SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 1307 words

COMMITTEE: SENATE FINANCE

HEADLINE: NATIONAL ENERGY POLICY

TESTIMONY-BY: MR. ROBERT T. BOYD, VICE PRESIDENT,

AFFILIATION: ENRON WIND CORP., LOS ANGELES, CA

BODY:
July 19, 2001

Mr. Robert T. Boyd Vice President, Enron Wind Corp., Los Angeles, CA

INTRODUCTION

Enron Wind Corp. (Enron Wind) is pleased to offer testimony on removing barriers to wind energy development in the United States.

Enron Wind is a wholly owned subsidiary of Enron Corp. The company has been in business for over two decades and has installed over 4500 wind turbines comprising more than 1,600MW of electric generation capacity. As a manufacturer of wind turbines, our current product line ranges from 600kW to 1.5MW with new 3.2MW onshore and 3.6MW offshore models under development. During 2001 our U.S. facility in California will manufacture 300 1.5MW turbines which will be deployed in Texas, Wisconsin, New York and Pennsylvania. STATUS OF WIND ENERGY

Wind Energy has become the most rapidly growing renewable technology because it has moved rapidly down the cost curve from over 25cents /kWh in the early 1980's to between 4 and 6 cents today in good sites without a tax credit. The major factors on the federal level driving down the cost of wind have been the creation of a U.S. market by using the Wind Production Tax Credit (PTC) to help equalize costs with conventional generation technologies and technological advances made possible through DOE cost-shared research and development and deployment programs. State renewable power requirements have also helped wind energy growth. The American Wind Energy Association estimates that installed wind capacity will almost double in the U.S. this year. BMT Consult ApS estimates that close to 40,000MW of wind will be installed throughout the world between 2001 through 2005.

WHY WIND ENERGY?

Wind energy is close to becoming competitive with conventional fuels. With additional R & D funding and the continuation of the Production Tax Credit for the next five years wind should become price competitive with conventional generation technologies. One primary advantage of wind technology is that because it burns no fuel long term fixed price contracts can be offered. This is a hedge against both fuel price volatility and potential pollution or CO2 taxes. We have certainly learned the value of fuel diversity during the energy crisis and we should put that lesson into practice by adding non-fuel dependent technologies like wind into our electric generation mix. A balanced portfolio approach helps mitigate risk.

The agriculture sector has been impacted significantly during the energy crisis and the value of wind energy should not be overlooked in the rural farming communities. Some of the best wind resources are found in sparsely populated areas used for farming and ranching. The landowners benefit by receiving significant land rent payments which far outstrip the value of agricultural income on a per acre basis. The host Counties also receive additional property tax revenues with very little increase in the services they must provide.

RECOGNITION OF THE BARRIERS TO WIND ENERGY

We appreciate the chairman and ranking member's consideration for renewables in drafting their bills. Energy policy is a very complex issue in the U.S., but renewables must be a part of our long-term strategy to satisfy U.S. energy needs. The issues we have highlighted below are those we view to be most significant in the future development of wind energy.

1. Wind Production Tax Credit (PTC)

By far the most important issue for wind energy is the extension of the Wind Production Tax Credit which has been included in your bills. The PTC has helped wind become more competitive with conventional generation technologies while we continue to reduce our costs. The PTC is vital to the long-term success of wind energy. This program has been the most effective tool in increasing the use of wind energy in the country. The extension of the PTC is a priority for this year as it expires on December 31, 2001.

2. Renewable Portfolio Standard

A federal purchase requirement is also a part of S.597. The federal government can play a leadership role as a consumer of clean renewable energy. There has been a particular interest from the military in using renewables on their bases for energy security reasons. We would like to see the purchase requirement expanded to a nationwide Renewable Portfolio Standard (RPS) which would require all power sellers to have some percentage of their electricity be renewable. This is a quasi-market based program which offers choices to the sellers in how they satisfy the requirement. Power sellers would have the option of owning renewables, buying and reselling renewable power or buying tradable credits from renewable sellers. There are several states with this type of program. Under the Texas RPS program, over 800MW of wind will be added this year. This will be an $800 Million investment in rural Texas.

3. Transmission

Transmission is a key issue for all electric generation, including wind power. Transmission upgrades and new lines are needed throughout the country. EPRI recently released a study which concludes that $10 to $30 billion needs to be invested in the western states transmission grid over the next 10 years just to bring the system to a stable condition. Wind energy, like hydro facilities and mine mouth coal plants, is often found in areas remote from load centers. We must have adequate access to transmission facilities on a non-discriminatory basis to reach the markets where wind power is needed. Transmission of electricity is much like the interstate highway system for the transportation of goods. We need a national electric grid just as we need a national highway system to get goods to market. FERC's decision last week to create four Regional Transmission Organizations (RTOs) is vital to the development of that national grid. We strongly urge Congress to support the FERC's RTO plans.

Intermittent resources such as wind have some difficulty accurately scheduling their deliveries and penalties can result from transmission providers for not meeting schedule. Wind generators are working to develop methods to better forecast delivery schedules, but we are not there yet. Your prohibition of such penalties is vital to future wind energy development.

4. Public Benefits Fund

We support the proposed Public Benefit Fund for renewables. Some states have adopted this type of program, which has been successful in bringing more renewables on line. The cost for renewables is spread over all the electricity purchasers in proportion of how much they use. Projects then bid for funding which is awarded to the lowest cost bids. California's program has resulted in a significant amount of new renewable projects under development. Federal funding would ensure that all states have the opportunity to participate in renewable development.

5. Assessment of Renewable Energy Sources:

The Department of Energy has done wind resource assessment in the past. It has proven valuable in siting wind projects around the country. We believe there are similar DOE programs for most renewable resources. The key to their being successful is adequate funding.

CONCLUSION

The U.S. has begun to move toward a competitive electricity market. Many states have already opened the door to competition, some with better results than others. There are many ways this committee and the Congress can help steer this emerging competitive market. We would hope to see competition not only at the wholesale level but at the retail level as well. The retail customer should be able to choose his supplier and product, which should include renewables. We appreciate your consideration of the renewable issues that the bills before this committee have already addressed. We request that you also consider some of the other issues we have raised in this testimony.



LOAD-DATE: July 24, 2001