Wind Power's Future May Depend On Gas Fracking's Fate: Panel

After suffering a punishing year because of low natural gas prices, the wind power industry is keeping close watch on the prospect that water pollution from hydraulic fracturing may lead to regulation of shale gas drilling.
"That is, I think, the big question mark," said economist David Loomis, director of Illinois State University's Center for Renewable Energy, during a wind industry panel discussion Wednesday in Chicago:
If we regulate that to a significant degree it will restrict the supply and raise the price of natural gas. If we say no, this isn’t a concern—if the EPA says no, we’re going to give our blessing to this—or if we can do it in a much more environmentally friendly way, I think that natural gas prices can stay low for a fairly long time.
So that’s kind of the critical question on the shale gas, and that effects electricity prices in the long haul, and what new generation gets built. Is wind the new generation that gets built, or is natural gas?
A study released Tuesday linked shale gas wells to increased methane levels in neighboring drinking water wells.
Although methane itself is not regulated as a water pollutant, the study could lead to federal regulation of the heretofore largely unregulated practice of the hydraulic fracturing, or fracking, of deep layers of shale to tap vast reservoirs of natural gas in the United States.
The Maker's Mark
Loomis, who heads the Illinois Wind Working Group under the Department of Energy, spoke at the Illinois Manufacturing Extension Center's Supply Chain Growth Conference, held in the Student Center at the University of Illinois, Chicago. He appeared with wind turbine and component manufacturers, whose practical assessments agreed:
"Largely the process of getting at that [shale gas] is not regulated by the government, and so it’s kind of a Wild West, and so there’s just a tremendous amount of supply in the market, and it’s really brought the cost down," said Brandon Hoeft, the vice president of sales for Broadwind Energy, an Illinois firm that makes turbine towers and gears.
"Until the government regulates that, and the processes by which they extract that resource, obviously the utilities have to answer to the ratepayers and they’re going to take the cheapest, and natural gas is it."
Broadwind built a turbine manufacturing plant in Brandon, South Dakota that it has been unable to turn on, Hoeft said, because the plant was built anticipating growth in wind power.
The wind power industry enjoyed strong growth from 2005 to 2008, stalled in 2009 and suffered a significant setback in 2010.
At the same time, natural gas prices dropped from $11 per million Btu in 2008 to $4.3 in 2011, according to Joe Coleman of Acciona Windpower, a Spanish-owned, Chicago-based wind turbine manufacturer.
"In 2008 we were living the dream," Coleman said. "But today it looks completely different."
Sibling Rivalry
Natural gas has proven to be wind power's most lethal competitor, but at the same time wind power needs natural gas to succeed. Wind turbines can only supply electricity when the wind blows, and as long as inexpensive energy storage remains elusive, utility companies will have to combine wind with a resource that can be banked in reserve, like gas.
"A lot of times we say that wind competes with natural gas and that’s true, that’s true to a point, but in a way they’re kind of complementary," said Matt Aldeman, a wind technology specialist with ISU's Center for Renewable Energy.
"If we want to get away from coal, the combination of wind and natural gas is actually a pretty good replacement."
There are signs wind may be recovering from the blow dealt by low natural gas prices. Even though gas remains inexpensive, the wind industry reported its best quarter on record during the first quarter of 2011. The Chicago panelists were cautious about that result, saying the industry is volatile, and preferring to wait for future results.
“The first quarter is critically important and the fourth quarter is critically important,” Loomis said.
Bonds of Steel
Even if demand returns and reinvigorates sales, wind power faces constraints from its need for steel. The industry depends on steel for 80 percent of turbine construction, and steel can be both too expensive and too slow to acquire.
“We have a hard time finding competitive steel in North America,” said Acciona's Joe Coleman. And when orders arrive, they have to be filled fast.
In 2008, customers gave turbine manufacturers two years or more of lead time to fill an order, often with a cash deposit. But demand has dropped, competitiveness has increased, and lead time has shrunk:
"I’ve got nine months to build a turbine and ship it," Coleman said.
UPDATE: This story has been updated to clarify that Duke scientists linked methane in drinking water to shale-gas wells but have not determined the precise route of the methane, whether it derives from the deep shale layer or from the well casing. They have called for further study on that point.

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