PRETORIA, South Africa () -- While it continues to experience problems on the U.S. oil & gas side of its business, BP's [NYSE:BP; LSE:BP] alternative energy business continues to grow unabated. BP Alternative Energy North America expects to begin construction on five wind power generation projects in four western U.S. states this year, the company announced on Jan. 12.
The five projects - in California, Colorado, North Dakota and Texas - are expected to bring on-line a combined total of approximately 550 megawatts (MWs) of electrical power when completed, surpassing the company's previously stated goal of bringing 450 MWs of wind-generated electrical power on-line by the end of 2008.
Momentum continues to build in the wind power industry in Europe, the U.S. and globally. The Global Wind Energy Council in a recently released position paper forecasts that wind-generated power will make up between 10.8% and 15.6% of global electricity production by 2030, depending on energy efficiency measures that are taken coincidentally.
The Acquisition Trail
BP Alternative Energy N.A. was a busy place in 2006. Its recently announced slate of wind power projects result from agreements and acquisitions the company made last year.
In addition to establishing its headquarters in Houston, BP Alternative Energy North America, Inc. in July 2006 announced a strategic alliance with Carpinteria, California's Clipper Windpower [AIM:CWP], a key part of which calls for the latter to supply up to 4,250 MWs worth of its 2.5 MW Liberty wind turbines to BP over the next five years. BP plans to deploy 150 MWs worth of these in its five recently announced wind power projects.
Launched in November 2005 to consolidate BP's investments in low and zero-carbon power generation, BP Alternative Energy N.A.'s wind portfolio includes almost 100 projects with a potential total generating capacity of some 15,000 MW. In addition to wind power generation, the company is involved in solar and hydrogen power generation, carbon capture and storage, and gas-fired power generation.
BP Alternative Energy on Jan. 8 announced that it was acquiring Orion Energy LLC. Oakland-based Orion Energy has developed wind power projects with approximately 1,300 MWs of generating capacity and has more than 30 active development projects in 16 states with a potential generating capacity exceeding 6,000 MWs.
"We have undertaken a rigorous process to find the right strategic partner for Orion," the company's president Michael Haas said in a press statement. "We chose BP because of the company's long-standing commitment to find practical solutions to climate change, its financial strength and proven ability to develop long-term energy projects."
The Orion acquisition followed BP's acquisition of Greenlight Energy, Inc., another U.S.-based wind power project developer, last August. With the Greenlight acquisition, BP Alternative Energy added 4,400 MW of active U.S. wind power projects to its portfolio, as well as a further 2,000 MWs of early stage development projects.
The BP business unit's North American operations also include gas-fired power plants at BP's refineries in Texas City and Los Angeles, as well as a new high-efficiency cogeneration facility under construction at the BP Cherry Point refinery in Washington State. The company also has plans to build the U.S.'s first industrial-scale hydrogen power plant with carbon capture in storage in the Los Angeles area.
Five by Five
Of the five wind power projects announced on Jan. 12, construction is already under way at BP's Cedar Creek project in Weld County, Colorado. A joint venture between BP Alternative Energy and Babcock & Brown Operating Partners LP, the 300 MW project is to comprise 274 wind turbines. Expected to come on-line in 2007's second half, the wind power farm will generate enough electricity to supply 120,000 homes.
"This is an exciting project for Babcock & Brown," said Hunter Armistead, head of Babcock & Brown's U.S. wind energy group. "The Cedar Creek project will be a significant source of renewable power in Colorado, and it represents a significant investment in the state's infrastructure."
The other four wind power projects include the Yaponcha project, which entails re-powering an existing 20 MW wind power generation facility in California's San Gorgonio Pass; a 65 MW project in North Dakota; a 60 MW joint project with Clipper Windpower in central Texas; and a project in west Texas with a more than 100 MW generating capacity.
"Today's announcement marks an important step in delivering BP's commitment to producing low and zero-carbon electricity," said Robert Lukefahr, BP Alternative Energy North America Inc.'s president, of the five projects in a press statement. "Our 2007 build program surpasses our target and does so a year ahead of schedule. It is a testament to the calibre of people working in our business and the opportunities in the US wind sector."
Wind Power Forecast
According to a position paper released earlier this month, The Global Wind Energy CounciI (GWEC) believes that that the International Energy Agency's (IEA) "World Energy Outlook" (WEO) short sells wind energy's potential around the world.
While it welcomed the IEA revising upward by more than 30% its figures for expected global wind power project development its latest 2006 Wind Energy Outlook, the GWEC said that the new estimates still greatly underestimate the expectations of the industry itself.
In its latest Reference Scenario, the IEA increased from 328 to 430 gigawatts (GWs) its forecast for installed wind power capacity for 2030 and forecasts an additional 25% increase, to 538 GWs, in its Alternative Policy Scenario (APS), according to the GWEC.
"The global wind energy industry firmly believes that the success of wind energy that has occurred in Europe will be replicated in other parts of the world," a spokesperson stated. "This expectation is underpinned by recent developments, which have shown that more than 49 countries around the world have already introduced policy mechanisms to support renewable energy, indicating that the political will to expand the wind energy industry clearly exists.
"Moreover, large consumers such as the US, China and India are making substantial commitments against the backdrop of rising power demand, concerns over security of supply and the disastrous effects of climate change."
In its recently released "Global Wind Energy Outlook 2006", the GWEC developed two scenarios for the development of wind energy around the world which can be used to compare the contrasting expectations of the IEA and the GWEC.
The main differences can be found in three areas. According to the GWEC, the 9.8%-12.5% growth rates built in to the IEA's WEO Alternative Policy Scenario "appear more than pessimistic when compared to the actual average growth of the industry of 28% over the last 10 years."
Secondly, according to the industry association, the IEA's figures dramatically underestimate the potential of a number of regions, especially Latin America, North America, the Pacific Region and India when compared to the GWEC's analysis of global markets.
Finally, the GWEC begs to differ with the IEA's assumptions and forecasts regarding the role wind power will play in the global energy mix.
"While the WEO expects for wind energy to account between 3.5%-4.7% of the global electricity production by 2030, the industry in its moderate scenario projects that this share will reach between 10.8%-15.6%, depending on energy efficiency measures that are taken at the same time."
The GWEC is taking the IEA to task. It has sent a letter to the agency signed by seven wind and renewable energy associations from major world markets, inviting the latter to engage in a dialogue on the points outlined in the GWEC position paper. The industry, through the GWEC, also asked to be more closely involved and consulted in the development of the next IEA WEO.
