“BP is a 21st century Energy Company committed to producing essential sources of energy and providing our customers with cost-competitive power,” says John Graham, president & CEO of BP Wind Energy, which is based in Houston. “We are witnessing increasing demand growth from the rapidly-developing world economies; in just the next 20 years, the world energy demand will be 40 percent greater than today.
“It is for this reason that BP has invested more in the United States over the last five year than any other oil and gas company,” he adds.
This isn’t just idle talk from BP, either. The company made a commitment in 2005 to invest $8 billion over 10 years in alternative energy. By the end of 2012, BP had invested some $8 billion in its renewable energy, and BP Wind Energy has attracted the majority of this investment.
Winds of Change
BP is the principal owner and operator of wind power facilities with interests in 13 wind farms throughout the United States. By the end of 2012, Graham says the company will have 16 operating wind farms, which will equate to almost 1,500 spinning wind turbines.
“Since 2006, we essentially have been building two to three projects a year, turning our leased land holdings into wind farms to produce renewable power that we sell primarily to utilities or into a merchant market,” Graham says.
“The predominance is to have power purchase agreements to sell to local utilities where the wind farms are located, but it’s a merchant market in Texas to sell into the grid.”
Graham praises the foresight of those creating public policy in the United States for creating a boon of opportunity for the wind industry. By the end of 2012, wind energy in the United States will account for nearly 4 percent of the total energy generated in this country.
“The U.S. market in particular is blessed with huge amounts of wind and public policy that, to date, has favored wind power development,” Graham explains. “Over the past few years, most new energy generated in the United States has been either wind or gas, and wind has accounted for a third of that new capacity.
“In the areas where the wind blows, companies like the one I lead find ways to harvest a new kind of crop.”
Even in the short time that BP has been in the wind energy business, the amount of wind turbine equipment manufactured in the states for the average U.S. wind farm was less than 20 percent in 2005. Today it is on average more than 65 percent and in some cases exceeds 80 percent.
“On average, BP has installed some three turbines a week since 2006 which has helped contribute towards the growth of the U.S. manufacturing industry,” Graham says.
In fact, BP says more than 400 manufacturing facilities across the United States manufacture components for wind turbines, and dedicated wind facilities that manufacture components like towers, blades and assembled nacelles exist in nearly every region.
Aiding Manufacturing
The wind energy is constantly evolving, with product designers coming up with new and innovative techniques to make operations more efficient and drive down the costs.
“There are lots of incremental changes taking place as we strive to continually improve our competitive position,” Graham says. “Wind turbine manufacturers are investing in research and technology in the way wind turbines operate, and a number of small changes and incremental improvements have lowered the cost of energy for customers.
“We’ve seen a dramatic increase in the ability to produce more power from the wind in general,” Graham says. “There are new materials used to make turbine blades larger and lighter so that they can reach higher into the air where the best wind is located.
“The wind industry has access to new and improved software that enables operators such as BP to maximize the efficiencies across its fleet when the wind is blowing, and there are ways to use software to control the equipment.”
PTC Needs
One of the policy mechanisms that the industry currently relies upon is the Production Tax Credit (PTC), which is set to expire at the end of 2012. It is a tax credit that is only available once companies like BP have put up all the money, built the wind farm and have demonstrated that the farm is producing electricity.
Only then does the program credit companies like BP 2.2 cents per kilowatt-hour generated which helps alternative energy producers offset costs and remain competitive with traditional forms of energy production.
Without the credit, though, many experts agree that the production of renewable sources of energy will decrease significantly. Graham says the credit should be extended at least in the short term to give renewable sources of energy the opportunity to grow into a viable option for the American smart grid system.
“Renewing the PTC will stop the boom-and-bust cycle that we’ve witnessed since it was first introduced back in 1992,” Graham says. “Let us finish the job by getting renewable power to the grid by leveling the cost of energy.”
Instead of eliminating the PTC entirely, Graham suggests it should be renewed for a short time and then phased out over a period of time. He believes without a solution like this in place, foreign manufacturers – especially those based in China – will enter the American marketplace to offer wind turbine components at a fraction of the current cost.
“The Chinese will potentially take over the great success the U.S. has made as a made-in-America product,” Graham predicts. Some 75,000 jobs, Graham says, have been created because of the PTC and the boost it has given to the U.S. manufacturing business.
“To achieve great parity, we have to find a way to make the industry’s costs come down to bridge the gap the PTC gives us today,” he maintains. “We can continue technological improvements that makes the industry more efficient at extracting energy and we can figure out a way for the federal government’s to ramp down and out the PTC.
“If technological improvement continues and we ramp down the PTC over a period of time and align, we can get this new energy industry up and running in a way that competes and investors like ourselves can justify being in it.”
Wind of the Future
Overall, Graham says he hopes the United States maintains its policy of a diversified energy portfolio because the nation is “blessed” with oil and gas as well as renewable sources. In the meantime, he also hopes renewable energy will continue to be supported as it grows into its own in the energy marketplace.
“We need a healthy mix of all energy sources to be part of the energy production,” Graham says. “We want to use our ability and investments to grow the renewable space and grow resources for the future.
“I know that the wind energy is making a valuable contribution to the energy supply,” he continues. “This is why I am with BP, who supports growing the sources of energy available in the world.” m
