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Acting Under Secretary of Energy David Sandalow's Remarks at the U.S.-Brazil Wind Workshop - As Prepared for Delivery

August 29, 2012 - 6:26pm

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Wind power has arrived.

For many years, widespread wind power was a distant dream.  No longer.  Today, wind power is shaping energy markets around the world.

Wind power is cheap and getting cheaper.  New technologies are opening new frontiers, helping harness the wind for electricity in ways and places out of reach in years past.  Wind power is creating jobs, cutting pollution and spurring innovation.  Yet the industry faces important challenges, including competition from cheap natural gas, transmission siting and stop-and-start policies that frustrate long-term planning.

In this short speech I’ll talk about wind power today, it’s potential for growth, and how the US and Brazil can work together to promote our common interests in wind power.

Last month I visited Iowa, where more than 20% of the electricity comes from wind power.  I toured a factory that makes large wind turbines and one that makes small wind power components – part of a supply chain that employs more than 6000 people in Iowa and 75,000 people around the United States, according to industry estimates.

Iowa is hardly alone.  In Denmark, 26% of the electricity comes from wind power.  In Spain and Portugal, it’s more than 15%.  Last year China added more new wind power capacity than the United States and Europe combined.     

Wind power is a big business.  In 2011, the global wind power industry had more than $65 billion in sales.   Global wind power capacity now exceeds 250 GW – the equivalent of more than 500 mid-sized power plants.  Last year, global wind power capacity grew by more than 20%.

In 2011, new wind power investment in the United States exceeded $14 billion, accounting for 32% of new electric capacity additions.  Over the past three years, the United States has more than doubled the electricity we produce from wind.

In part, this growth reflects steady cost declines in the industry.  Since 1980, the cost of electricity from wind power has fallen roughly 90%.  In the past few years, costs have continued to fall.  Costs vary depending on location, technologies and other factors, with many new wind projects   now delivering electricity at costs in the range of 5-7 cents/kWh. 

These cost declines reflect many factors.  Greater volume is helping cut manufacturing costs.  Improvements in turbines, blades and gearboxes, along with taller towers, have played a big role, as Secretary Chu and former ARPA-E Director Arun Majumdar noted in an important article on energy technologies published in Nature last month.  I’m especially pleased to note that research funded by the U.S. Department of Energy has played an important role in these cost reductions.  DOE-funded research supported the first multi-megawatt turbines, advanced components and rotors, and more.  Our wind projects supported 112 patent families—ranking first among leading research organizations in the field in wind energy patents from 1978-2008.  Early support for the development of wind turbine components and control systems contributed to the United States’ most-installed commercial wind turbine (GE 1.5/1.6), and to small wind turbines (e.g. Southwest Wind Power Skystream) made in the United States and sold around the world.

The focus of this workshop on distributed wind power is especially timely.   Wind power systems at factories, warehouses and other businesses, and in communities, can often provide low-cost electricity at slower wind speeds than utility-scale turbines, without the need for long-distance transmission.  One leader in this field is Wal-Mart, which operates 14 stores in Northern Ireland entirely on wind power, has 12 mini-turbines supplying a store in Massachusetts and recently announced its first on-site industrial scale turbine at a distribution center in California.  In the past five years, installed capacity of small wind turbines (capacity <100kW) in the United States has increased 247%. 

Wind power has a bright future.  Technological progress and manufacturing scale can help further reduce costs.  Advances in energy storage can help address the challenge of intermittency.  Cheap natural gas, which may compete against wind as an energy source, can also work in combination with wind, providing cheap backup power when the wind doesn’t blow.  Advances in computer modeling can help optimize power production from large wind farms, driving down costs.  With smart policies and top talent working in the field, the potential is enormous. 

President Obama speaks about wind energy often.  Last month he said “Over the past four years, we’ve doubled the amount of electricity America can generate from wind -- from 25 gigawatts to 50 gigawatts.  And to put that in perspective, that’s like building 12 new Hoover Dams that are powering homes all across the country.”  In 2010, he called wind power “a key part of a comprehensive strategy to move us from an economy that runs on fossil fuels to one that relies on more homegrown fuels and clean energy." 

In this year’s State of the Union Address, President Obama called for an extension of the Production Tax Credit for wind power, as he has on many other occasions.  That credit is set to expire at the end of 2012 unless Congress acts.  As the President said last month:    

“America has doubled the amount of electricity we get from wind over the last four years, enough power for nearly 13 million homes -- clean, renewable energy.  That’s something you leave behind for the next generation.  That is worth fighting for.  There are 37,000 American jobs at stake in this wind energy tax credit.  We should support it.  I support it."

A comprehensive survey of wind power technologies is beyond the scope of these brief remarks.  But let me say a few words about distributed wind -- the focus of this workshop – and then about offshore wind -- an interesting and important technological frontier.

The United States pioneered small wind turbine technology in the 1920s in order to power rural farms that were out of reach of electricity distribution lines.  At a size of only 200 - 300 watts, these early machines were used to provide lighting in remote locations while the U.S. undertook a rural electrification effort to build out the electric distribution network.  Starting in the late 1970’s, federal law required utilities to allow for the interconnection of distributed generation, spurring innovation in grid-tied small wind turbine generators.  As a result, the United States still leads in distributed wind technology and manufacturing.  Wind turbines are deployed in residential, agricultural, industrial and community installations, providing clean power for on-site use and relieving pressure on the grid.   These turbines can be large, midsize or quite small (some less than 15 feet high). 

The market for wind turbines in distributed applications has significant growth potential.  Industry studies report that distributed wind systems in the U.S. are projected to reach an installed capacity of 3-5 GW by 2020.  This growth will be driven by the projected cost reductions due to performance improvements resulting from ongoing research and development activities. In addition, cost reductions can be achieved through innovative manufacturing techniques.  The technology continues to be a means for local economic development, while providing energy autonomy.

Wind turbines used in distributed applications do not require new transmission capacity.   Transmission constraints remain one of the biggest barriers to further deployment of utility-scale wind -- new or upgraded transmission often requires siting, planning and cost allocation across multiple jurisdictions. In the United States, there is a long queue of wind projects awaiting interconnection before they can be built, and the curtailment of existing wind plants to deal with overcapacity continues to be a problem in some areas.  Distributed generation offers substantial benefits. 

In recent years new small wind power products have entered the market without a framework for verifying manufacturer claims about turbine performance, reliability, noise and safety.  As a result, in 2009 U.S. DOE supported the development of technical standard that can now be used voluntarily to test small wind systems to performance and safety criteria.  In 2010, U.S. DOE supported the establishment of four small wind turbine regional test centers and the Small Wind Certification Council, which provides accredited third party verification of test results in accordance with internationally adopted technical standards for testing.

DOE and US industry view small wind product certification as a way to provide manufacturers with the parameters for communicating transparent and credible information to consumers, utilities, lenders and policymakers about the safety, performance and durability of small wind turbine.  Mike Bergey, president of Bergey Windpower and the 2011/12 president of the Distributed Wind Energy Association, said “this is huge for consumers,” describing a new standard as "… the most significant milestone in the history of the small wind industry because it provides, for the first time, third-party verification of real world performance and a highly technical review of a turbine's strength and safety."  The focus of DOE’s small wind technology R&D portfolio will continue to be the establishment of a framework for turbine certification.  Aligned with these efforts, DOE’s Wind Program aims to increase the number of small wind turbine designs certified to performance and safety standards from a 2010 baseline of zero to 40 by 2020.  Presently there are 5 turbine certified in the U.S.

Offshore wind power can play an important role in the clean energy future of the United States, and perhaps Brazil as well.  In the United States, the technical potential for offshore wind energy is estimated to be more than 4,000 GW – four times the generating capacity of the entire U.S. electric power system.  Much of this resource is near coastal population centers.  While technological challenges must be overcome, harnessing even a fraction of the potential of offshore wind could create thousands of jobs, revitalize ports and diversify energy supplies. 

That’s why, in 2011, U.S. DOE announced a National Offshore Wind Strategy in partnership with the Department of the Interior, which is the U.S. government agency responsible for projects sited on the Outer Continental Shelf.  Pursuant to this strategy, DOE funded a series of projects in 2011 with goal of cutting the cost of building, installing and maintaining offshore wind farms. These projects seek to develop newer, more cost effective and efficient technologies and address key barriers of this developing market.  Earlier this year, DOE announced a six-year, $180M offshore wind demonstration effort  to address key challenges associated with installing utility-scale offshore wind turbines, connecting offshore turbines to the power grid, navigating permit and regulatory approval processes, and collecting data to guide future design standards while expanding the industry knowledge base. Through these projects, we expect to deploy at minimum one demonstration size and one utility scale project in U.S. waters, the first of which is scheduled to begin construction as early as 2014.

The nascent U.S. offshore wind industry can greatly benefit from experience and expertise of other offshore industries like oil and gas to develop new low cost foundations (including deep water floating platforms) and optimized installation, operation and maintenance strategies.

As the two largest economies and democracies in the Western Hemisphere, the United States and Brazil have much in common.  We share a history of cooperation and friendship, bolstered today by the leadership of President Obama and President Rousseff.

Both our countries are blessed with rich energy resources.  We both have vast oil reserves.  We are the world’s two largest producers of biofuels.  We both produce enormous amounts of electricity of hydropower. The solar potential in both our countries is enormous and – most important for today’s workshop – both our countries have strong winds that can provide substantial electric power. 

In light of the foregoing, President Obama and President Rousseff launched a Strategic Energy Dialogue between our two countries in March 2011.  The underlying objective of the Strategic Energy Dialogue is to grow bilateral, technical and private sector energy cooperation.  By doing so, we can strengthen our energy relationship, increase bilateral trade in energy-related goods and services and enhance energy security.  Specific goals of the SED include advancing safe, responsible and efficient oil and gas development, safe and secure civil nuclear power, biofuels cooperation and deployment of renewable energy, smart grid and energy efficient technologies.  Through the Strategic Energy Dialogue, we are working together on a wide range of energy technologies. 

Wind power, which brings us here today, provides an important opportunity for collaboration.  Brazil is endowed with strong and consistent winds —resulting in a more than 40% average capacity factor.  This means that more power can be generated with less installed capacity, resulting in a lower cost per kilowatt-hour.  Moreover, the Global Wind Energy Council projects a wind power capacity of more than 7.7 GW in Brazil by the end of 2016.  The potential for the U.S. and Brazil to work together on wind energy in the years ahead is substantial.  One particular area of opportunity is expansion of wind capacity in northeastern Brazil, including Ceara state, which currently houses Brazil’s largest wind energy sector.  

Brazil recently took an interesting step toward promoting distributed wind development—federal rules on net metering. On April 17, 2012, the Brazilian Federal Energy Regulatory Agency (ANEEL) enacted new rules to reduce barriers to distributed power generation in utility procurement.  To promote renewable energy on a broad scale without relying on long-distance transmission lines, the new regulation establishes a net metering program which allows small-scale power production generators of 1 MW or less to offset their electricity bills with credits from the energy they provide to the grid. 

Net metering promotes wind deployment while providing no preference to any particular wind technology, company, or ownership structure. Unfortunately some policy mechanisms fail to do that.  For example, Brazil’s 14% tariff on the import of wind turbines hinders development of Brazil’s distributed wind industry.  Brazil could make this industry 14% more competitive with traditional forms of energy overnight, by allowing duty free import of certified, advanced small wind turbines from the U.S.  This could promote a new industry in Brazil, while creating jobs across the country for installers, service providers and equipment suppliers. And it would further our two governments’ commitment to developing the type of trade relationship that has benefited our countries in so many other industries.

U.S. exports of wind turbines grew to $149 million in 2011.   Brazil has long been one of the leading destination markets for U.S. exports of wind-powered generating sets.  With substantial growth projected for Brazil’s wind power sector, our economic partnership on wind power has substantial potential for continued growth.  

Wind power has arrived.  So too have countless opportunities for the United States and Brazil to promote their common objectives in the energy sector.  The Strategic Energy Dialogue – led by the U.S. Department of Energy and Brazilian Ministry of Mines and Energy -- is paying dividends for both our countries.  Let us build on this foundation, lending a hand as our companies, research institutions and government agencies explore ways to work together in the months and years ahead.  As Brazil prepares to host the 2014 World Cup and 2016 Olympics, important opportunities for partnership may emerge.    

Working together, we can accomplish more than acting alone.  President Obama and President Rouseff have called on us to promote innovation and clean energy —so let us take up that challenge and win the future together.  Thank you. 

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