High Winds for Texas: Lone Star State is Stepping Up

Unlikely as it may seem, a billionaire oilman and the ‘Lone Star State’ of Texas are driving wind to new heights of acceptance and growth in the United States, as the country becomes the top nation for wind power production for the first time. Elisa Wood reports.

Randall Swisher, the executive director of the American Wind Energy Association, has been telling people for a long time that wind energy is a great idea. And he has seen his efforts help move US wind power, step by step, from a fringe alternative to a mainstream resource. This work took decades, but he suddenly has on his hands what feels like an ‘overnight sensation’, brought on by a succession of events over the summer that pushed the wind resource to the fore of the American psyche.

‘It really does feel like just a huge wave of change is occurring’, he said. ‘It was 25 to 30 years getting to this point, but people are waking up. People suddenly recognize that there may be something to this wind stuff.’

Wakey, wakey?

Prompting this wake-up, first and foremost, billionaire energy fund manager T. Boone Pickens decided to make wind energy his cause, and began pumping his message into the American living room. In a barrage of prime-time television commercials, he warned an already recession-anxious public that over the next decade US dependence on foreign oil will represent a US$10 trillion transfer of wealth out of the country, the largest in the history of mankind. His solution depends upon building enough wind power to supply 20% of US electricity in 10 years, a significant increase from today’s 1%.

His confidence in wind energy seemed justified when, in July, word spread quickly over news wires, the internet and television that the US had surpassed Germany as the largest producer of wind generation during the first half of 2008. Although Germany still has more installed wind capacity, the US has stronger winds so produces more electricity from its facilities. Those who have been promoting the resource scored a point in capturing American pride.

At about the same time, former US Vice President Al Gore put forth a controversial challenge to supply all of the country’s electricity from renewable energy within 10 years. While many industry analysts question the goal’s feasibility, they commend Gore for creating an ambitious vision.

And finally, the state of Texas made the news when it took a concrete step to solve one of the biggest obstructions to wind power — the need to construct massive new transmission facilities to move the energy from remote wind farms to demand centres.

The state public utilities commission (PUC) on 17 July approved a transmission scenario for an innovative planning model known as the competitive renewable energy zone (CREZ). These zones are designated for wind development and offer a co-ordinated plan to build an accompanying transmission superhighway. By marshalling government and market forces, the decision paves the way for $4.93 billion of transmission construction to accommodate 11,550 MW of new wind projects— two to three times more capacity than currently installed in the state.

Not so lone star?

Several years in the making, the decision means more wind for Texas. It also could mean more wind for the nation, as many other states and maybe even the federal government join the ‘Lone Star State’ with similar models.

The concept is catching on because it offers a way to cut the Gordian knot of transmission planning, according to Swisher. Or as put by Paul Sadler, executive director of The Wind Coalition, the decision solves the infamous ‘chicken and egg’ issue that stymies wind energy growth. The resource needs transmission to grow, but transmission owners do not want to build unless they know for sure that wind generators will come on line. At the same time, wind developers do not want to commit to projects unless they know the transmission will exist.

‘This is a problem that is not unique to Texas, but is pretty common’, says Sadler, whose organization covers Texas and the Southwest Power Pool with a membership that includes many major wind developers, among them AES, Babcock & Brown, Edison Mission Group, Horizon Energy and Iberdrola.

Several years in planning, the competitive zones emerged out of a 2005 Texas Senate bill that directed regulators to select the most productive wind areas in the state and devise a transmission plan to move the power from the zones to cities. The state PUC in July 2007 designated CREZs in five sections of the Panhandle and West Texas.

The commission then asked the Electric Reliability Council of Texas (ERCOT) to recommend transmission plans for four different levels of wind capacity in the designated zones. This was achieved with an eye toward achieving system reliability, sufficient transfer capacity, and cost advantage to consumers. ERCOT, the grid manager for 75% of the state, unveiled the four scenarios in April. Each scenario could accommodate somewhere between 12–24 GW of wind energy.

Next, in July the commission made the much-awaited decision of choosing one scenario for execution. The winner, ‘Scenario 2’, offers the potential for 18,456 MW of wind capacity, including 6903 MW of projects that already exist or have interconnection agreements in place.

Several transmission owners expressed immediate interest in building the lines in filings before the Public Utilities Commission. The largest proposal came in the form of a joint filing to the PUC from several utilities: Electric Transmission Texas, AEP Texas Central Company, AEP Texas North Company, the Lower Colorado River Authority Transmission Service Corp., Oncor and Sharyland Utilities. Together, the companies offered to build, operate and maintain all of the CREZ transmission facilities.

The companies decided on the joint plan because state regulators had sought co-operation among bidders. Details of the proposal had yet to be filed as REW goes to press.

However, Chris Shein, spokesman for Oncor, said that each company proposes to build largely within its geographic footprint under its own corporate banner, rather than as a new mega-business entity. The companies instead intend to use their joint status to co-ordinate construction and operation of the transmission facilities, particularly in rights of ways and areas where they connect. Oncor, which operates Texas’ largest transmission and distribution company, wants to build 1000 miles (1600 km) of transmission lines, at an estimated cost of $2 billion.

The final decision on who builds the lines rests with the Commission. The entire process — from companies winning commission approval to securing permits and finally building the transmission — is expected to take several years.

Sadler says the CREZ decision ‘is critical because it allows our continued development of a very valuable resource in the state of Texas.’ He adds that more important is the value the CREZ programme sets in establishing a procedure that can be used by utilities around the country, a precedent that identifies wind energy resources and identifies the type and amount of infrastructure necessary to support that resource. ‘I suspect it will be modified for other areas of the country, but it provides a solid framework’, concludes Sadler. Indeed, similar plans are already under consideration in other parts of the country, including California, Colorado, Nevada, Oregon and Colorado, as well as the 11 states, two Canadian provinces, and parts of Mexico within the Western Interconnection area. That plan, being developed with the help of the US Department of Energy, follows a goal of the Western Governors Association for development of 30,000 MW of clean energy by 2015.

Meanwhile, US Senate Majority Leader Harry Reid, a Democrat from Nevada, is pushing legislation that would create national renewable energy zones. His Clean Renewable Energy and Economic Development Act (S. 2076) calls for the US President to identify zones where renewable energy can generate at least 1000 MW. The bill also creates special financing structures to help transmission companies and developers pay for the lines to move the power to population centres. The federal government would finance the projects under 50-year-terms.

‘Utility executives like to say that we can’t afford to build transmission lines that carry only or mainly renewably generated electricity. They like to say it just doesn’t pencil out’, Reid told the Senate Committee on Energy and Natural Resources during a 17 June hearing. ‘But, if they say that, I just don’t think they’ve really tried very hard or very seriously to crunch the numbers. This is particularly relevant when you look at the declining cost curves for renewable energy technologies and the rising costs of fossil fuels, even without a carbon constraint. Cost is an issue, but it’s not an excuse for inaction.’

Oil drives oil man crazy

The Texas PUC’s decision is good news for T. Boone Pickens, since the Texas oilman plans to build one of the largest wind farms in the world within the Scenario 2 footprint. The Pampa Wind Project is slated to be 4000 MW at full build-out, seriously dwarfing today’s largest facility, the 736 MW Horse Hollow Wind Farm, also in Texas.

This spring, Pickens’ company, Mesa Power, ordered 667 turbines, in what vendor General Electric called at the time the largest turbine request for a single project yet to be made. The 1.5 MW turbines are slated for use in the first phase of Pampa Wind, expected to cost $2 billion and be in commercial operation by early 2011. When finished, the four-phase project will encompass 400,000 acres (162,000 ha) in the Texas Panhandle.

In announcing the purchase, Pickens said that the development of wind power is critical as oil supplies decline. ‘You find an oilfield, it peaks and starts declining, and you’ve got to find another one to replace it’, Pickens said. ‘It can drive you crazy. With wind, there’s no decline curve.’

Even so, wind is only the start of the ‘Pickens Plan’, a $58 million campaign highlighted on his website: www.pickensplan.com. He suggests replacing gas-fired generation, which now accounts for 22% of US electric supply, with wind power, and then using the extra natural gas to fuel cars. The plan, he says, could allow the US to replace more than one-third of its foreign oil imports in a decade.

While the US Department of Energy says it is possible for the nation to make wind energy 20% of the resource mix by 2030, Pickens wants to reach the goal much more quickly: ‘If we treat it as an emergency, which I believe it is, we can get to 20% in 10 years. We have to do it quick because we have so much outflow of money’, he told Congress during testimony in June.

The question often asked about the Pickens Plan is why it appears to ignore the emerging plug-in electric vehicle and instead favours natural gas as a transportation fuel. Pickens, in public appearances, says he has nothing against the plug-in, but believes the transportation sector can more quickly ramp up to use natural gas. When accused of using the plan to pump up the fortunes of his own gas holdings, he responds that he already has enough money. Pickens is ranked as the 117th richest person in the US by Forbes Magazine.

Pickens is big on wind, but he also favours solar. He says that wind energy is cheaper, but solar is gaining ground. In addition to pushing policymakers to make full use of the fertile wind territory that stretches from Texas to Canada, he wants to see more solar developed in the Southwest: ‘We are very close to doing something major with solar. In the Southwest we have the solar quarter. We hope we can combine the solar opportunities in the Southwest with wind. What we need is leadership to come forward so we can develop these resources’, he told Congress.

While AWEA welcomes Pickens campaign, Swisher said he questions the likelihood of completely removing gas-fired generation from the mix, as Pickens suggests. ‘Natural gas is too important to the electric power industry to totally foreclose its use by utilities,’ he said. ‘You want the kind of operational flexibility that gas brings to the system. It is very important to a variable resource like wind that relatively flexible generators like gas continue to play an important role.’

Get Smart

Pickens, and others pushing for an expanded transmission system, miss another key point, according to Kurt Yeager, former president and CEO of the Electric Power Research Institute (EPRI) and now executive director of the Galvin Electricity Initiative.

Yeager says it is not enough to make the grid bigger, it needs to be better, specifically upgraded from a ‘dumb’ 1950s mechanical switch-based system to a digital technology befitting the times. To that end, Yeager and former Motorola chief Robert Galvin are attempting to convince industry thought-leaders and policymakers that as a first step they need to pursue a smart grid, particularly on the distribution level.

Up-to-date digital controls and communications technology allows the grid to anticipate the natural fluctuations in wind and solar power and keep power supply in step with consumer demand, according to Yeager. If such a system is developed, the US would find it could use the existing transmission system more, ‘rather than stretch new wires that nobody wants in their backyard’, Yeager said in an interview.

‘The sun doesn’t always shine, the wind doesn’t always blow. In today’s power system, the ability to accommodate that kind of intermittency is not possible unless we have large quantities of back-up power or storage. In a smart grid, I can use silicon as my back up energy source’, Yeager said. ‘Buildings, whether home or business or whole neighbourhoods, can become a solar energy power source that can be integrated into the grid and provide power when you get the right price signals.’

Yeager sees regulatory obstructions and utility monopolies holding up development of the price-responsive smart grid. Today’s electric meter and pricing structure serves as an ‘iron curtain’ preventing the consumer from using electricity in the most effective way.

‘First and foremost, start with the consumer and create the policy changes at the state level, since electricity is regulated at the state level. That will enable utilities to begin making the technical changes’, he said. ‘We have to change the rules of the game, it is not a technology issue, but a policy issue.’

Meanwhile, Terry Boston, president and CEO of the PJM Interconnection, the largest organized market in the country, says the US needs both expansion and intelligence brought to its grid, if it is to accommodate renewable energy.

‘To adopt some of the ambitious renewable energy and climate change goals that are being discussed will require a substantial investment in new transmission and new grid technology. The electricity industry can deliver, as it has done in the past, but only if we get beyond endless debate over yesterday’s issues and instead partner with the states, the federal government, consumers and industry to focus on truly deploying the 21st century grid’, he said in testimony before the US Senate Energy & Natural Resources Committee at the end of July. ‘While other technologies are promising, the greatest promise for renewable energy in our region is wind generation. Additional long-haul interstate transmission will be needed to move these wind resources to load centres in the east,’ he said. The PJM region, like Texas, promises to be a mammoth wind producer. Of the 90,000 MW of generation in the early stages of development within PJM, 40,000 MW currently comes from wind farms.

Time runs out

Boston went on to warn Congress that the US does not have the time to waste it tinkering with old energy policies. ‘We don’t have the luxury of time for continuous debates over corridors, cost allocation or the respective role of the states and the federal government in these areas… the more important task in my view is to focus on the future — ensuring a complementary integration of the next generation of technology with the next generation of issues you are already addressing, such as climate change and energy independence.’

Nonetheless, this is exactly what Congress did this summer with the debate on extension of the federal production tax credit (PTC), a key incentive for wind development. As REW goes to press, Congress had recessed for the summer, after months of political haggling without deciding what to do about the PTC, which is due to expire at the end of this year.

‘Both parties want to extend the PTC. They just can’t agree on how. It is a bit of national embarrassment that the Congress cannot get its act together on something that has such broad based support’, said AWEA’s Swisher.

US wind farms now generate more electricity than any other nation in the world and are on track to expand by over 45% this year, but the looming expiration of the PTC overshadows this ‘spectacular progress’, according to AWEA, which issued a strong public missive in early August for renewal of the PTC.

‘The US is now the world’s largest wind energy producer, with wind development sparking job creation and economic opportunity in a troubled economy’, said Swisher. ‘But the current figures hide a dire reality: the pipeline of investment for 2009 has been on hold for months, with escalating risks and costs for the industry, because of the uncertainty about the production tax credit. At a time when unemployment is at a four-year high and the economy needs every stimulus it can get, a rapid extension of the credit should be on any economic priority list for Congress.’

While the expiring PTC continues to cast a shadow over the industry, other news continues to be upbeat. More than 7500 MW of new wind is likely to be installed in the US this year, bringing the total nationwide to 19,500 MW, according to the Second Quarter 2008 Market Report, released by AWEA on 5 August.

Domestic investment in manufacturing facilities for wind farm components increased over the past 18 months, with 41 facilities announced, opened, or expanded. The manufacturers will also create over 9000 jobs when they are at full capacity, according to AWEA.

So, while the wind industry has policy worries, it continues to be a US sensation, in an economy where far too few are to be found. US consumers are likely to see home and transportation fuels eat up 13% of their earnings this year, according to the Alliance to Save Energy. But big money, a big state, and big thinkers offer up the wind industry as a promise for relief.

Elisa Wood is US Correspondent for Renewable Energy World magazine.
e-mail: rew@pennwell.com

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