I couldn’t help but wonder why the New Albany-Floyd County (NAFC) School Board is spending a significant amount of time and energy evaluating a speculative investment in a wind turbine(s) to be installed in northern Indiana. Who on the school board has recommended such an investment and what do they know about the technology or the power generation industry as a whole?
I have been working in the power generation industry for over 15 years. I have seen the explosive growth of new generating facilities in the late 90’s during deregulation, the quick collapse in 2002, in the wake of the Enron scandal, and recent demand suppression due to the poor economy. One thing that I have learned is that the industry is volatile and subject to quick change, particularly under political changes and pressure. One thing that I do know about wind power is generally not available when needed.
An article in The Tribune stated that the Board is evaluating the investment of $3,500,000 per turbine that has an “expected” revenue of $11,500,000 over 25 years with a profit of $8,000,000 (previous reports were $3.57 million cost and profit of $4 to $7.5 million). I would sure like to see the numbers that back this up, considering that the availability for most wind generation is very low. Does this consider the maintenance costs required for this 25-year period? Is there a 25-year power purchase agreement already in place with a utility?
Assuming this is a 1 MW turbine, a revenue projection of $11,500,000 would equate to selling power for about 20 cents per kW-hour – does anyone want to purchase power for 20 cents when we currently pay around six cents?
Assuming all is covered and due diligence is complete, this investment results in less than a 5 percent annualized return; there are much safer investments that can yield this type of return. If the Board is looking for an investment in power generation, why not invest in a power company stock or mutual fund; that way the investment would be spread over a broad portfolio of generation technologies and not tied to just one turbine sitting in northern Indiana.
I would hope that members of the school board have already talked with City officials in Union City, and Randolph Eastern School Corporation where they have purchased similar units and are frustrated by the delays. There, in Union City, the wind turbine was provided by the same company that is talking with NAFC Schools (Performance Services). The city’s wind turbine failed on initial startup in February. The school’s turbine squeaked when it turned and does not turn much.
The technology proposed is a two-blade technology of which I am not familiar. Most of the utility-based wind turbines are a three-blade technology.
State Sen. Connie Sipes questions the legality of such an investment. I question whether the School Board has the expertise to understand the risks associated with such a narrowly focused investment. The wind power generation market would not exist if it weren’t for government subsidies, grants and requirement for a renewable energy portfolio for power generation companies. It is my opinion that if you cannot justify a business case on its own merits – without such political incentive – then you have a pretty poor business case. Who knows what will happen over the next 25 years. What I do know is that over the past 15 years, the power generation market has been anything but certain and we are currently facing a lot of uncertainty with cap and trade, fossil technology, nuclear and renewable energy.
I would much rather the school board focus on education and balancing a budget; let the engineers and venture capitalists of the world take on the challenges and risks associated with renewable energy.
— John E. Kraft, P.E., Vice President of Energy & Industrial, Louisville
|Wind Watch relies entirely
on User Funding