Wind Project Performance 1994 Summary

1. Introduction

California has long been recognized as a world leader in the development of wind energy. Early wind industry growth in California was supported by the availability of federal and state tax credits and long-term interim standard offer (ISO4) contracts with electric utilities that offered favorable rates. These economic incentives provided the impetus for substantial growth from about 500 megawatts (MW) of installed capacity at the beginning of 1985 to a high of 1,679 MW at the end of 1991.

California dominated worldwide development of wind energy during the 1980s. In recent years, however, California's share of the world's installed capacity has decreased due to continued retirement of older turbines and low levels of industry growth in California compared to growth in the rest of the world. The 25 MW of new capacity added during 1992-1993 and the 54 MW added in 1994 did not offset capacity losses from turbine retirements. Thus, installed capacity declined to 1,609 MW and California now accounts for 44 percent(1) of the world's installed capacity.

(1) Calculated from "1994 Grid-Connected Wind Energy Capacity," American Wind Energy Association, 1994.

At the present time, the California wind industry is facing an 11th year "price cliff" resulting from the expiration of interim standard offer contracts (ISO4s). ISO4s based on forecasts made in 1983 began at about 5 cents/kilowatt/hour (kWh), ramping up to approximately 14 cents/kWh in 1997. Current forecasts of about 4 cents/kWh are less than one-third of the fixed payment. These revenue reductions are of particular concern to wind projects with outstanding loans extending beyond the 10th year. By the end of 1995, standard offer (SO4) contracts representing about 37 percent of total installed capacity in the Altamont, Pacheco and Solano resource areas and 52 percent of installed capacity in San Gorgonio and Tehachapi resource areas will have expired(2).

(2) California Energy Commision utility data as of fourth quarter 1994.

Some California wind farm operators are responding to challenges facing the industry by planning for or initiating project redevelopment at existing wind sites with optimum wind resources. Repowering wind farms by upgrading existing equipment or replacing aging turbines with newer equipment offers benefits such as higher efficiency and generating capacity as well as lower operating and maintenance costs associated with maintaining older equipment.

Although the California wind industry profile has changed in recent years, statewide wind performance continues to improve. The record 3.2 billion kWh of electricity generated in 1994 represents enough output to meet the annual electricity needs of more than 500,000 typical California homes.

The improvement in statewide capacity factor performance during 1994 also is very impressive. In previous years, it was assumed that the statewide capacity factor had leveled off at 20 percent; however, capacity factor performance increased to 23 percent in 1994. When turbines installed since 1985 were isolated, the capacity factor climbed to a record 27 percent. The statewide capacity factor would be even higher if turbines installed in the mid- to late-1980s were not considered.

Increased electricity production and improved capacity factor performance in 1994 may result from one or a combination of factors, including high availability of the wind resource and improved turbine performance. Successful project redevelopment by California wind farm operators may also have contributed to improved wind project performance during 1994.

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