Texas extended its already formidable national lead in wind power by clearing the way Thursday for a major expansion of the state's electrical power transmission network, valued at nearly $5 billion, a move that will triple its current wind power capacity.
The preliminary approval from the Public Utility Commission of Teaxs (PUCT) effectively green-lights tens of billions of dollars more in wind development investment and will supply the state with more than 18,000 megawatts of additional wind power.
The decision consolidates Texas as "the epicenter of land-based wind energy development in North America, if not the world," said Commission Chairman Barry Smitherman in a statement.
Texas’ basic challenge – bringing power from where the wind blows hardest to where the electricity it generates is most needed - is the same faced by the rest of the country, and the Lone Star state's aggressive embrace of wind has made it a national 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 - almost a third of the national total - supplying 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 utlity commission weighed four different transmission scenarios approved by the Electric Reliability Council of Texas, the state grid operator, ranging from 12,000 MW to 24,000 MW. It chose the middle range plan known as 'Scenario 2' (see map below) which envisions 18,456 MW of new wind power.
It will cost an estimated $4.83 billion to build sufficient transmission to integrate the additional 18,000 MW of wind power into the state grid, leading some market watchers, including the inimitable Jim Cramer have suggested to predict "everything wind is going to get a multiday move"as are a result of the Texas move.
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.
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.
Monthly utility bills are expected to rise $4 a month to pay for the new transmission lines approved Thursday but Sadler says by using wind to displace ever more expensive gas-fired electricity Texas consumers will soon be able could save $3 billion a year – paying off the transmission investment in two years.
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 – 35,000 MW more than what was approved Thursday.