Breezing In

How Spain's Iberdrola Renovables is meeting American demand for wind power, the leading source of new electricity in the U.S.

By Erik Heinrich Monday, June 20, 2011
    • Paul Langrock / Zenit / Laif / Redux

    An Iberdrola wind farm near Guadix in southern Spain

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    What separated Iberdrola Renovables from its domestic rivals was an aggressive mergers-and-acquisitions strategy. Its parent Iberdrola SA's acquisition of Scottish Power in 2007 created the third largest power utility in Europe, with significant renewable-energy assets in the U.S. At the same time, Iberdrola Renovables began spending $3 billion a year on expanding its global footprint of wind farms, becoming the No. 1 provider in Spain, Britain and Eastern Europe. "The key to success in this industry is having money and deploying it in a favorable regulatory environment," says energy analyst Matthew Yates of Bank of America Merrill Lynch in London. "Iberdrola Renovables has accomplished both."

    Iberdrola and a host of other wind companies will be rolling out more power globally this year, in countries ranging from Greece and the Czech Republic to China and India, yet wind still makes up a tiny 2% of worldwide electricity production. Whether wind is able to make a serious dent in the consumption of dirty fossil fuels will to a large extent depend on success in the U.S. Consider that every day, 21 million of 85 million barrels of oil produced around the world are burned there. That's 25% of the world's oil supply consumed by just 4% of the world's population. Transport eats up the lion's share, and wind isn't a viable transport energy, but nearly 30% of American oil consumption goes to industrial, commercial and residential uses. If a portion of this low-hanging fruit could be replaced by a combination of natural gas and renewable energy like wind, then cleaner energy will have scored a major victory against the U.S.'s addiction to foreign oil.

    A lack of clear and consistent regulation will be a major hurdle. There are 30 states with renewable standards. But unlike most E.U. countries, the U.S. does not have a national quota compelling major power utilities to buy a percentage of their electricity from renewable sources — a must for sustained development of wind and solar, as proved by Spain, Portugal and Germany. "There is a disconnect between what the population wants and what is being done legislatively," says Liz Salerno, chief economist of the American Wind Energy Association.

    Why is that? Mainly because the fossil-fuel industries are lobbying Congress hard to block any legislation that would impose federal standards for renewable energy or diminish their special status. This includes $5.5 billion each year in tax breaks and discounted royalty payments as a result of $200 million in lobbying and political contributions. By contrast, the clean-energy lobby, which includes wind and solar, spent $30.7 million in 2010.

    The other major coming challenge is termination of the Treasury's grant program for renewables at the end of 2012. Without another extension, financial support for wind producers will dry up, which could stop America's green shift dead in its tracks. It brings to mind President Jimmy Carter's pledge more than 30 years ago that the U.S. would derive 20% of its energy needs from solar power by the end of the century. That pledge lasted as long as oil was scarce and prices were high, then evaporated when OPEC lifted its embargo and began resupplying the U.S. with oil from the Middle East.

    For now, the outlook is still favorable. Iberdrola's next big installation, the Blue Creek Wind Farm in western Ohio, comes onstream later this year. It will produce enough electricity to power some 200,000 U.S. households, proving that renewables aren't just tilting at windmills.

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