The Quest: Energy, Security, and the Remaking of the Modern World

by Daniel Yergin

  The Danes had something else going for them, too, which proved to be of critical importance—the Risø National Laboratory, situated on a fjord 40 miles from Copenhagen. Risø had been created under the auspices of the Danish Nobel laureate physicist Niels Bohr, who had spent part of World War II at Los Alamos and was one of the fathers of the atomic bomb. After the war Bohr returned to Copenhagen, where he presided over the founding of Risø Laboratory, the purpose of which, reflecting Bohr’s fervent dream, was “to further the peaceful use of atomic energy for the benefit of society.”

  But by the mid-1970s, support for nuclear power in Denmark had so waned that some of the members in the reactor department at Risø shifted their research over to wind. They did everything, from study the kinetic power of winds to prepare an atlas of wind resources in Denmark and then Europe. Most important, they tested turbine designs. Risø was critical to the rise of the Danish industry. So were subsidies from the Danish government. But much of the Danish market was initially composed of what has been described as “mostly long-haired activists living in collectives and alternative farmers.”14

  James Dehlsen’s arrival would change that. He tramped out into the field with Hansen and examined the Vestas machines that were up and operating. They would, he decided, be able to withstand the furious winds on the ridges in California. Virtually on the spot, he put in an order for 150 turbines, far more than Vestas had produced till then. Over the decade, Zond bought almost all Vestas’ output. Dehlsen did as much as anyone to create the scale market that nurtured the Danish industry. Dehlsen and the other California developers who turned to Danish companies for their more rugged wind machines did much to restore the tattered credibility of wind power. By 1987, 90 percent of the new machines being installed in California were made in Denmark.

  HARNESSING WIND POWER

  Generalised diagram a wind turbine.

  Source: National Renewable Energy Laboratory, Nordex, wind Energy EIS Public Information Center

  This is how California became the birthplace of the modern wind industry. By the mid-1980s, 96 percent of U.S. wind investment was in California, and 90 percent of worldwide wind development was taking place in the Golden State.15

  But difficulties emerged. The threat to birds and bats from the whirling blades galvanized opposition among environmental and animal rights activists. They kept logs of the number of raptors—birds of prey, including golden eagles—killed by colliding with the turbines in the Altamont Pass. Others rose up in opposition because of the whooshing, clanging, irritating noise, or because of what they regarded as eyesores and defacing of the natural environment, especially where wind-battered machines had collapsed or fallen apart. In the resort city of Palm Springs, many residents were outraged by the wind machines that were crowding in on their vistas. Palm Springs’ mayor, the entertainer Sonny Bono (and former husband of Cher) went on the attack against proposed new wind turbines that would tower above Palm Springs in the San Gorgonio Pass. He announced that he would fly to Washington, D.C., “to do battle as Don Quixote did against windmills.” However, when a budget crunch hit Palm Springs, he changed his mind and instead went to war against neighboring Desert Hot Springs, battling over which city would get to annex nearby wind farm sites in order to augment ailing property tax revenues.16

  THE SLUMP

  The boom didn’t last. By the early 1990s, the California wind rush had turned into a bust. Jerry Brown was no longer governor, and the federal tax credits had expired.

  Indeed, there had been enough flimflam that the tax credits themselves had become a target. “These aren’t wind farms,” one California congressman had fumed. “They’re tax farms.” With the collapse of energy prices, the rationale for wind power had also lost much of its force. Moreover, with lower prices, there were no more rich “avoided cost” contracts.17

  The wind industry went into a deep downturn. “They are very visible, and very ugly,” the Washington Post said of turbines in 1991, adding, “Wind power will never be more than a supplemental source of electric power.” Many of the American wind companies went bankrupt, as did Vestas in Denmark. Kenetech, the publicly traded subsidiary of what had been U.S. Windpower, was the biggest and most famous of all the American wind companies. It had gone as far afield as Argentina, New Zealand, and Ukraine. Finally, in 1996, Kenetech went bankrupt too. Its collapse seemed to sound the death knell for the U.S. wind business.

  “It was a really grim story,” James Dehlsen remembered. “We were hanging by a thread.” What kept his company, Zond, alive was the fact that it had taken a little bit of ownership in every project it had developed, which gave it a revenue stream. “We could survive until the next stage.”

  Dehlsen acquired a major new innovation that Kenetech had developed just before its demise: variable-speed technology. “This was the most important technical advancement in the industry since the beginning ,” said Dehlsen. Using advanced power electronics, variable speed enabled turbines to adjust to very low and very high wind speeds, and continue to produce steady levels of electricity, helping to contribute to the stability of the overall grid.18

  THE RETURN OF WIND

  But in the mid-1990s, just as it looked as though the wind industry was on its last legs, prospects began to improve. Innovation was increasing both the efficiency and reliability of machines. Environmental considerations were coming to the fore, and wind had the great virtue of emitting no carbon. In the aftermath of the 1991 Gulf War, there was an inevitable drive in Washington, D.C., to do “something” about energy, and that took the form of the Energy Policy Act of 1992. One of its provisions was a reintroduction of tax credits for wind power, but with an important difference. The new production tax credits for renewable power rewarded not investment in building new turbines, as had the previous credits, but instead rewarded operating time, the actual production of electricity from the turbines. Later in the 1990s, individual states started to implement renewable portfolio standards—which mandated that a certain amount of renewable generation had to be installed.

  The company that actually put wind back in business in the United States was Enron, the high-flying natural gas and electric power company, which at the time was an innovator in the power sector. Robert Kelly, a West Point graduate with a Ph.D. in economics from Harvard, had come back to Houston after five years of running Enron’s business in Europe. Unsure what to do next, he spent an afternoon talking to Enron’s CEO, Kenneth Lay. “We were trying to decide what would be the next opportunity,” said Kelly. “For some reason, we said why not take a look at renewable energy. I had the sense that something real was there. I had seen firsthand the difficulties of getting gas supply for our electricity plant in England, and there was the looming issue of global warming. Wind was also a good hedge against exploding natural gas prices.” Enron bought part of Zond. Or, as Kelly put it, “We brought Zond back from the brink.”19

  A MAINSTREAM TECHNOLOGY

  A few years later Enron purchased the rest of Zond as well as a German company with gear box technology. These combined capabilities enabled Enron Wind, as it was now called, to build bigger, better-operating wind turbines, improving wind economics and establishing a reputation as the leading wind company. But then fraudulent accounting sent Enron into a downward spiral that culminated in a spectacular financial collapse in autumn 2001.

  In 2002 General Electric stepped in and bought Enron’s wind business out of bankruptcy. The price was $328 million. But that was really just a down payment in the sense that a great deal of investment and manufacturing know-how were needed to bring the turbines up to GE’s strict standards and ensure reliability. “The industry was fundamentally broken,” recalled Victor Abate, the head of wind development at GE. “We needed to go through and rigorously re-engineer it to make it a mainstream technology.” In so doing, it substantially increased the capacity factor for wind generation.20

  Wind by then was beginning to boom in Europe. Already in 2000, Europe’s instal
led capacity was five times greater than the United States’, where there were repeated struggles over renewing the tax credit. The leaders were Germany and Spain, which by 2005, with their generous feed-in tariffs, accounted for 70 percent of Europe’s wind capacity.

  GLOBAL ONSHORE WIND RESOURCES

  The endowment of wind resources around the world provides the basis for a global wind industry

  Source: NASA

  THE UNITED STATES WIND BELT

  The most abundant wind resource in the United States stretches from the Great Plains down into Texas.

  Sources: NREL, AWS Truepower

  But 2005 was also the year that wind really picked up speed in the United States, driven by the renewable portfolio standards. Between 2005 and 2009, installed capacity grew at an average annual growth rate of about 40 percent. In terms of absolute capacity, that growth was equivalent to adding about twenty-five new nuclear reactors (but in terms of actual generation of electricity, it was equivalent to more like nine nuclear power plants).21

  China was a latecomer to wind. But it leapfrogged to the top in terms of adding new capacity and will account for the largest growth in wind generation for years to come. As Liu Zhenya, president of China’s State Grid Corporation, explained, China plans to build several “Three Gorges of wind,” meaning that its commitment to expanding wind power will far outstrip even the Three Gorges Dam mega-hydroelectric project.22

  China’s push for wind is driven by the country’s awesome need for new electric power of any kind, and by a strong policy commitment to clean energy as a growth sector. It is also a way to reduce dependence on coal, at least relatively, and thus reduce pollution. And China has the wind resources to make good on this commitment, especially in the northwest, including Inner Mongolia. “Many regions of China suffer from very strong winds,” said Wu Guihui of China’s National Energy Administration. “Originally these winds were seen by people as a natural disaster. Now these winds are a very precious resource.”23

  Globally, wind has become a substantial growth industry both financially and physically. In 2009 worldwide sales of wind-generating equipment totaled $64 billion. A standard turbine today turns out a hundred times as much electricity as one did in 1980.

  Among the wind majors, Vestas and GE are the global leaders. In the United States, GE is dominant, with almost half of the total market share, while Vestas leads in the rest of the world. In the West, other major market participants include Siemens, the Spanish company Gamesa, the German company Enercon, Japan’s Mitsubishi, and what was Clipper Windpower, James Dehlsen’s subsequent company, purchased by United Technologies in 2010. But there are also significant companies growing up in the developing world.24

  Tulsi Tanit ran a business making polyester yarn for saris and dresses in the northwestern Indian state of Gujarat. One day in 1990, visiting his father-in-law, he was flipping through a magazine when he came upon a photograph of a wind turbine. He had never seen one before; he was a mechanical engineer, and it piqued his interest. But then he forgot about it. What he could not forget, however, were the big problems that the lack of reliable, steady electric power—endemic to India—was creating for his business. He recalled the photograph, and in 1993, fearing for the future of the business, said to his brothers, “Let’s invest in a turbine.” They bought a turbine from a Vestas dealer, but then they found that they were completely on their own when it came to installing it and tying it into their own system. They learned a lot from that.

  Tanit saw the opportunity to supply wind power to other Indian factories that, like his own, were shut down during part of the day owing to chronic interruptions in electricity and that needed to hedge against prices. In 1995 he founded Suzlon. He bought part of a German company and was soon supplying turbines, along with their installation, to hundreds of other textile factories. He enabled them to sell extra electricity back into the grid. He also led the lobbying effort for tax incentives from the Indian government. Finally, Tanit concluded that building turbines beat making saris and dresses and, in 2000, he exited the textile business altogether. By 2011 Suzlon was operating in thirty-two countries. “Wind hedges the power cost,” he said. “That is the beauty of wind.” As to the development of Suzlon itself, he explained, “Always the best ideas come when you are under pressure.”25

  Two of the largest five wind companies in the world are Chinese, Goldwind and Sinovel. As a global competitor, Chinese wind companies have benefited from both generous government supports and the country’s low-cost manufacturing base. Domestic growth has been further stimulated by the government requirement that wind turbines be 70 percent “local content”; that is, made in China. Western competitors are bracing to see to what degree Chinese companies become low-cost global suppliers over the next few years, as they have done in solar. But China is not yet a major exporter. For all their heft, Chinese companies will have to establish the same global reputation for reliability and service as their Western counterparts. And wind turbines—which can weigh hundreds of tons—are not easy to ship.

  “ON THE CUSP”

  Building turbines is one business. Developing wind farms—acquiring sites, getting regulatory approval, buying turbines, negotiating purchase contracts with utilities for the power—is another. Three of the four biggest developers in the world are the Spanish companies Iberdrola and, next door in Portugal, Acciona and EDP Renováveis.26

  The biggest wind developer in North America—and the second biggest on a global basis—is NextEra Energy Resources, formerly known as Florida Power & Light, FPL. Its base is Florida, where it operates the largest conventional utility business in the state in a service area that includes Miami. Its wind business stretches across 26 states and Canadian provinces. It was not obvious why NextEra would become a player in wind. After all, its home state of Florida has just about the worst wind resources of any part of the country. As it turned out, accident preceded strategy.

  In the late 1980s, FPL, as it was then called, lent money to wind projects as part of a general diversification program. When the wind business went into a steep decline, some of those projects went into bankruptcy. FPL found, to its surprise, that it was now the proud owner of wind farms. It also discovered that these businesses could make money. As a result, it developed the technical skills necessary to manage wind power.

  At the end of the 1990s, however, hardly anyone wanted to be in the wind business. The hot place to be was natural gas–fired merchant power plants, and—rather late—NextEra started to get on that bandwagon. The company’s wind developers “felt smothered,” recalled Lew Hay III, at the time the chief financial officer. “They were convinced that they were on the cusp.” Hay led a strategic review that concluded that it was going to be tough to make money in natural gas–fired power. By comparison, wind looked better.

  Shortly after, the giant natural gas–fired boom turned into a huge bust, creating a number of power business bankruptcies; it was to NextEra’s good fortune that it had been so slow getting in. The company was largely unscathed, except for one thing: it was stuck with orders for 30 or so gas-fired turbines from General Electric. But there was another timely break. General Electric had just bought Enron’s wind business and was looking for wind customers. Hay was able to persuade GE to swap the orders for gas turbines to wind turbines. This was actually helpful for GE, as it provided most of its first major orders as a supplier of wind turbines.

  UTILITY SCALE WIND: GROWING UP

  2.5 megawatt wind turbine

  Sources: GE, Boeing

  NextEra was now seriously committed to the wind business. “We were so out in left field compared with what other companies were doing,” said Hay, by now CEO. “The Wall Street analysts were very skeptical. Investors kept asking, ‘What are you doing?’” To Hay’s great irritation, they also kept asking, “Is this a hobby?” NextEra became the largest operator of wind power in the United States—by 2010, over 20 percent of total installed wind capacity. For NextEra what mak
es wind a good business, beyond the absence of CO2 and other airborne pollution, is the basic economics of the business. As Hay put it: “The fuel is free.” In so saying, he sounded remarkably like Herbert, the twelfth-century English clergyman and the pioneering advocate of free wind.27

  BUT HOW BIG?

  But how big can wind get? Twenty percent of electricity by 2030 would be as large a contribution as nuclear today. Certainly the United States has a great deal of good wind resources. Some hold out the vision of a vast wind corridor down through the Midwest. In the 1930s, the powerful winds that came down through that corridor blew away the topsoil and created the Dust Bowl, impoverishing millions of people and uprooting many of them. Today those winds are recognized as a great natural resource, a bounty of nature to be harvested—if the transmission is there.

  But scale is a challenge. There has been a continuing drive for height and breadth in wind turbines. The bigger the better because size translates into more electricity generation.