SIX | Gridlock on the Western plains

As oil prices continue to rise and support for clean energy development increases, 2008 could be a year of record growth for U.S. renewable energy companies. Yet with the West Coast’s increasing electricity demands straining the region’s transmission grid, the race to tap into the West’s best wind sites is getting tighter—and some developers are feeling the squeeze.

Investment in the U.S. renewable energy market is expected to reach an all-time high of $25 billion in 2007, following a strong 2006 when investments in the sector tripled, according to a recent report from research firm Packaged Facts. The report, “Renewable Energy Investment in the U.S.,” projects the rapidly emerging renewable energy investment market could reach nearly $50 billion by 2011.

Despite the industry’s rapid growth, wind developers in the West are being forced to work harder than ever to secure the region’s best sites. “The competition for sites is as fierce as any time since I have been in the business,” says Chris Taylor, director of project development for the Portland office of Horizon Wind Energy, a subsidiary of Energias de Portugal.

Passed with strong support from rural landowners anxious to host wind turbines, new state renewable energy standards in Oregon, Washington and other states have lured an increasing number of wind energy companies to Portland in recent years [see “Northwestern winds,” SI, November 2007].

Taylor, who has worked to develop strong relationships with Northwest landowners since Horizon landed in Portland in 2001, says the companies that established themselves early on are the ones best positioned in the current market.

Horizon, which was acquired by Goldman Sachs (NYSE: GS) in 2005, was sold in April to Energias de Portugal for $2.2 billion. Acquiring Horizon Wind Energy’s 560 gross megawatts (MW) of windpower generation provides EDP an entry into the rapidly growing U.S. renewable energy market. Yet even if the federal government passed a national RPS, further boosting wind–energy project development, transmission troubles in many parts of the country could raise the stakes even higher among developers.

Taylor notes while the “low-hanging fruit”—sites with an excellent wind resource on large tracts of land with a single landowner, located close to transmission and with easy access to permits—are getting tougher to find, without transmission upgrades, many potentially viable projects might never be built.

“We’ve only skimmed the very cream of the crop so far in the United States as far as wind sites,” Taylor says. “We generate less than 1 percent of our energy from wind in this country, and we have far better resources than Europe. There’s plenty more to be done.” The wind industry plans to meet 6 percent of U.S. electricity needs by 2020. Transmission troubles won’t likely stall any projects currently in the pipeline, but if the issue isn’t addressed soon, the wind industry could take a serious blow. Constructing additional transmission can take years—and time is of the essence for most investors of capital-intensive projects such as wind farms.

In the West, the challenge is not so much lack of new transmission as constraints on the existing transmission system, adds Anita Marks, corporate spokesperson for Portland-based PPM Energy. “The West has been growing so much in recent years,” Marks says. “The utility infrastructure has to be built up to keep up with growing demand. Transmission constraints make it harder to move power from the generation areas to the locations where people need the electricity.” Darin Huseby, who heads wind developer enXco’s Portland business development office, agrees. “There are pathways where it’s virtually impossible to get any more megawatts through the line,” Huseby says.

While current efforts, led by Portland-based Bonneville Power Administration, are under way to tackle the West’s transmission issues, some in the industry say federal legislation mandating a federal renewable energy standard could help create new transmission. A recent Zogby International poll of potential 2008 voters found 77 percent of Republicans and 92 percent of Democrats agree the federal government should require at least some of their electricity come from renewable sources such as wind.

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TrendWatch 2008
The Sustainable Industries editorial team talked with dozens of industry leaders, reviewed hundred of articles, and sifted through stacks of research to bring to you, our readers, insights on what to expect from sustainable industries on the West Coast and beyond in the year ahead. Keeping reading for more insights into the year ahead!
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