Innovations in Wind Technology and Economic Analysis for Wind Energy Integration

Client

General Electric Renewable Energy

Advisor

Jeanne Fox

Semester

Spring 2015

In the US, wind energy has grown rapidly in recent years. At the end of 2014, installed capacity reached 61,327 MW, a 145% increase since 2008.  Much of this growth has been fueled by incentives provided at both the state and federal levels, which allow wind generation to compete with traditional generation technologies. In particular, the Production Tax Credit (PTC) offered a strong incentive by providing an inflation-adjusted per kWh tax credit of $0.023 to wind generators for the first 10 years of generation. However, conditional expiration of the PTC began at the end of 2014.

As a leading manufacturer of wind turbines, the Capstone client -- GE Power & Water -- would like to gain a better understanding of how utilities will evaluate wind generation in a post-PTC market. As such, GE has asked the Capstone team to:

  • Identify and analyze the factors utilities consider when evaluating wind generation against other generation assets;
  • Analyze the alternative methodologies currently being used by utilities to evaluate generation assets and determine the extent to which they might be indefensible; 
  • Identify and outline opportunities for GE to overcome barriers for wind generation amongst target utilities.

The scope of the project is limited to investigating two vertically-integrated utilities operating in the regulated Southwest Power Pool Regional Transmission Organization – Oklahoma Gas & Electric and Westar Energy of Kansas. The Capstone team has commenced research on each utility’s regulatory environment and current and future electric supply and demand portfolios. The team conducted interviews with stakeholders to gain an in-depth understanding of the themes underlying their objectives. After synthesizing this information, the team was able to determine the opportunities and risks presented to GE by a post-PTC marketplace.

The Capstone team recommended GE address asymmetry in the allocation of fuel price risk, standardize avoided cost methods, advocate for resource specific avoided cost with state commissions, utilize forward capacity markets, inform utilities of security constraint economic dispatch, create new opportunities with the growth of the Integrated Marketplace, and include the monetization of carbon and other externalities in economic analysis.