Alternative energy sources required to create an energy legacy for future generations

October 6th, 2012 by BP

John Graham, President and CEO, BP Wind Energy (click to expand - image courtesy of BP)

John Graham, President and Chief Executive Officer, BP Wind Energy, spoke at the Kansas Energy Conference, USA on 25 September 2012.

Below is an abbreviated transcript of what he said. The complete transcript is available on the BP website.

“The rules for energy supply that governed during the last three generations are likely not to be sustainable for the next three generations.”

“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% greater than today.”

“The fossil fuels extracted to burn and generate this extra power will add to the question of what do we do to manage the rising carbon levels in the environment.”

“Fossil fuels are finite. The more they are consumed over the long term, prices inevitably go higher which gives rise to the pragmatic need to diversify the sources of energy we have, to give us more choice, and at the same time address energy security given that hydrocarbon sources are located in only a few places around the world.”

“In 2005, BP started an Alternative Energy business and by the end of 2012, BP will have invested some $8 billion in renewable energy businesses.”

“The Wind Energy business I lead has attracted the majority of this investment. We use this money to develop land with the best wind blowing over it. We build and operate the wind turbines and sell the electricity into the U.S. market.

“Some of the enthusiasm for renewable energy has fizzled out. A stagnant economy is damping US energy demand and the emergence of new gas fracking has in a very short time driven gas prices to lows no one had forecast.”

“Now is time to double down on our efforts to find alternative energy sources – we cannot forever extract from the earth as we do today.

We have the means to create an “all of the above” energy legacy for the future generations just as we today benefit from the early oil pioneers who 100 years ago found the oil that makes our lives so prosperous today.”

BP entered the United States wind energy market when we identified Wind Energy as the most viable alternative energy.”

“Our investments along with many other people have contributed to the growth in technology that has given rise to Wind becoming a real made-in-America success story.”

The investment dollars companies have put into wind energy has been a boon to the economy.

“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 fact, by the end of 2012, wind energy will account for nearly 4% of the total energy generated in the USA.”

“Clearly wind power and the other renewable energy sources are not going to come close to replacing fossil fuels any time soon. But even though wind will not supplant conventional energy sources, the case for Wind generated electricity being part of the energy mix is compelling.”

“Wind is a free energy source that does not deplete over time as you use it.”

“The price of Wind does not fluctuate from day to day as the other global commodities do.”

“Wind produces no harmful carbon emissions when it is converted into electricity.”

“North America, and in particular states like Kansas, is blessed with a plentiful supply of wind, which farmers and ranchers tell me has caused them misery, but now they see the wind as an opportunity, to convert the wind for the much needed electricity we all use and depend on.”

Human inventiveness continues to show huge improvements in turbine technology and far more efficient machines that convert more wind into electricity.

“Wind energy is a much more efficient and reliable source of energy that can be delivered to consumers at a far lower cost than even just 10 years ago.”

This progress has created tens of thousands of new good paying technical jobs.

The wind industry has attracted into the USA very large amounts of foreign investment including from BP, and brought manufacturing jobs back from abroad into the United States.

A whole new U.S. supply chain is forming to serve this industry. And related service industries are taking advantage of opportunities to compete and innovate.

Farmers and ranchers who harness the wind blowing across their lands receive royalty payments which supports them to remain as stewards of that land. Small communities receive additional revenues that improve schools and local infrastructure.

In Kansas, together with our partner, BP is building the largest, single-build wind farm in the history of the U.S. wind industry. Over the lifetime of the wind farm, the landowner group will be paid some $20 million.

An additional $23 million will flow into Kansas through contracts awarded, income derived from the living expenses of workers, and local spending in the communities where the wind farm is being built.

Payment in lieu of tax (PILOT) dollars that Kansas communities receive from wind developers such as ourselves have gone to retro-fitting aging schools, lowering the county mill levy, financing the creation of rural water systems, creating a conservation easement program, new economic development programs, and community grants that directly benefit the people living there.

We are an industry that brings new investment. The activity these dollars create working in partnership with many parts of the rural communities is creating a win–win as communities and industry grow together hand in hand.

Yet today much of the progress made in meeting America’s increased energy needs with clean, abundant and affordable U.S.-made energy, is in jeopardy.

What we need to sustain this industry is predictable, comprehensive energy policy that allows companies to plan over a reasonable period to attract investors to put their money to work and grow business to a scale sufficient for them to compete without government help.

We have got to get away from the manner in which US Federal law makers have ramped up and down support for renewable power.

US Federal programs have been structured that are sometimes inefficient and leave investors reluctant to make the long term commitments which are so very necessary in the power business.

The challenges renewable energy development faces do not justify ending the pursuit of renewable power generation. Rather they justify reforming it.

The wind energy Production Tax Credit (PTC) has led to new investment in this country that has promoted the growth of a very significant new energy manufacturing business, generating many sought after and well-paying jobs.

The investments companies make in manufacturing facilities and land development to build new wind farms far exceeds what the US Treasury has had to forgo in tax revenue.

At about the same time as the wind energy Production Tax Credit was first enacted in 1992, US states began passing laws requiring power companies to produce a given percentage of their electricity from renewable sources.

We agree that such standards were not designed to be permanent and should not be made permanent now. However, we need these a while longer to provide a “demand pull” as a compliment to the “policy push” provided by the Production Tax Credit.

In the longer term this will create a more level playing field, and will help create a freer market were all energy sources can compete without the need for government support.

There are a number of American companies that want to buy renewable power. They have pledged to their customers, the public and their shareholders who have demanded it, to purchase more renewables to power their business.

Some 19 companies announced in September 2012 their support for PTC renewal including Kansas-based companies like Sprint, and Mars and other Global majors like Yahoo, Pitney Bowes, Starbucks, and Johnson & Johnson.

Mars is building its first manufacturing facility in North America since the 1960’s. Mars selected Kansas for a host of reasons, but one publicly cited reason was that Mars believed that being in Kansas, it could fulfil its corporate objective to be powered between 50 to 100% by renewable energy generation.

The wind industry is constrained by a lack of transmission and needs assurance that it can get on to the existing grid in accordance with fair and non-discriminatory government policies.

The strongest wind resources are often in out-of-the way places and far from the metropolitan areas where the energy would be consumed.

Moving renewable energy to the marketplace requires the transmission to be built and the permitting of that transmission to be streamlined to encourage investment.

Streamlining regulations helps business understand what is expected and making the permitting process more efficient eliminates unnecessary costs for the good of all. The prize is promoting renewable energy in harmony with the environment.

The US Federal government has a role to play in facilitating more innovation in the energy industry. History shows that the United States has moved forward in astonishing ways thanks to investments in basic research that have produced breakthroughs that benefit the entire industry and society as a whole.

The process to approve wind energy projects in Kansas is fundamentally sound and working properly as authority resides at the County level. It allows the local community to decide if and how wind energy projects are to be developed, constructed and operated.

Three years ago, Kansas approved an Energy Bill that included a voluntary Renewable Portfolio Standard (RPS) of attaining 20% of its energy from renewable sources by 2020. The RPS helped to kick-start the rapid development of wind energy projects. Both the targets of 15% by 2016 and the 10% by 2011 threshold have already been met.

Kansas has phased in a series of incentives for investor-owned utilities to develop new transmission. This policy has attracted approximately $1 billion dollars’ worth of investment to build high voltage transmission projects in Kansas.

There has been little cost to the state for construction of the lines and minimal cost to Kansas ratepayers yet the economic benefits to the state of these new transmission lines are profound.

The approach Kansas has adopted to public/private partnership is also adding to its ability to compete with its neighbours.

After 13 years of constructing a predictable, stable, environment in partnership with business,  Kansas is now meeting all of its own energy needs with renewables as part of the mix and is again a net energy exporter.

Some 60% of all the new wind energy being developed in Kansas in 2012 is being exported.

For almost two years our industry has been petitioning the U.S. Congress to extend the Production Tax Credit (PTC) as a growth engine that has created thousands of good jobs.

The Wind Industry needs this incentive a little while longer. There are already a few particularly windy places and high cost energy markets, were power generated by new wind projects costs less than producing power from new coal or gas-fired power plants.

However, the technological improvements which we can confidently count on continuing mean that wind will soon be a truly competitive part of the energy mix.

We have demonstrated the wind energy PTC has resulted in lower costs.

This is good for jobs, the communities that benefit, the consumers who have greater choice and the US Federal government who can show the PTC investment delivered.


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