March 1, 2008

Notes from Wind Power Finance and Investment Summit, II

Wind Power Finance and Investment Summit, Feb. 7, 2008, San Diego, Calif.

Session: Strategic Wind Developers' Perspective on Wind Development

Tim Callahan, Partner, Mayer Brown LLP

Eric Blank, Executive Vice President, Development Division, Iberdrola USA
Sam Enfield, Wind Energy Development, PPM Energy
Declan Flanagan, CEO, Airtricity North America
Peter Duprey, CEO, Acciona Energy North America

Where in the United States is the growth [of the wind sector] expected to continue? The Midwest looks good, although nimbyism and lack of transmission are restraints there. Lack of transmission on the Great Plains is a drawback. The Northwest has issues with transmission as well, although deals are in the works to make it happen. There are premier sites in this region.

What regions of the United States are more difficult to develop and why? Landowners are understanding more about the industry. Upstate New York is "not a reality". 70% of construction in 2007 was on sites 100 MW or bigger. This trend will continue. A 30 MW project costs as much as a 100 MW project because of the mobilization costs, making these smaller projects less feasible.

Are there regions in the United States that are over-built? West Texas is reaching saturation but will continue to grow as new transmission is built.

What are the major constraints and challenges to expansion in the industry? Turbine manufacturers are sold out though 2009. Developers have to settle for second and third choices for equipment. The scarcity of turbines is hurting the smaller players and it will continue to get tighter for them. It is also putting more stress on marginal projects.

In 2001 there was one manufacturer in the U.S. Now there are seven. These new entrants are hampered by a lack of subcontractors and suppliers as well as a competent workforce. The industry is still competing with traditional generation, which is also slowing things down.

Is a Federal RPS necessary for the industry to continue growing? Absolutely. "If this doesn't happen in the next administration we can all start looking for other jobs."

Is the extension of the PTC necessary for the sector to continue growing? If it doesn't happen in 2008, and be retroactive to 1/1/08, it will set the industry back two years. "If we don't get at least a one year extension of the PTC in 2008, projects will shut down for lack of financing." "Tax credits are always taken from somewhere else that is getting them. We are getting a stronger 'pushback' from those who stand to lose them [oil and gas interests]." "We have bipartisan support but the extension has always been attached to legislation that fails for some other reason." "It is hard to spend money when there is doubt about the future of the industry."

Are all the best sites (Class II) developed or being developed? Are less desirable sites economically feasible? "The low hanging fruit from a siting perspective has already been picked."

Is off-shore a realistic possibility in the United States? These projects are quite expensive, especially the further from shore and deeper they are.

Is transmission becoming a significant constraint to development, and if so, how can this constraint be overcome? "Transmission is the biggest restraint to development. We need to go to larger projects to justify new transmission costs." This will be a problem for a while. The question of who will pay for new transmission is a tough political issue.

Are NIMBY issues becoming more prevalent? How does a developer overcome these challenges? "Nimbys are cropping up everywhere, especially in the
East. It is a cottage industry. Friends of this and friends of that are very effective at networking and putting out pseudo-science. They are still fighting on a project by project basis, however." "A new AWEA guidebook will be out soon that deals with how to fight nimbys." "National Wind Watch is very sophisticated and is helping local groups get organized."

Baby boomers seeking second homes and realtors are a huge threat to development, especially in New England. They have the resources to mount campaigns against projects. It's better in the Midwest and the Rocky Mountain regions where communities are dependent on local projects. Expansion is easier also.

Is the industry still grappling with environmental considerations, or have these become more manageable? Bat problems are turning out to be a serious issue. Fifty or sixty kills per turbine are significant numbers and are causing concern. "Fortunately, bats are not charismatic creatures so this doesn't carry any weight."

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