Oklahoma's Wind Power Development Strategy

Oklahoma was not always a big source of wind power projects, but a leader in oil and gas, and that may be what helped the state to develop its wind resources. “Our history and experience with the oil and gas industry helped us to understand the energy industry, so adding wind to the generation mix made logical sense,” said Kylah McNabb, wind development specialist out of the state Energy Office at the Oklahoma Department of Commerce.

McNabb said the state has 7,000 MW of wind energy in the queue and more that are reaching the development phase. The addition of transmission lines has also helped to expand the industry, including the proposed 800 mile (1280 km), 500 kV Clean Line Energy Plains and Eastern transmission line, which would be built from wind farms in Guymon in the Oklahoma panhandle to the Tennessee Valley Authority in Memphis. The line is expected to open up 3,500 MW of wind capacity for export. Construction is expected to begin in 2014, with service scheduled to begin in 2017.

“The state has been very supportive of the Clean Line development,” said state Energy Secretary Michael Ming. “The line is privately funded, and the Oklahoma Corporation Commission is behind it by granting utility status for building the line to Clean Line.” Utility status puts Clean Line one step closer to raising the funding required from private and public investors for actual construction of the project.

Examples of successful investment in the state”s wind sector come from Enel Green Power SpA, which was recently awarded $220 million in investments from a group — including JPMorgan Chase, Wells Fargo and GE Capital - for the 235 MW Chisholm View wind project in Oklahoma. When completed, the project will sell the output to Alabama Power, a unit of Southern Power, under a 20-year power purchase agreement (PPA).

And, businesses have opened manufacturing facilities including Siemens, which opened a facility in Woodward in February 2012. This centre will store and distribute main components and spare parts, including wind turbine blades, drive assemblies and generators, as well as tooling operations. Siemens said it plans to create up to 40 jobs at the facility over the next five years.

“You can”t discount the location,” said Ming, “as it”s at the epicenter of world class wind resources in the mid-continent.”

Indeed, Oklahoma is where Siemens is testing its newest wind turbine, the SWT-3.0-101, rated at 3 MW. Three machines are currently in use at the 227.5 MW Crossroads wind farm, completed in January 2012 in northwestern Oklahoma.

The American Wind Energy Association (AWEA) said in its annual report for 2011 that Oklahoma ranked eighth for wind projects under construction, and 10th for states with wind as a percentage of their portfolio, but the state did not reach the top 10 for overall wind jobs. Commerce”s McNabb said the reason for the disconnect is the difficulty in reporting wind jobs.

“We had more workers on the ground when projects were being developed, and a bulk of the new jobs are now in manufacturing,” McNabb said. “The resource is here, and that”s what we are focusing on right now. That”s what drew in Siemens.”

A state energy plan

Ming said Oklahoma plans to have 3 GW of wind energy online by the end of 2012, which will beat the state”s Energy Plan of 15 percent renewable energy by three years, with more projects to come online in the future.

“It”s a standard and not a mandate, so it allows market involvement and keeps us as a low-cost electricity state. We are able to grow without adverse rates. It also makes PPAs price mitigaters. Last summer shows how wind does not need cooling water, especially since we were in a severe drought,” Ming said. McNabb explains, “It shows that wind can work in fair market conditions.”

Making the switch to renewables

Utilities in the state have not had issues in adding wind power to their portfolios. “We had state incentives and transmission and enough injection points,” Ming said. “That contrasts with other states that built wind but no transmission. Also, wind and gas make good partners in terms of integration.”

Another point that helped ease the addition of wind is the backing of landowners. “The landowners are pro-development as well. They like oil and gas, so they want oil and gas. They like wind, so they want wind,” Ming added. “A lot of these landowners look at wind, gas and agriculture as retirement plans, because they know at least one of them will be making them money at some point,” McNabb said.

Utility models for wind

Oklahoma Gas & Electric (OG&E) set a goal in 2006 to add wind to diversify along with natural gas and coal. The utility, based in Oklahoma City, also owns the 120 MW Centennial, the 101 MW OU Spirit and the 227.5 MW Cross Roads wind farms. The company has power purchase agreements (PPAs) with the 50 MW Sooner, the 152 MW Keenan and the 130 MW Taiga wind farms. OG& E is working with a developer on the construction of the 60-MW Blackwell wind project in northwestern Oklahoma, which the company also has a PPA with.

But OG&E Treasurer Max Myers said the company does not currently have plans for additional wind projects because of the uncertainty of how they will fit in with environmental regulations and the low price of natural gas.

“We have a couple of sites in the infancy of development, but ultimately it will depend upon environmental regulations and the economic justification of wind in light of natural gas prices as to whether or not they are developed.”

Nevertheless, Myers did sound a note of optimism: “Capacity factors are going up due to technology advancements and Oklahoma has very competitive wind resources. This combination should bode well for wind development in Oklahoma if the federal PTC”s are extended or if natural gas prices rebound.”

Since 2009, OG&E has offered a program that allows customers to buy renewable energy credits that are supplied by the Sooner and Centennial wind farms. The customer can buy from 25 per cent of their usage for $0.009/kWh and up to 100 per cent at $0.007/kWh.

“Although our program is not a direct fuel hedge, it provides customers the opportunity to purchase up to 100 per cent of their electric usage via a carbon-neutral generating source, which many people appreciate,” Myers said.

PSO wind

Public Service Co of Oklahoma (PSO), a unit of American Electric Power, offers WindChoice, a program similar to OG&E’s WindPower, where customers can buy 100 kWh blocks for $1.72 each. The difference is that it is a hedge against the cost of natural gas, so if natural gas prices go up, the price customers are paying for the wind power will not.

“Our focus now, along with continued goals to increase residential use, is that we’re beginning to target larger commercial users,” said Stan Whiteford, corporate communications director with PSO.

A portion of the 99.2 MW Minco Wind Farm, located north of Chickasha, is used for the WindChoice program. Meanwhile, PSO also has long-term PPAs with seven wind power projects in Oklahoma and Texas. “It became price competitive,” Whiteford said. “We could make it part of our fuel mix, and since that time, there has been the development of the state’s renewable energy goal.”

However, Whiteford noted that even though wind is becoming a big part of their generation mix, it is not the main generation source. Nonetheless, although acknowledging the continued domination of fossil-fuelled generation in Oklahoma: “We are definitely not getting away from those traditional sources of generation,” Whiteford said that PSO is always looking for contracts to sign for more renewable energy supply.

“We continue to keep our options on the table as far as additional PPAs, but the main question is ‘What’s the price?’ Can we do something that is advantageous, provide them with a good deal and be a driver for continued development?”