Electrifying Everything: Wind Continues Roaring Onward

The wind industry is a massive economic driver for the U.S.

Tyler Lancaster, Principal at Energize Ventures
February 18, 2021

The impact of severe weather on the energy systems in Texas and other Midwest states right now is unprecedented, and in many ways nearly impossible to prepare for. While we recognize that this crisis can’t be attributed to one single source of energy, one thing is abundantly clear: In the face of extreme weather events caused by climate change — whether you operate wind or natural gas or solar or nuclear — embedding resilient, redundant equipment is mission-critical to staying online in sun, snow, sleet and hail — or subzero weather in Texas, of all things! At Energize we are bullish on the role of software in bolstering resiliency and efficiency of critical infrastructure. Today, we’ll talk about what that looks like specifically for wind.

Electrification is a key theme to Energize’s investment thesis. We invest in software and business model innovations, many of which directly contribute solutions towards decarbonization by means of electrification. In this blog series, we’ll explore this critical transition and the technologies driving and enabling it.

In my last piece, I argued why solar is poised to become the king of zero carbon power over the coming decades. Wind also has something to say — and that’s what I’m tackling today.

Wind, like solar, is a tremendously expansive resource that if fully tapped, could cover global energy demand by more than 19 times. Wind is also highly complementary to solar from a geographical and temporal standpoint — wind is typically strongest along coasts, over flat plains, and at night. In the U.S., the Great Plains boast strong onshore winds which are complemented by powerful offshore winds along the coasts. On the other hand, solar is strongest in the deserts of the Southwest and other regions with lots of sunlight (shocker) like Hawaii, California, Florida and Georgia.

More power, lower costs

The wind industry has sustained cost declines despite a perception the sector was maturing and reaching rock-bottom costs. Since 2009, the levelized cost of wind has decreased 71 percent, according to Lazard. While costs continue to decline, the production efficiency of wind turbines has increased as producers innovate and adopt new technologies.

In the power industry, “capacity factor” is a common term that represents the percentage of hours in a year a power plant is producing at 100 percent capacity. Historically, wind and solar have been criticized for low capacity factors (20 to 30 percent) relative to thermal and nuclear generation (60 to 90+ percent). But, thanks to advances in technology, wind turbine manufacturers and operators have determined how to consistently generate power during many different wind conditions, during most hours of each day. The highest-performing wind farms are now steadily producing power at 40 or even 50 percent capacity factors, nearing thresholds of traditional generation technologies.

Maggie Pakula, vice president of strategy at Invenergy, a leading wind developer and operator and Energize investor, explains why this is important.

“Wind farms reaching 50 percent capacity factors and higher are frankly game changing,” she said. “Reliable and persistent wind output that can be accurately forecasted is much closer to a 1 to 1 replacement for coal and gas plants, and when combined with complementary solar you begin to approach a firm around-the-clock product. Increasing penetrations of solar, further enhancements to wholesale market rules, and improvements in forecasting will only increase the value of wind and incentivize further cost declines.”

So wind achieving higher capacity factors is important — but how is it done? Allow me to release my inner engineer to further elaborate. The below equation is what wind engineers actually use to calculate wind power production. Stripped down, wind power production is primarily a function of two key variables: turbine blade size (A) and wind speed (V).

From a progress standpoint, this explains why we’ve seen so much focus on building taller, bigger wind turbines and locating wind farms offshore. Advancements in wind turbine materials and aerodynamics allow lighter, stronger blades to be made almost impossibly long without breaking — bigger “A.” High up in the sky and out over the ocean, wind speeds are strong and persistent — faster “V.”

Ultra-strong wind towers allow turbines to reach new heights, accessing even stronger wind. Look no further than GE’s newest wind turbine — the Haliade-X 12MW — to see results of the incredible innovation occurring in materials science, manufacturing and engineering of wind equipment. What do these innovations mean for wind? More power and higher capacity factors at similar or lower costs — all of which result in continually declining levelized costs for wind.

Headwinds challenging the wind industry

Though the wind industry has ridden steady growth breezes over the past few decades, it is not without its own set of challenges. In my opinion, here are the greatest barriers for wind power to overcome:

  1. Aging equipment: Declining performance and rising operations & maintenance (O&M) costs accompany an aging wind fleet. IHS reports the average wind turbine age in 2020 is 7 years, so with an average lifespan of 25 to 30 years the wind fleet is approaching middle age!
  2. Transmission interconnection: Transmission interconnection (which I’ll cover more thoroughly in a future post) has long lead times and can prove costly.
  3. Complex regulatory landscape: Energy market rules and lengthy permitting processes add complexity to wind projects.
  4. Shipping & logistics: Delivering blades and equipment to remote sites can pose a challenge and may even be the most costly part of a project.

I believe the wind industry can again confound expectations to overcome these barriers by:

  1. Harnessing data and software at scale
  2. Soaking up excess wind capacity
  3. Offshoring wind

Wind farm data and software at scale

Today’s wind farms come equipped with a bevy of sensors and embedded ruggedized computers. Operators can measure sound, temperature, vibration, wind speed, humidity and a host of other data. Software can then parse through these massive volumes of data to optimize operating set-points and predict potential problems with mechanical components like gearboxes. What’s more, this data can all be processed right on-site with “edge” computers rather than uploading to the cloud to minimize telecom and data center storage costs.

Energize portfolio company ZEDEDA is an edge computing software platform that helps wind operators like Invenergy unlock the value of this data through orchestration of thousands or even millions of distributed edge compute nodes.

“Meaningfully driving down operational costs and improving uptime for wind requires access to high volumes of diverse data that is generated at the asset level,” said Said Ouissal. “By extending the capabilities and agility of cloud computing to on-premise environments like wind turbines, edge computing enables data processing and analysis right at the source — close to sensors and operations. ZEDEDA’s platform enables customers like Invenergy to run advanced cloud-native software and analytics at the edge, which improves predictability of turbine failure and in turn drastically lowers O&M costs.”

Advancements in software that allow wind operators to better derive insight and value from data are helping to propel the industry forward. Experienced wind energy veterans are partnering with top data science and software engineering talent to build companies that are specifically focused on developing wind software. One such company is Ensemble Energy, a leading artificial intelligence firm that applies machine learning to wind.

“Ensemble’s software can increase wind farm annual energy production while reducing the cost of unplanned maintenance by 10 percent or more,” said Sandeep Gupta, CEO of Ensemble. “Our engineering and physics-based optimization algorithms take in SCADA, meter, meteorological, maintenance and financial data. We then evaluate fleet-level performance and identify specific turbines affected by issues such as bearing and generator health. Operators close the loop by remotely adjusting control parameters or directing maintenance crews to undertake a preventative action.”

Including Ensemble, here are a few innovative firms building software for the wind industry:

Soak up that excess wind capacity

Wind energy is incredibly cheap and prevalent in some regions, like the U.S. Wind Belt, otherwise known as the Great Plains. Wind is also a zero marginal cost resource, meaning wind farms will produce power no matter the price of electricity because a wind farm’s fuel — wind — is free. Wholesale power prices in the Wind Belt and Texas occasionally drop down to $0 or even go negative because there is so much wind energy production.

What the heck do we do about so much wind electricity? Savvy innovators are harnessing creative solutions in two ways:

  1. Bringing energy-intensive processes to wind farms
  2. Shifting energy consumption to the early morning and evening when wind production is typically high

Bringing energy-intensive processes to wind farms

Flexible data centers, green hydrogen production with electrolysis, and cryptocurrency mining all have one thing in common: they require large amounts of electricity. In fact, electricity typically represents the largest line item in operating costs for data centers. A simple solution? Locate them near wind farms to harness low-cost wind power while avoiding transmission and distribution costs.

Data center giants like Google are catching on, and have systematically sited massive hyperscale data centers right near wind farms to leverage low-cost, renewable wind energy. In fact, Google announced in 2020 that they are expanding their 24x7 renewable data center initiative to their entire fleet of cloud computing facilities. Google intends for its data centers to run on zero carbon electricity every hour of every day throughout the year, meaning they’ll have to procure massive amounts of wind (and solar) energy. They’ll also attempt to match data center computing activities to the production profile of wind, making those free range wind electrons all that much more valuable.

Pakula weighed in on why integrating wind and hydrogen might finally pencil out from an economic perspective.

“People call the U.S. Great Plains the Saudi Arabia of Wind — but it could also become the Saudi Arabia of Wind-Produced Hydrogen!” she said. “Leveraging wind oversupply to create green hydrogen that is economically competitive with other long-duration storage technologies is potentially transformational. Critically, green hydrogen can be distributed and stored using existing infrastructure — like natural gas pipelines — or converted into ammonia and transported as a liquid. Hydrogen’s chemical flexibility is a unique asset when paired with low-cost, homegrown Great Plains wind.”

Thomas Leurent, CEO of Akselos, an engineering simulation software, is also optimistic about the nexus of wind and hydrogen.

“In the long view, if ammonia with hydrogen becomes cheap enough, developing economies can convert recently built coal plants into zero-emission plants,” said Leurent. “We can decarbonize faster by triangulating different but complementary approaches. For example, floating wind farms or giant ammonia-producing solar farms can repurpose coal power and petrochemical plants, all while outlining a clear pathway for traditional fossil fuel firms to join the energy transition.”

Shifting energy consumption

In most cases it is not possible to relocate electricity demand. However, technology and equipment can help moderately shift when electricity is consumed. Think about EV charging, pre-cooling buildings and refrigerators, running hot water heaters early then storing the water in an insulated tank, delayed starts on dishwashers and laundry machines…and the list goes on. The point is, by shifting electricity use by an hour or two, consumers can align their consumption with wind production — and save money. Aside: Later in this series, I’ll be writing an entire post on electricity demand flexibility and why it will prove an essential tool to decarbonizing a heavily electrified energy system — stay tuned!

Several innovative companies are tackling the challenge of soaking up excess wind:

Offshoring comes to wind

I believe that offshore wind’s complementary value will make it a key cog in the renewable energy mix. However, the offshore wind industry will need to embrace emerging technology for pre-construction and operations to ensure high uptime (revenue) and low maintenance requirements (cost). The logistical complexity of building and operating an offshore wind farm is simply greater than onshore infrastructure.

Let’s imagine for a minute what goes into building and maintaining an offshore wind farm: Ships and cranes historically used for oil platforms are used to build the wind turbines. Some have towers that stretch deep all the way to the seabed, others float (can you believe that?) and are anchored to the seafloor with ultra-strong cables. And because they are located in the middle of the ocean, performing maintenance on offshore wind turbine poses its unique challenges as well.

Offshore wind holds immense promise, but becoming economically competitive with cheaper onshore wind and solar will require material innovation. Offshore wind developers and operators must embrace emerging technologies like simulation software, drones and 3D printing that can help lower costs of construction and operations — and in turn accelerate growth of offshore wind.

I am particularly bullish on the potential for simulation software to transform offshore wind. This is where firms like Akselos are making a big impact by helping offshore engineers streamline the design process.

“The equipment for a complete install of one offshore wind turbine can weigh as much as ten Boeing Dreamliners. The magnitude of construction and maintenance for offshore wind is far more costly than onshore, meaning digital twin-enabled simulation for predictive O&M is even more impactful — and more important — out at sea,” said Leurent. “This also leaves even more room for system optimization, which is where Akselos’ physics-based simulation approach can help by reducing CapEx by up to 40 percent.”

Along with Akselos, a few other startups to watch in this space:

Gusts of wind-ovation abound

Wind and solar together can largely decarbonize power supply and even the modern economy by electrifying mostly everything on the demand side. Like solar, the wind industry has continually innovated to sustain cost declines, in part by building bigger and better wind farms that are truly astounding feats of engineering.

The wind industry is a massive economic driver for the U.S. already and will only grow as the energy transition accelerates. A significant portion of the materials required to build a wind farm are manufactured domestically. Wind creates well-paying local jobs all up and down the value chain, from manufacturing to construction to end-of-life recycling.

Finally, let’s end with a good sports analogy. Wind and solar are like having Lebron James and Dwayne Wade on the same team — two competing, yet complementary superstars that are pushing each other further and farther, and both still winning. Wind and solar can likely offset 70 to 80 percent of greenhouse gas emissions alone, but to tackle the last 20 to 30 percent, they’ll need the help of a) energy storage, b) transmission and c) low-carbon flexible generation. More to come on that soon — be on the lookout for my next few posts!