up to 45,000 homes.

NV Energy has faced criticism from Reid and others for not doing enough to promote renewable energy in the state, but officials disputed that notion as they helped cut the ribbon on Spring Valley last week.

Bobby Hollis, NV Energy's executive in charge of renewable energy, said in an interview that the utility is on track to meet the requirements of the state's renewable portfolio standard, which calls for 25 percent of the electricity sold to be from renewable energy by 2025. He said one of the biggest hurdles in getting large-scale renewable projects built in the state comes from delays encountered in the federal permitting process because at least 85 percent of the land in the state is managed by the federal government.

The Spring Valley project is one of seven renewable energy facilities coming online in the state this year, along with three solar facilities, two waste-to-energy projects and a large geothermal installation, said Mary Simmons, NV Energy's vice president of external affairs. The 300 MW of new renewable projects will increase the state's renewable energy footprint by 62 percent this year, she told the crowd.

"We're always asked when Nevada is going to do more about renewable energy, so I hope everybody here today recognizes that we're doing a lot about renewable energy," Simmons said.

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