Wind Power's Happy Premium

Consumers are willing to pay a bit more for green electricity

About 17 miles east of Bennington, on a hilltop in southern Vermont, 11 wind turbines rise 132 feet above the treetops. Gentle giants such as these, put into operation last year by Green Mountain Power Corp., could soon become a more familiar sight. With the coming deregulation of electric utilities, consumers will be able to choose who they buy their power from. Green Mountain is finding that many consumers will pay a few dollars more per month to buy environmentally friendly energy.

Many other energy producers feel the same way. Large-scale wind farms are under construction in Minnesota, Iowa, and Wyoming. Customers of Public Service Co. of Colorado have already shown that they are willing to pay more for wind power. Approximately 6,200 residential and 40 commercial subscribers have signed up to buy power from a new wind-generation facility. Customers choose how many "blocks" of wind energy they want. One block represents about a fifth of average household electric usage and costs about $2.50 more than energy from existing sources.

Currently, the U.S. has a capacity of about 1,700 megawatts of wind power out of the world total of 7,600 megawatts, according to the American Wind Energy Assn. (A plant with 1-megawatt capacity can power about 500 homes.) Those 1,700 megawatts of wind power represent about 0.1% of the nation's electrical output, but industry figures predict that the percentage will grow. "The receptivity of people in Vermont was not only positive, but remarkably positive," says Douglas G. Hyde, former president of Green Mountain Power and now head of its retail marketing venture, called Green Mountain Energy Resources. People being offered green power are buying it, he says.

The opportunity to choose green power became possible in California in March. Since then, Californians have been besieged by about 300 green marketers. Among them is Green Mountain Energy Resources, which has pledged to build a new wind turbine in the state every time it adds 3,000 more customers for its green-energy programs. The energy giant Enron Corp. initially planned to offer wind power to consumers in California but later dropped the idea, saying it would focus on developing wind power for the wholesale market.

Electricity deregulation is spreading. Pennsylvania, Massachusetts, and Rhode Island are among the states that have approved it, creating more opportunities for green marketers. Massachusetts, for example, will require power providers in the state to demonstrate by 2001 that at least 1% of their power comes from renewable sources, such as wind and solar power. "Deregulation gives us an opportunity to build a sustained market for renewables," says Michael W. Tennis, a manager at AllEnergy Marketing Co., a subsidiary of New England Electric System in Westborough, Mass.

Increased demand for wind power could mean lower costs. "The real dramatic changes in cost-effectiveness are less likely to come in technological changes, but rather in manufacturing economies of scale," says Randall Swisher, executive director of the American Wind Energy Assn. Wind turbines cost about $1 million per megawatt of installed capacity, and they last 20 to 30 years, says Edgar A. DeMeo of the Electric Power Research Institute in Palo Alto, Calif.

NEW LEADER. The U.S. has been a leader in wind energy, but it is losing its position to Europe, which is pushing it more aggressively. Swisher says Germany surpassed the U.S. in wind-power capacity only last year. Dino J. Pionzio Jr., CEO of SeaWest Power Systems Inc., a San Diego-based wind-energy developer, says: "Europe doesn't play around. Europe is serious about renewables."

Over the next decade, the wind association believes there will be at least 30 countries with 50 megawatts each of wind-energy capacity. Growth is expected in Latin America and China, too, but there it will be slower. In the U.S., forecasters say that for the wind industry, pleasantly blustery days could be just ahead.

Before it's here, it's on the Bloomberg Terminal.