The Flowering of Wind Power: Iberdrola Renewables' Vision for Growth
The name of the Spanish utility, Iberdrola, rolls off your tongue. When it comes to its renewables business in the United States, it is fast rolling across the landcape as a major developer of wind projects. By the end of last year, Iberdrola Renewables controlled or operated almost 40 proj¬ects totaling roughly 3,500 megawatts of wind in the United States. It now employs 800.
To better understand Iberdrola Renewables' ambitions, EnergyBiz magazine recently sat down with Don Furman, the company's senior vice president for devel¬opment, transmission and policy in the company's Portland, Ore., headquarters. Furman, 54, is a wind power industry leader, having just completed a stint as chairman of the American Wind Energy Association. His comments were edited for style and length.
EnergyBiz: Why is a Spanish company in the United States putting up wind turbines?
Furman: Iberdrola purchased ScottishPower. The wind business in the United States was started as a subsidiary of PacifiCorp, which was owned by ScottishPower. We are in active development of wind, but also solar and biomass.
EnergyBiz: The Department of Energy says wind could generate 20 percent of the electricity in the United States. How long would that take?
Furman: Certainly not the next 20 years. I don't think there's any doubt that 50 years out we should be getting a substantial part of the U.S. portfolio supplied by the wind.
EnergyBiz: What is Iberdrola's commitment to renew¬ables in the United States?
Furman: Over the next three years we expect to invest about $6 billion in renewables. We have more than 20,000 megawatts of wind projects in the pipeline. We are in every wind region in the United States.
EnergyBiz: To what extent are you constrained by transmission resources?
Furman: From our earliest origins, we've put a lot of emphasis on transmission and hiring seasoned transmission professionals. We were really for a long time the only wind developer that did that. Our approach differs depending on the market we're in. In the West, which is largely a bilateral market, we're pretty aggressively buying point-to-point transmission service. Our marketing strategy has been one of delivering to the utility customer.
EnergyBiz: How do you structure your sales?
Furman: We predominantly sell through long-dated power purchase agreements. You give up upside in the future if you think renewable energy credits are going to be valuable, but you gain secure pricing when energy markets are depressed.
EnergyBiz: What will be the impact of growing natural gas supplies on wind development?
Furman: The real secret to wind integration is not putting 100 megawatts of gas in the ground for every 100 megawatts of wind. The most efficient use of both natural gas and wind is where those two can come together in a market and you can optimize both.
EnergyBiz: Do you want the federal government to establish a price on carbon emissions through a cap-and-trade regime?
Furman: Realistically, cap and trade was never going to make a significant contribution to our business in the long term. It's the right policy and we fully support it. The way the Waxman-Markey bill was constructed, we weren't going to see a significant carbon price in the next 10 years because they doled out allowances.
EnergyBiz: Would other policies spur renewables?
Furman: We need a renewal energy standard. That is the American Wind Energy Association's and Iberdrola Renewables' top policy objective.
EnergyBiz: How might it work?
Furman: Core renewables count toward the standard. Every utility would be required to provide or to source its energy sales up to 20 or 25 percent from renewables. There are a lot of variables. Should energy efficiency count?
EnergyBiz: Should it?
Furman: Energy efficiency is some of the low-hanging fruit in this country. You have to go do that. To say otherwise
is just wrong. But the administration of the renewable energy standard is difficult when you add energy efficiency into that equation.
EnergyBiz: Should nuclear be counted as a renewable?
Furman: Is this a renewable energy standard or is it a clean energy standard? We are not opposed to nuclear having a role, but if you're going to do that, then you also should expand the amount the utilities are required to have.
EnergyBiz: How did wind deployments fare in 2009 compared with 2008?
Furman: It was up almost 10 gigawatts.
EnergyBiz: What impact are federal stimulus funds having on wind deployment?
Furman: The conversion to the investment tax credit from the production tax credit literally saved the industry.
Furman: For a number of years, the policy support of this industry has been solely the production tax credit. There were two problems. It got renewed sporadically, so we'd have this boom and bust. And nobody had any tax capacity left. Nobody had enough income to use. So I moved to Washington
for about four or five months. AWEA pulled out the stops and we put a few coalitions together and we worked really hard at getting what we call the grant program. It allows us to convert for a two-year period our production tax credits into investment tax credits. We took a little bit of a haircut on the value of that, but we got the cash up front. More importantly, we were permitted under the stimulus bill to turn in our investment tax credit to the Department of Energy and receive a check for its full value in 30 days. This was not new stimulus money. This was all money that had already been appropriated years ago for the production tax credit.
EnergyBiz: What are the major misconceptions about wind?
Furman: I think the big one has to do with integrating intermittent resources. It's difficult, it's a very new challenge,and it's doable. But it requires a new mindset, it requires some new skills, and it requires some new tools. Number one is forecasting.
EnergyBiz: It is part of the entire grid getting smarter.
Furman: And it needs to get a lot smarter. In the West we predominantly schedule on the hour and what happens in between is the grid operator's problem. If the rules are structured right and we have a market where we can adjust every 10 minutes, like they do in some of the organized markets, we'll do a much better job of following our schedules and adjusting our generation, and it takes some of that burden off of the grid operators. Part of the problem we have is this patchwork quilt where we have some organized markets and some bilateral markets and some developing markets. If we could put all of our wind in the New York ISO and California ISO and PJM, we'd do it because they're great. They're much, much more sophisticated, much more able to integrate wind. MISO is a developing market. Their congestion markets aren't really working yet. They have markets there but there are some real infirmities.
EnergyBiz: What is happening on the national level?
Furman: The Federal Energy Regulatory Commission has opened a notice of inquiry into wind integration. We can finally start to get some progress at the national level. But you asked me what the biggest fallacy was. The biggest fallacy is that you've got to have 100 megawatts of thermal for every 100 megawatts of wind.
EnergyBiz: What should the equation be?
Furman: Well, it depends. If you've got a big balancing area with a deep liquid market and good ancillary services markets, maybe it's 10 to 1.
EnergyBiz: Ten megawatts backup for 100 megawatts of wind?
Furman: Right. That's just an order of magnitude.
EnergyBiz: Tell me a little bit about your plans for solar.
Furman: It's a new business. We've been under way about two years. The strategy is to remain technology neutral, so we're looking across all different technologies. We've taken some significant land positions in the Southwest on Bureau of Land Management land for concentrating solar. We've also got some 20- to 40-megawatt projects under development in Colorado, Nevada and New Mexico. We're in the utility scale market for photovoltaics and thin film.
EnergyBiz: Your parent company has invested heavily in Spain?
Furman: They've done a number of sizeable solar projects.
EnergyBiz: Do they intend to be big solar developers in the United States?
Furman: There's more resource here than there is in Spain. It's more intense, it tends to be at higher altitudes and there tends to be less humidity.
EnergyBiz: And that's good.
Furman: That is good. There is absolutely a benefit from diversity and I think we're getting support from Spain to continue that.
EnergyBiz: Do you have any targets of how much solar you would like to develop?
Furman: Not at this time. We would develop probably less than 100 megawatts in the next year or two. We are hoping to get a few projects over the line, get our feet wet, learn the vendors and learn the construction process, which is what we did with wind. This is not a company that goes out and takes huge risks. We work into it systemically.
EnergyBiz: Why is it that foreign companies play such a big role here in renewables?
Furman: The reason foreign companies are here is because there were no American companies, and the reason there were no American companies is we gave it up. We invented the wind business, we invented the solar business and we absolutely had a lead in the 1980s. But we have no energy policies at the national level like every other country has had. Germany, Spain, the United Kingdom, France, China, India, Brazil - they all made decisions at the national level to support new energy forms and domestic energy forms. All this technology went overseas.
EnergyBiz: We believe in letting the marketplace pick winners and losers.
Furman: We did not have a vision for where we wanted to go.
EnergyBiz: So have we learned?
Furman: Well, I'm hoping. I spend a lot of time trying to get this message across to members of Congress. There is an effort to get this moving again in a bipartisan way.
EnergyBiz: Do you aspire to be the largest wind devel¬oper in America?
Furman: We have a ways to go, but we'd like to be there. We were number one in new installations last year.
This article first appeared in EnergyBiz magazine. Subscriptions are available at www.energybizmag.com.