He says it’s no spin: Wind has a big future
Mike Garland is the CEO and president of Pattern Energy, which operates 16 wind power facilities in the United States, Canada and Chile, including four in Texas. The company is headquartered in San Francisco but has a major operation in Houston.
Q: What is the industry doing to bring down costs as the main federal subsidy, the production tax credit, is phased out over the next five years?
A: In places like Texas, we are selling power for 2 cents a kilowatt-hour with the PTC. That’s dirt-cheap power. Over 50 years, the real cost of electricity in the United States has averaged 3.5 cents.
We think the manufacturers of wind turbines and the owneroperators will lower the costs on new projects enough to offset the loss of the PTC over the next three to five years.
Q: Isn’t the big question whether the price of natural gas will continue to set the price for wholesale electricity in the future?
A: If the idea is that gas is going stay down for several years and then start going back up again, we’re not going to look at that curve and say that you can trust that gas is going to be on the margin in Texas. The last bid we did was in Mexico, and the award for mostly solar was between $35 and $45 a megawatt-hour (3.5 cents to 4.5 cents a kilowatt-hour.)
That’s still really inexpensive.
Solar upfront is getting more efficient in terms of how they build them. Wind is a little different. It’s a mechanical system. So you can actually make more improvement on a wind machine over time as you learn more. They are software-driven now, and we’re going to see a lot of things that can be done to enhance the performance of projects going forward through software improvements.
We’ve been doing retrofits on all of our projects for improvements in performance through blade modifications. We do little vortex generators and winglets like you see on planes that help the lift.
If you’re seeing 4-cent power from this technology looking out two years from now, I can’t get comfortable with looking out 10 years from now and thinking you’re going to see 6 cents.
Q: You seem to be describing a very competitive market with solar, natural gas and demand management. Will it be difficult for wind
to compete?
A: We’re the only guys who are stepping up and saying we’re willing to compete head to head. Solar did not want to do a phase-out of tax credits.
We gave up our subsidies over the next several years, while other people haven’t. To me that’s the big issue, treat everyone the same.
I think it’s amazing that for the first time, you can actually see how it could happen where we would go not just 20 or 30 percent renewable but 75 or 100 percent renewable energy. I don’t think that’s in 10 years, probably longer, and gas will play an important part. But I don’t think gas will be the dominant, or should be the dominant, addition of new capacity.
Think about how much solar is going to cost in Northern states. It’s going to be expensive. If coal is going away, which we think it is, think about where that is happening. It’s happening in enormous wind resource states. Isn’t it a great idea to try to expand on the wind resource in those central states that are dependent on coal now so that you can create new jobs? It’s not just a wind issue, but a job and societal issue as well.
Q: What does the future hold for wind companies?
A: I used to say our goal over the next five years was to compete with $3 or $4 natural gas, and I think now we’re headed toward potentially competing against $2 to $3 gas, which is pretty mindboggling considering it’s renewable. The world still thinks renewable energy, particularly wind, is a subsidized high-cost form of power, and that’s not true. The second is that it’s intermittent, you can’t manage it and it’s bad for the system. That couldn’t be further from the truth.