Market, Legislation Make Wind an Attractive Investment
Feature article in the June - July 2001 edition of the State Energy Program's bimonthly newsletter, Conservation Update.
West Texas has a new crop: electricity
Those odd shaped structures popping up out in West Texas aren't funny looking oil rigs and they're not genetically altered cotton plants. They're wind turbines, an old technology with a 21st century update. Once too expensive for commercial production, the addition of computers to wind turbines and the rise in fossil fuel prices has brought the cost of wind-generated electricity in line with other power sources.
A push by the 1999 Legislature to restructure the retail electric power market put in place rules that encourage wind generation. One rule requires Texas utilities to get an additional 2,000 megawatts of their power from renewable resources such as wind and solar power by 2009. Rules easing the cost of transmitting electricity from remote areas also aid the development of wind farms in West Texas.
Buyer's market
The biggest boost, however, is the market. The cost of wind-generated electricity has dropped from 38 cents a kilowatt-hour in 1980 to about 4 cents a kilowatt-hour in 2000, a rate comparable to other sources of electricity.
The major utilities have been quick to respond. While several Texas utilities have invested in wind generation since the mid-1990s, the projects had been relatively small, the largest being a 75-megawatt wind farm.
Propelled by the market and the legislation, however, wind has picked up in the last year and a half. Utilities in Houston, Dallas, Austin, San Antonio and Amarillo are proposing projects with a total capacity of more than 500 megawatts of power. The two largest should come online by the end of 2001. If all of these projects are completed, Texas utilities will be well on their way to the 2009 goal.
Mountain top
A 200-megawatt project, to be built on the mesa top of 3,141-foot King Mountain near McCamey, is billed by Reliant Energy of Houston as the largest single installation of its kind in the world. Reliant will buy 75 percent of the electricity generated at the site. Austin Energy, the municipal utility for the city of Austin, will buy the rest.
The project will produce electricity from 160 wind turbines—each capable of generating about 1.3 megawatts—and will supply enough power to serve nearly 65,000 households.
Joe Bob Perkins, Reliant wholesale group president and chief operating officer, says the electricity produced by the project will be sold into the state's power grid, to rural electric cooperatives, and to other retail energy providers after the state's energy markets are restructured. Perkins calls the wind farm an environmentally friendly project that meets the need for additional electricity while benefiting many of the state's rural electricity consumers.
The second large project, a 160-megawatt wind farm from which Dallas-based TXU will buy electricity, will also be in the high mesa area of West Texas and is scheduled to be completed by the end of the year. Rand LaVonn, spokesman for TXU, says, "There is a surprisingly fast turn-around on some of the wind turbine projects." He says that adds to the economic attraction of such projects, because companies can begin to get a return on investment sooner. The project will be built and operated by FPL Energy, which runs wind farms in five states.
Most ambitious in the nation
TXU has other wind projects installed and planned. In December 1998, the utility began drawing electricity from the 41-megawatt Big Spring Wind Power Project, which has the tallest wind turbines in North America. TXU and the Lower Colorado River Authority also are planning an 82.5-megawatt project at the Indian Mesa Wind Farm in Pecos County.
LaVonn says the Big Spring project came before the legislative mandates and was in response to dropping costs and customer interest. He says the current scramble to put up wind turbines by TXU and other utilities is a direct result of the state's electric utility restructuring legislation. "These new projects are part of the deregulation bill that calls for more renewables."
The American Wind Energy Association (AWEA) has labeled Texas' renewable energy initiative as the nation's most ambitious and praised the state for being well on its way to meeting the 2009 goals for renewable energy production. Randall Swisher, AWEA executive director, says there are four reasons Texas is setting an example for the nation.
"A combination of factors has come together in Texas to make this happen: a heck of a wind resource, a drop in the costs of wind energy technology, a well-crafted renewable energy requirement and non-discriminatory electricity transmission rules," Swisher says. "Texas provides a textbook example of what could be achieved nationwide with these fabulous four (reasons)."
High tech, new rules
The electricity transmission rules help keep the costs down. The 1999 electric utility restructuring legislation requires the postage stamp method of pricing for wholesale transmission services within a bulk electric system that serves about 85 percent of Texas.
Mike Sloan, president of the Texas Renewable Energy Industries Association (TREIA), explains that postage stamp pricing means users pay the same price for electricity shipped over the lines regardless of how far it is shipped. "Doesn't matter if it is across the street or across the state," Sloan says.
Until the new rules were in place, a developer of transmission services could charge the full cost of the service directly to whatever utility or other customer was using the service. That made it expensive to run new lines from remote places such as West Texas. Developers can still recover reasonable costs for providing the transmission services, but now the costs of constructing the transmission lines are spread among all the customers in the system.
"The pro-developer rules have really helped wind," Sloan says. Projects still must be approved by the Public Utility Commission, however, and if one is too costly, it may not get approved. Also helpful to the economics of wind power is a marriage to high tech.
"What's on top of the turbine is a weather meter tracking the direction of the wind," LaVonn says. "It tells the computer which tells the turbine which way to turn (to get the best wind). Also, a different computer tells the blades which degree to turn." That makes the wind turbines operate more effectively, picking up the best wind speed available, even when it changes direction.
Don't need water
The economics of wind energy are not limited to a cost per megawatt of electricity that is comparable to other energy sources. Wind is bringing investments to a part of Texas that is at the mercy of the fluctuations of oil and gas prices and a water-dependent agricultural economy.
Pam Groce, an analyst with the Comptroller's State Energy Conservation Office (SECO), says landowners in West Texas are eager to lease land for wind developments that are likely to have a longer life than an oil project and do not depend on water. "Water is a critical issue to West Texas farmers and ranchers," she says.
TREIA's Sloan agrees. "It takes an average of 4,000 pounds of water to make one megawatt-hour of electricity (in a conventional power plant)," he says. The wind generator doesn't use any water. Besides preserving a scarce West Texas resource, not using water keeps costs down.
Finally, the success of the wind power industry is built on a foundation of some 30 years of research and development in Texas. The Alternative Energy Institute, now a part of West Texas A&M University, has been funding demonstration projects since the mid-1970s. SECO also has funded several wind demonstration projects over the past seven years.
SECO helps Texans learn about the economic benefits of renewable energy. SECO projects renewable energy sources hold promise for meeting future needs for electric power. Texas has more renewable energy resources than any other state. These resources can be harnessed to provide an inexhaustible supply of energy to power Texas into the future.
Learn online
SECO's outreach campaign, "Renewable Energy: The Infinite Power of Texas," encourages people to visit the Web site.
Wind Energy Settles in Texas
July 6, 2001
- What are other states doing with wind energy?
- State and regional sources of information on wind energy.
What is it about Texas and its booming wind industry? Certainly the wind energy resource is abundant, as documented by studies conducted by the U.S. Department of Energy (DOE) and the Texas State Energy Conservation Office (SECO). Then there is the state's restructuring of its electricity markets, which has resulted in policies supportive of wind energy development. Finally, SECO runs an effective educational effort targeting consumers. All this activity means Texas will soon lead the nation in wind energy installations.
What is a Renewable Energy Portfolio Standard?
The Union of Concerned Scientists outlines how such a standard works on both a state and national level. In Texas, the state legislature passed and subsequently Governor George W. Bush signed a law in 1999 that Texas will produce 3% of its electricity from renewable energy by 2010. This makes Texas one of eight states to enforce a renewable energy portfolio standard (RPS); the other states are Arizona, Connecticut, Iowa, Maine, Massachusetts, Minnesota, and Wisconsin. The Texas RPS is regarded as one of the simplest, and therefore, one of the most effective for stimulating wind energy development.
The Renewable Portfolio Standard - A Practical Guide
The National Association of Regulatory Utility Commissioners published this comprehensive report on the characteristics and benefits of a renewable portfolio standard. This report focuses on how to structure an RPS in order to take maximum advantage of market forces; 139 pp., February 2001.
Transmission Policy and Pricing in Texas
Texas policy of charging a single rate for electricity consumers to access transmission lines is credited with being another key to the growth of wind energy in the state. This draft study, published by the National Wind Coordinating Committee, outlines the transmission issues for wind energy and why the Texas policy is so important for wind energy development; 9 pp., February 2000.
Wind Power Demonstration Projects in Texas
This map identifies and links to wind energy demonstration projects in Texas and was published by the State Energy Conservation Office (SECO). According to the American Wind Energy Association, there are 188 megawatts (MW) of wind energy capacity currently operating in Texas, and approximately another 1,000 MW planned or under construction. What's more, there are more than 2,650 MW of capacity proposed in the state, according to the Texas Renewable Industries Association.
Wind Resources in Texas
Texas is blessed with abundant wind energy resources, especially in the southwest portion of the state, according to this resource map published by SECO. DOE estimates Texas could supply 10% of the 1990 electricity needs of the contiguous 48 states from its wind energy resources (of wind power class four and higher).
The Infinite Power of Texas
This educational Web site published by the State Energy Conservation Office is designed to inform consumers about the possibilities of using energy efficiency and renewable energy in Texas. The site is extensive, containing fact sheets for consumers, lesson plans for teachers, lists of renewable energy projects around the state, maps of resources, and even audio and video clips.
What are other states doing with wind energy?
The Iowa Energy Center (IEC)
IEC has published a comprehensive resource assessment for Iowa (written by the Iowa Wind Energy Institute), lists current projects, and has a demonstration project for secondary-school students. It also has published a Wind Energy Manual that addresses most of the technical, environmental, and policy issues surrounding wind energy development.
Wind Resource Map of New York
This is a great example of a modern, high-tech, online wind resource map, produced by TrueWind Solutions, LLC, of Albany, New York, with support from the New York State Energy Research and Development Administration. Wind resource maps are important because of the site-specific nature of the wind energy resource.
Minnesota's Windustry-Educating Rural Communities About Wind Energy
Windustry, a nonprofit organization headquartered in Minneapolis, provides education materials and holds seminars in the Midwest about the benefits of wind energy for rural communities.
Oregon's Wind Energy Program
Oregon's Office of Energy (OEE) has supported a wind energy program since the 1970s that focuses on resource assessment. Today, Oregon State University maintains wind resource data on 152 sites with good wind energy potential. In addition, OEE has authored model city and county ordinances for siting wind energy systems. These model ordinances are notable because OEE has underwritten extensive research into local siting regulations for wind projects.
State and regional sources of information on wind energy
Wind energy projects throughout the United States
The American Wind Energy Association (AWEA) Web site includes a map linking to summaries of active and proposed wind power projects organized by state. AWEA has also published individual Web sites for wind energy enthusiasts in the states of Iowa, Pennsylvania, and New York.
Regional Wind Activities and Contacts
Wind Powering America-a DOE initiative-publishes a list of activities and contacts in the DOE Regional Offices for the six respective DOE regions of the country.
Wind Resource Database
DOE's National Wind Technology Center publishes an atlas of wind resources in the United States broken down by state. In addition, NWTC publishes detailed online maps of wind energy resources for the states of North Dakota, South Dakota, and Vermont.