“Texas — leading the US wind power surge”

Texas has swiftly become the United States' hottest wind energy market, with 250 MW new capacity completed (or due to be completed) at the end of 2000, almost 500 MW scheduled for construction this year, plus a further 300 MW under consideration - so far.

Why Texas?

Like other states, it has an excellent wind resource and economically priced technology. What makes Texas stand out from other states is its recent renewable energy legislation and non-discriminatory electricity transmission policies. Christine Real de Azua reports.

Jan-Feb 2001, Renewable Energy World, by Christine Real de Azua

Midway through the US 2000 presidential campaign, the Wall Street Journal published on its front page a short news item indicating that 'an electricity law in Texas partially engineered by Gov. Bush created the nation's largest collection of wind farms'. That law is the renewable energy section, or Renewables Portfolio Standard (RPS), of the state's electricity restructuring legislation. Six other states have adopted an RPS as part of restructuring or other legislation, but none so far with the stunning results of Texas. By the end of 2001, high-tech wind turbines there may be wringing over 3 billion kWh annually from the state's high winds, close to the 3.5 billion kWh generated in California today, according to estimates from the American Wind Energy Association (AWEA).

AWEA executive director Randall Swisher explains that a combination of factors have come together in Texas to turn the big-oil state into the nation's hottest wind energy market, including '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.'

Texas provides a textbook example of what could be achieved nationwide with these 'fabulous four' factors, Swisher said. 'The nation as a whole already benefits from the first two, a superb, untapped wind resource and affordable wind energy technology. It's up to the policy-makers to make sure they come up with the other two: the right renewable energy legislation and non-discriminatory electricity transmission policies. Policy-makers need only look at Texas for an example of how to get it right.'

Restructuring legislation and the RPS

Texas' electricity restructuring legislation, intended to open the state's electricity market to competition, includes a 'Renewables Portfolio Standard' (RPS) - a requirement that 2000 MW of new renewable energy capacity, generating approximately 3% of the state's power, be developed by 2009. Eligible technologies include wind, solar, geothermal, wave or tidal energy, biomass and methane gas from landfills, and - tallied in a separate category - hydropower.

The RPS is essentially a minimum content requirement that grows over time, and allows the market to choose which renewable energy technologies are the most cost-effective. Specifically, the Texas RPS calls for 400 MW of new renewables by 2003, another 450 MW by 2005, another 550 MW by 2007, and a final instalment of 600 MW by 2009.

'Texas structured its RPS more effectively than other states,' said AWEA legislative director Jaime Steve, 'because they set a relatively ambitious, yet achievable, requirement. Then the power providers were set free to decide for themselves how to meet the requirement,' he added.

Utilities realized that they would do better in a competitive retail market if they were delivering a product that was closer to meeting their customers' expectations, and that the RPS could be a cost-effective way of creating the larger renewable energy market desired by consumers.

Legislators then worked with a variety of organizations, interested utilities, and the renewable energy industry to resolve problems such as how to account for existing renewable energy capacity, and which sources would qualify as renewable. The negotiations resulted in legislation that included the following key provisions, which AWEA recommends for any RPS:

The requirement for renewable energy as defined in the Texas RPS is set high enough (2000 MW of new renewable energy) above the existing level of such energy (880 MW) to trigger market growth. Setting an ambitious, yet achievable, level for an RPS is a critical first step, and this should be done taking into consideration both the RPS's definition of renewable energy and its existing level. Failure to do so can result in a meaningless requirement. For example, Maine's 30% RPS may sound ambitious, but about 40% of Maine's electricity already comes from hydropower, a form of energy that qualifies as renewable under that state's RPS.

The Texas requirement is in the form of tradable renewable energy credits, which ensure flexibility and least-cost implementation of the requirement. Credits favour development of the least-cost renewable energy source. They allow utilities to meet the RPS at the lowest cost to them. Credits also provide a simple accounting system for tracking new generating capacity and monitoring compliance with the RPS. Texas is the only state so far to clearly base the RPS obligation on credit trading from the outset.

There is an effective, automatic penalty. Electricity providers in Texas will have three months after each compliance period during which they can make up any shortfall in the required credits, but there is an automatic penalty for non-compliance after that period, and it is set high enough to at least exceed estimated compliance costs. (Penalties are absent from other states' RPS legislation, although some may eventually be set as part of implementing regulations.)

The RPS is phased in, creating a gradually, but steadily, growing market. The first phase of the Texas requirement will take effect early in 2003, three years after implementing regulations were issued, giving utilities time to prepare to meet the first level of obligations. The requirement is phased in thereafter, rising steadily until 2009.

AWEA recognized some of the authors of the Texas legislation at its WINDPOWER 2000 annual conference. Sen. David Sibley and Rep. Steve Wolens of the Texas legislature won the State Leadership Award 'for providing the legislative leadership that will result in substantial amounts of new clean energy serving Texas.' Sam Enfield of FPL Energy (now with Atlantic Renewable Energy), Mark MacLeod of Environmental Defense, Mike Sloan of the Texas Renewable Energy Industries Association (and president of Virtus Energy Research Associates) and Gillan Taddune of the Texas Public Utilities Commission (now with Greenmountain.com, a green energy provider), won the Special Achievement Award 'for playing an active and effective leadership role in establishment of the Texas Renewables Portfolio Standard.'

'This RPS will ensure that Texas remains a beacon for the energy industry,' said Sibley. 'Wind energy is here to play and stay, and can bolster our energy security and competitiveness.' Sibley and Wolens sponsored the legislation in their respective chambers, and ensured its inclusion in the electric restructuring bill signed by Gov. George Bush late in 1999.

Influence of the Production Tax Credit

While the Texas RPS has jump-started the wind energy market in the state, the federal wind energy production tax credit (PTC) is further accelerating the rate of investments there. The PTC is scheduled to expire at the end of 2001, and wind energy projects completed before the 31 December 2001 deadline will lock in a ten-year tax credit of 1.5 cents per kilowatt-hour, adjusted for inflation. The PTC brings wind energy's low costs down even further: electricity has been contracted this year at less than 3 cents per kWh from new wind farms in Texas and Iowa. Extension of the PTC is one of the few environmental provisions included in both the Republicans' and the Democrats' election platforms.

Transmission can pose impediments to the development of new wind power plants, because existing transmission policies tend to penalize wind generation because of its intermittent nature, impose multiple charges along transmission lines (rate 'pancaking'), traditionally favour older, previously-existing power plants over new plants when transmission capacity is congested, and impose burdensome requirements on wind plants wishing to connect to transmission lines. This is not the case in Texas. The regional Electricity Reliability Council of Texas (ERCOT) and Texas have adopted several policies that do not penalize new wind plants, including a single, full 'postage stamp' transmission rate to take effect in 2002 (this avoids 'pancaking'), a one-stop standardized interconnection process since 1998 (this avoids discriminatory requirements on new plants wishing to connect to transmission lines) and a market-based subzonal congestion management scheme that allocates congested lines fairly among generators. These provisions ensure that transmission does not discriminate against new market entrants and intermittent generators like wind energy.

Attracting utility investment

In Texas, an effective RPS, superb wind energy potential, low technology costs, and fair transmission policy have come together to create a vibrant new market for wind energy. As a result, several utilities are investing in wind energy at a pace that exceeds all initial expectations, even before the first phase of the RPS requirement goes into effect in 2003.

In July 1999, six months after RPS implementing regulations were finalized, Dallas-based TXU Electric & Gas (TXU) announced it would purchase electricity from a 160 MW wind farm, larger than the record-breaking 107 MW wind farm of Storm Lake, Iowa, to be developed with the nation's largest wind energy producer, FPL Energy LLC, and Renewable Energy Systems (RES). The project, scheduled to be completed in July 2001, is located in Pecos County, south of Odessa. Reliant Energy followed suit in August with the announcement of plans for a 198.9 MW wind farm to be built by RES. The plant will consist of 160 wind turbines of 1.3 MW each.

Project announcements have cascaded since then, with a total of close to 1000 MW of new wind energy generating capacity being proposed for completion by the end of 2001. The projects are concentrated in Western Texas, where the best of the state's wind resource is located. As a result, half of the 2009 goal of 2000 MW will have been already been met before the first phase of the RPS requirement (400 MW by 2003) kicks in.

Public and media attention

The new wind energy investments in Texas are drawing attention, and wind energy is a hot topic for the local papers.

The Dallas Fort Worth Morning Star-Telegram, in an in-depth article on wind energy in Texas (2 October 2000), interviewed residents at Big Spring, where some of the largest wind turbines in the US are in operation. 'We don't look at these things as good or bad, just something necessary,' said a local construction contractor. 'But I tell you what: I'd rather have them up there than an old coal-fired boiler. Wind is free. It's clean. It's not going to kill us. And wind is going to be as much a part of our future as anything.' The article also featured 'Cloud Catcher,' the favourite turbine of local schoolboys and of the 2-year-old son of Margarito Yanez, a Big Spring wind farm technician. According to his father, the little boy likes to wrap his arms around Cloud Catcher and listen to its peaceful, giant electric heart.

The San Antonio Gazette-Enterprise noted that the Lower Colorado River Authority (LCRA) is more than doubling its commitment to renewable energy in order to diversify its source of electricity in the face of a dramatic increase in the price of natural gas. LCRA, which will purchase power from the Indian Mesa Orion Energy/National Wind Power project, also has agreements to purchase power from one of Texas' first wind energy projects, the 35 MW project in Culberson County, completed in 1995. The LCRA press release on their latest wind project noted with pride how the cost from their wind project would actually be cheaper than the cost of electricity from a new gas project.

On track to lead the US in wind capacity

The surge in investments puts Texas on track to becoming the state with the second-largest installed wind energy generating capacity by the end of 2001. California currently has about 1600 MW of installed wind energy capacity, and most of the new projects proposed there are repowering projects, where new powerful turbines replace older, less efficient ones. Although the energy crisis in California's restructured market could lead to a fast-track approval process for a number of wind energy projects, that has not yet happened, and installed capacity is not expected to top 2000 MW by the end of 2001 in California. Moreover, Texas' large, new wind turbines will be generating electricity more efficiently than many of California's older turbines, so the amount of electricity coming from Texan wind farms (over 3 billion kWh annually) is likely to come close to the 3.5 billion kWh generated in California today.

What is around the corner?

With natural gas prices at an all-time high, skyrocketing electricity prices in California and pent-up demand for more power in many parts of the nation, President Bush is expected to turn his attention to energy issues early on in his Administration. At the same time, an extension of the federal wind energy production tax credit, an ambitious but achievable federal RPS - whether it is included in electricity restructuring legislation or adopted separately to increase the price and supply reliability of the nation's electricity - and non-discriminatory electricity transmission policies are all items for which George Bush has expressed support or on which he and his State's Administration have an outstanding track record. If George W. Bush and his advisors choose to build on this record, they will preside over a wind power surge that will channel a steady stream of economic and environmental benefits to Texas and the nation's windy corridors.

Christine Real de Azua is Communications Coordinator at the American Wind Energy Association, Washington D.C., USA
Tel: +1 (202) 383 2500 Direct tel: +1 (202) 383 2508
Fax: +1 (202) 383 2505
e-mail: mailto:christine:awea.org
web: http://www.awea.org/

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