sailing to commanding heights

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sailing to commanding heights
huDgens steeRs PPM eneRgy
By MaRtin RosenBeRg
ppm energy SitS neStleD in the
gorgeous Pacific Northwest, surveying the
American landscape for opportunities to develop energy
projects for wholesale, industrial and commercial
customers. The Portland company, founded by
PacifiCorp, became part of ScottishPower, which was
acquired by Iberdrola in late 2006. Under European
guidance, the Northwest company is focusing on
development of wind resources in the United States.
Terry Hudgens, president and chief executive of
PPM, at the Washington International Renewable
Energy Conference in March envisioned a future
where one-fifth of U.S. electricity could be generated
by wind. Such wind resources, he said, would eliminate
the need to import about $250 million worth of
natural gas a day to meet future electricity demand.
We recently caught up with the 53-year-old
executive, a veteran of the oil industry, for a followup
interview. His comments, edited for style, follow.
EnErgyBiz Iberdrola Renewables, the parent of
PPM Energy, is about to invest $3 billion euros, or
$4.6 billion, a year on renewables, half of that on the
United States.
huDgEns We have plans to invest at the rate of
2,000 megawatts per year worldwide over the next
three years.
EnErgyBiz How much will be in the U.S.?
huDgEns 1,000 megawatts per year in the United
States. We have 30 to 40 utility customers and
we’re continuing to grow that. We have more than
2,000 megawatts in operation.
EnErgyBiz What is your business model?
huDgEns Our business model in the United
States and also internationally is to develop, build,
own and operate wind generation. We then sell the
product through a medium- to long-term purchased
power agreement or carry a certain portion as a
merchant business.
94 EnErgyBiz May/June 2008
EnErgyBiz Where do you see wind heading in the
United States? How big will it be a decade out, and
what market share do you think PPM Energy will
have?
huDgEns We see wind growing in the United
States today at the rate of about 5,000 megawatts
per year, and at that rate, we’re approximately a
20 percent share of that market growth. We see
the potential for that 5,000 a year to increase
upwards to 10,000 per year if there is a continuation
of strong support for domestic clean, renewable
energy resources in the U.S.
EnErgyBiz That’s the equivalent of five nuclear plants.
huDgEns That’s correct.
EnErgyBiz Do you hope to still have 20 percent
of that?
huDgEns We want to be one of the top one or two
players in the business.
EnErgyBiz Tax credits for new wind investments
are set to expire the end of this year.
huDgEns If you look at this decade, we’ve had
expirations of the production tax credit occur on
three occasions. On each of those occasions, the
following year activities fell to little or nothing. What
is changing, though, is we now have 28 states with
some form of renewable portfolio standard. The
industry needs to grow at about 5,000 megawatts a
year to meet the level that’s already set by those 28
states. In many of those states, the prices will rise
in absence of a production tax credit to keep our
returns at a reasonable level. But that’s not true in
every state that has a renewable portfolio standard.
EnErgyBiz Would you prefer to see a nationwide
renewable portfolio standard or a 10-year production
tax credit without the national standard?
huDgEns I would prefer the first option. The
problem with the production tax credit is it will either

wE hAvE PlAns to InvEst At
thE rAtE oF 2,000 mEgAwAtts
PEr yEAr worldwIdE ovEr
thE nExt thrEE yEArs.
Terry Hudgens
Photo CourtEsy of PPm EnErgy
be too rich or not rich enough, depending upon circumstances
down the road. It requires companies
to have substantial taxable incomes to fully utilize
the tax credit.
EnErgyBiz So a national renewable portfolio
standard really would set the standards for a longer
period and allow your business to evolve?
huDgEns It would. It puts the burden on industry
to work together to develop what is the most
cost-efficient way of meeting the standard, and that
working together is required to see expansions in
infrastructure, particularly in grid, to allow for wind
and other renewables to realize their full potential.
EnErgyBiz Europe has embraced wind.
huDgEns Northern Germany is on track for using
wind to generate 20 percent of its electricity. Spain
is at 8 percent with goals to get toward 20 percent.
A lot of Europe is well on the way to getting
20 percent of their energy from wind.
EnErgyBiz The United States is still around
1 percent, right?
huDgEns … a little bit more than 1 percent, but big
growth. The United States has much superior wind
resources than Europe.
EnErgyBiz Will the United States ever get 20 percent
of its electricity from wind?
huDgEns Well, that would be over 300,000 megawatts
of wind capacity. We’re today at about 15,000.
www.energycentral.com EnErgyBiz 95

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EnErgyBiz We need substantial grid investment to
support renewables like wind. Will that investment
be made?
huDgEns Yes. I think it is going to happen.
EnErgyBiz What about the intermittency of wind?
Can we have one-fifth of our generation tied to wind?
huDgEns Absolutely. Again, I’ll just point to Europe.
They’re doing it there. In fact, if you look at Denmark,
they don’t have nearly the diversity and flexibility of
resources we have in many parts of the U.S.
EnErgyBiz The main difference, though, is the vast
geographic expanse of the United States.
huDgEns We ship power large distances already
in the United States. Look at where hydro facilities
are, where coal facilities are. They are not close to
the load centers.
EnErgyBiz What will our future generation mix
look like?
huDgEns We’re going to back off coal over the next
10 to 15 years until the coal industry decides to get real
on developing clean coal. I’m talking about sequestration.
Anything else is just nonsense in my mind.
EnErgyBiz Where do you see coal going? Down
to 30 percent of our generation?
huDgEns Yes, I think probably down to the
30 percent range.
EnErgyBiz Do you see nuclear growth?
huDgEns Not for a while, but in the long run, I
believe it probably will grow.
EnErgyBiz Where do you see most of the new
wind generation going?
huDgEns It’s going to be a bit of everywhere,
frankly. It’s probably going to make sense to build
some large resource in the Midwest and transportation
from the Midwest.
EnErgyBiz Do you see a future for offshore wind
here similar to what’s now being developed in
Europe?
huDgEns I do. But today, the cost for offshore wind
is not very competitive with the onshore wind, and
we have plenty of good onshore wind to continue to
work on.
EnErgyBiz What attitude are you finding among utilities
executives in the United States? Are they increasingly
interested in wind, or are some still skeptical?
96 EnErgyBiz May/June 2008
huDgEns We went through a period the last three
years where we’ve had amazing, increasing receptivity
and interest in wind among many of the utilities
with probably the exception of the Southeast,
because they just don’t really have any wind. They
continue to be skeptical as to how much concentration
of wind they can have, but it’s helpful to have
good examples like Denmark, Germany and Spain,
to point to.
EnErgyBiz Describe the corporate culture at PPM.
huDgEns We started, well, really in 2001. The
culture and the basis for building the company was
to establish a strong merchant competitive business
in the United States with its own independent
culture. We’re an energy provider of gas, electricity,
a variety of structured products, and, of course, a
lot of wind development and gas storage development.
PPM grew from nine people to 600 during the
period of 2001 to 2007.
EnErgyBiz You worked for Texaco for 25 years.
How is your current job different from working for a
major oil company?
huDgEns I love the oil and gas business and what
we were doing. But this is a business that has a
lot more excitement, a lot more future. The biggest
difference is when I go to speak publicly or visit
with politicians or local government we’re a lot more
welcome. People see us as doing work that’s really
benefitting society.

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