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Wind Farms Blowing Strong by Gail Kinsey Hill The Oregonian - October 28, 2005

Portland's PPM Energy has become the country's most prolific builder

WASCO -- As PPM Energy prepared to celebrate today the completion of its Klondike II wind farm in Sherman County, it was already hard at work on its biggest undertaking yet: a 200-megawatt 130-turbine project across the river in Washington's Klickitat County.

The new wind farm, scheduled to come online next summer, would be one of the largest in the Columbia River corridor, an area known for its windy conditions.

Other national developers are involved in projects of similar size -- or larger -- throughout the Northwest and across the country, as wind energy becomes an increasingly mainstream and profitable industry.

"There are a lot of giant players -- big banks, big developers, a lot of smarts kicking around," said Peter West, director of renewable programs for the Energy Trust of Oregon. "The industry is rock-solid and ready."

PPM Energy, a Portland-based subsidiary of ScottishPower, this year will build 574 megawatts of wind-powered capacity throughout the country, more than any other developer, according to company officials.

ScottishPower also owns Portland-based PacifiCorp but is trying to sell the utility to MidAmerican Energy Holdings Co. of Des Moines, Iowa. ScottishPower said it has no plans to sell PPM Energy, just 4 years old and already profitable.

Several market forces are giving the wind industry a big boost. One is the production tax credit, a federal subsidy aimed at easing up-front development costs and making wind-power prices competitive with more traditional forms of energy.

Another is the huge jump in the price of natural gas, which fuels most new power plants. Power-cost run-ups are forcing utilities and other power purchasers to look for ways to diversify their resource portfolios, and they're turning increasingly to renewable sources such as wind.

"Three years ago, we had a hard time getting the time of day" from potential wind-power buyers, said Terry Hudgens, PPM Energy's chief executive. "Now they're saying, 'Can you do it for me tomorrow?' "

Wind power remains a small part of the overall mix. By year's end, it will account for about 1.5 percent of electricity consumed in the Northwest.

"It's a small but growing number," said Rachel Shimshak, director of the Renewable Northwest Project, a coalition of public-interest organizations and energy companies that support the development of renewable resources.

Hudgens expects the boom in wind-farm development to continue through at least 2007. Then, the production tax credit will expire, which could cool the frenzy. In 2004, when an earlier version of the tax credit ended, development all but ceased.

Randall Swisher, executive director of the American Wind Association, said his trade organization will push for the credit's extension. It also will seek a renewables portfolio standard that would require the nation to generate 10 percent of its electricity from renewable sources, such as wind and solar, by 2020.

In any event, wind energy is becoming increasingly competitive with coal and natural gas, and more attractive to big-money investors such as banks and energy conglomerates.

"You wouldn't have the likes of Goldman Sachs in the game if it was just a three-year play," Swisher said.

Goldman Sachs, a New York investment bank, bought Zilkha Renewable Energy, one of the nation's leading wind-power developers, in June. It renamed the company Horizon Wind Energy.

Sherman County boom

Nowhere is the rapid-fire development more evident than in Sherman County near the tiny farming town of Wasco. Klondike I and II, both owned and operated by PPM Energy, have brought 100 megawatts of capacity online, enough to power about 25,000 homes annually.

Wind is a variable resource and doesn't produce the nonstop electricity flow of traditional natural gas- or coal-fired power plants. Adjusted to account for wind's ups and downs, a megawatt of wind energy capacity is estimated to generate enough power to continuously light up 250 homes.

Klondike II involves 50 wind turbines manufactured by GE Energy. The sleek white towers stretch 389 feet from the ground to the tip of the highest blade, about the height of a 30-story building. Each has a 1.5-megawatt capacity.

The project covers 6,400 acres of land leased from eight local landowners. John Hilderbrand, a third-generation farmer, has 11 turbines on his 1,100 acres. He continues his dryland wheat operation, but he admits he struggles to make money, particularly as droughtlike conditions have persisted for years.

The turbines are little bother, he said, and he simply farms around them. What's more, they're money producers.

Arrangements with wind developers vary, and farmers sign agreements not to divulge compensation.

Industry publications peg payments to farmers at between $2,000 and $4,000 per turbine yearly.

"Farming is all about gross," said Hilderbrand. The turbines "are all about net."

"It's sacrilege to cuss out the wind anymore," added Hilderbrand, 78.

Cash flows to county

Local governments also like the cash flow. Sherman County has long been one of the poorest counties in the state, but the wind farms already have begun to change the equation.

Klondike II will put $700,000 annually into county government and account for 10 percent of the total budget. There may be much more to come. PPM has begun the permitting process for Klondike III, which could be four times the size of Klondike II. Orion Energy of Oakland, Calif., plans to develop a 450-megawatt capacity wind farm in nearby Biglow Canyon.

Earlier this week the county held a special meeting to brainstorm ways to spend the money and bolster the economy.

"What do we want to look like in 2023?" said Judge Gary Thompson, who heads the Sherman County Board of Commissioners. "We could be playing with $100 million in additional tax revenue."

The wind in Sherman County is strong, but only moderately so by wind-farm standards. Much of the area's popularity has to do with available power lines, owned by the federal Bonneville Power Administration, which stretch into population centers in western Washington, Oregon and California.

Portland General Electric, for example, signed a 30-year contract to buy all the output from Klondike II. It is searching for more wind-power purchases.

Utilities generally buy power from developers, but PGE could take the more aggressive step of outright ownership. "We're looking at every option, including self-build," said Scott Simms, a PGE spokesman.

Buying down costs

The Energy Trust, which uses a pool of money collected from electricity ratepayers in Oregon to encourage large-scale renewable projects, said it will announce today that it has agreed to pay PGE $12.5 million to aid the wind-power effort.

"We're helping utilities buy down the near-term cost to get to long-term cheap, steady power," said the Energy Trust's West.

The Energy Trust was going to aid PGE in the Klondike deal, but the price was low enough without the subsidy. "PGE negotiated a really good deal," West said.

PGE declined to disclose a purchase price. However, PPM Energy's Hudgens said he has been able to offer customers wind power for about $50 a megawatt hour. That includes the benefits of the tax credit, he said, which can shave $20 a megawatt hour from the price tag.

Hudgens said electricity from a natural gas-fired generator costs more than $100 a megawatt hour to produce. Big Horn is the company's next project, a $270 million investment and its largest yet. Hudgens expects the next two years to be as busy as this one.

"We've moved ourselves into a lead position," he said, and the company expects to stay there.