Texas already accounts for almost a third of the country’s wind power but a new transmission system under consideration could quadruple wind power development and make the state an even better model for development elsewhere in the country.
Critical regulatory approval (perhaps as early as today) for billions of dollars in new transmission lines will effectively green-light tens of billions more in wind development investment, perhaps as much as an additional 24,000 megawatts.
Texas’s basic challenge – bringing power from where the wind blows hardest to where it is needed most - is the same faced by the rest of the country, making the Lone Star State something of a test case model.
“Transmission is the single largest strategic constraint for wind …but Texas has probably the most innovative policy for getting transmission built; it is increasingly a model,” says Randall Swisher, executive director of the American Wind Energy Association.
Texas currently has 5,249 megawatts (MW) of wind power, which supplies four percent of the state’s total electricity demand. The Department of Energy recently released a study saying wind could provide 20 percent of the country’s electricity needs by 2030, if the transmission and other key problems can be solved.
The Public Utility Commission of Texas is weighing four different transmission scenarios approved by the Electric Reliability Council of Texas, the state grid operator, starting from 12,000 megawatts. A decision could be made today or at its next meeting July 31.
The Commission investment for the transmission ranges from $2.95 billion to $6.22 billion and some market watchers, including the inimitable Jim Cramer have suggested that this latest step by Texas will be a boon for wind developers and transmission players.
Texas: Wind At Its Back
Texas, which has experienced a ‘wind rush’ since 2001, is a veritable jamboree of international wind developers – Florida Power & Light is the largest with 2,260 MW in operation and more coming.
Most active players in transmission are American Electric Power, Xcel Energy,and the ITCTransmission, a subssidiary of ITC Holdings Corp. which is the only national pure play.
Wind has also been embraced by one of the state's most famous entrepreneurs. T. Boone Pickens is in the early stages of an ambitious wind project there and recently launched a high-profile publicity campaign for his national energy plan centered around wind.
With some $9.4 billion in wind investment, Texas is the nation's clear leader.
Controversy And Contention
Among the states most important lessons is the need for a single national entity (probably the Federal Energy Regulatory Commission) to decide the critical issue of where to build power line corridors, which are never popular among local residents.
Some kind of Federal override authority is critical because utilities are generally regulated by the states, and some (notably Illinois and Missouri, sources say) have objected to having power lines cross their turf.
Senator Harry Reid (D-Nev.) recently introduced legislation giving Washington override authority (as do companion House bills) but its likely to be a contentious legislative process.
The federal-state nexus is spurring increasing talk about the need for a sweeping program, akin to interstate highway system launched by Pres. Eisenhower in the mid-1950s.
The DOE-funded study estimated it would cost $60 billion to build the transmission infrastructure needed to handle 400,000 megawatts of wind power.
Texas, however, enjoys some advantages in solving this riddle on a state-wide basis.
It is its own electricity market, while most states are part of regional electricity markets, requiring cross border negotiations.
(Siting transmission lines is also easier in relatively lightly populated Texas.)
“The other big thing that Texas did was to say since wind resources benefit the whole state the new transmission should be paid for by all the residents of the state –even if they are not immediate customers,” says Larry Bruneel, ITC’s vice-president for federal affairs.
Smart Planning
Texas earns kudos, beginning with its pro-active plan to get ahead of surging wind capacity rather than trying to accommodate new generation on a just-in-time basis.
“This was critical,” says Calvin Crowder, president of Electric Transmission Texas LLC, a 50/50 joint venture between AEP and MidAmerican Energy Holdings which is controlled by Warren Buffet’s Berkshire Hathaway .
“If you build a bypass around a city that is eight lanes, the first couple of years traffic is pretty light but over the next 10-15 years the traffic grows to meet the bypass and if you have designed it right to accommodate future growth you are going to have a smooth system.”
Another innovation: the creation of special zones (CREZ – Competitive Renewable Energy Zones) where wind developers made commitments to build in order to persuade public authorities to build new transmission.
“We solved the chicken and egg problem – which is not unique to Texas – and that’s why everyone is looking at Texas for a procedure to follow,” including FERC, says Paul Sadler, executive director Wind Coalition, a non-profit organization promoting wind in seven southern states.
It helps that Texas’ experience with wind has been so positive. Capacity has come on-line just as prices have soared for natural gas, which supplies 60 percent of the state’s juice.
Austin has the largest green energy program in the country with more than 500 participating companies; most want to switch 100 percent to wind.
By displacing more expensive gas-fired electricity Texas consumers could save $3 billion a year – paying off the transmission investment in two years, says Sadler.
Obstacles Remain
But there are challenges. This includes the engineering task of integrating a variable energy source like wind – which blows strongest at night when demand is lowest - into a grid traditionally fed by more constant base-load generation such as nuclear and coal.
But aided by better forecasting technology utilities are learning to better manage this.
They will have to if the US is to tap more of the country’s huge wind potential, most of which is currently ‘stranded resources’ for lack of transmission. That’s the case in North Dakota, another potential wind dynamo.
That’s why Xcel Energy, the nation’s largest retail wind provider, is pushing for a $1 billion-plus upgraded and new transmission lines to connect North Dakota with Minnesota’s Twin Cities.
“It would be the biggest build-out for us in the last 20 years,” says an Xcel spokesman.
That’s indicative of the generally woeful underinvestment in transmission around the country.
The grid in the Midwest is stretched to its limit during peak summer demand and there's a massive backlog of planned power plants wanting to connect to the system.
Even Texas, where the new transmission could start to come on line in 2012, may soon be overwhelmed. Developers have asked the grid operator to see if they can accommodate a total of 53,800 MW – 30,000 MW more than what's called for in the most aggressive transmission plan expected to be approved this month.