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    Founding Editor Herman K. Trabish



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  • WEEKEND VIDEOS, July 21-21:

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  • How Solar Serves The Heartlands

    Wednesday, December 02, 2015


    Will big corporations snatch the wind opportunity away from utilities?; A quarter of new wind in 2014 was bought by names like Google and Apple instead of power companies

    Herman K. Trabish, April 16, 2015 (Utility Dive)

    There is a remarkable “wind rush” on in the U.S., and utilities are falling behind.

    Installations jumped 400% from 2013 to 2014. A record 11,300 MW of wind was contracted for in those two years, but utilities lost 23% of the capacity to new players in the space.

    “Among the 4,854 MW commissioned during 2014, 40% of the capacity was contracted under long term power purchase agreements (PPA)… and 26% is utility-owned,” according to the "U.S. Wind Industry Annual Market Report" from the American Wind Industry Association (AWEA), the wind sector trade group.

    That 40% of capacity installed through PPAs “is down significantly from the 75% of capacity installed in 2013, 76% of capacity installed in 2012, and the 55% of capacity installed during 2011,” the report adds.

    Meanwhile, some 60 non-utility entities have contracted for wind. IKEA bought wind projects in Texas and Illinois totaling 263 MW. Both Facebook and Google contracted directly with the Warren Buffett utility subsidiaryMidAmerican Energy for as much as 547 MW of Iowa wind. Mars contracted for an 200 MW Texas project’s renewable energy credits (RECs). Anheuser-Busch’s California brewery installed a second 1.6 MW turbine on-site.

    “With locked-in long term PPA prices at record low levels, companies see wind as a valuable hedge against future fossil fuel price volatility,” explained AWEA Deputy Director Emily Williams. “For the same reason that utilities like wind, for the certainty it offers, tech companies, universities, and government agencies want it as well.”

    The 'wind rush'

    “The wind rush started after the extension of the 2013 production tax credit,” Williams said. Through 2013, the industry slowly recovered from the instability caused by the 2012 PTC’s expiration. By 2014 it was ramping up. 2015 and 2016 look to be strongly productive years.

    The PTC extension, with crucial “under-construction” language that allowed a two-year development process, led to vital long term investments in manufacturing, transmission infrastructure, and the workforce.

    “There are now over 12,700 MW under construction and 5,000-plus MW with power purchase agreements that have not yet started construction,” Williams said. “We lost 30,000 jobs in 2012 and were down to 50,000 total jobs in 2013. The jobs number in 2014 rose to 73,000.”

    The jobs regained were largely in construction, transportation, and development in 2014 but manufacturing job numbers are expected to rebound this year as new turbine orders for 2016 and 2017 are placed.

    The bulk of the wind rush is in the blustery corridors of the midcontinent, from North Dakota and Minnesota down to Texas, Williams said. Grids operated by the Midcontinent Independent System Operator (MISO), the Southwest Power Pool (SPP), and the Electric Reliability Council of Texas (ERCOT) have the bulk of new construction activity.

    Texas leads the wind rush with over 7,500 MW in construction and 17,000 people employed. The development of rich West Texas wind resources was driven by the $7 billion competitive renewable energy zone (CREZ) transmission expansion that was completed in 2013-2014. It is expected to take Texas cumulative installed capacity of 14 GW installed capacity to 18 GW.

    That success is now being replicated in SPP and MISO transmission policies. “The MISO Multi-Value Portfolio lines, which have an estimated wind carrying capacity of 14,000 MW, are scheduled to go into service between 2015 and 2020,” Williams said.

    Another crucial factor in the wind rush has been turbine technology advancesthat improved capacity factors in some wind-rich regions to over 50%. Installed where there is a good resource, turbines with taller towers and longer blades have cut contracted prices by as much as 50%, to as low as $0.019 per kWh.

    High-tech turbines are also beginning to open up new regions like the Southeast to development. Increasing a GE turbine’s height from 96 meters to 110 meters can open up as much as 1,000 GW of new resource potential, especially in the SE and on the East Coast, Williams said.

    The rise of corporate and institutional buyers

    The more than 50% drop in the cost of wind has attracted direct investment by businesses, government agencies, and universities looking to lock in long term low prices, reduce their environmental impacts, and meet institutional sustainability targets, AWEA CEO Tom Kiernan said.

    In 2014, Microsoft, Walmart, Yahoo, Amazon Web Services, the U.S. General Services Administration, and Cornell University joined the ranks of such institutional buyers of wind. Already on the list were Google, Apple, Oklahoma State University, Ohio State University, and the U.S. Air Force. PPAs for over 1,770 MW of wind were signed in 2014 by private sector, government, and education institutions.

    “Because energy is a large operating expense at Google, it is beneficial to power the data centers with low-cost wind power,” Director of Data Center Energy Operations Gary Demasi said.

    “As an industrial scale consumer of energy at our data centers, wind has proven to be a valuable commodity for our business,” Microsoft Energy Strategy Manager Paul Scanlan said. “We have seen awesome improvements in the economics of wind over the past few years.”

    Microsoft, Scanlan added, is working on ways for smaller companies to participate in renewables that typically require big scale.

    Over $8 billion in private capital went into new wind projects in 2014, up from 2013’s $5.5 billion, bringing private sector capital invested in new wind to an estimated $60 billion in the last 5 years. Tax equity inflow was $5.8 billion in 2014, up from 2013’s $3.1 billion. As a result, project debt was up only slightly to $2.7 billion from 2013’s $2.4 billion.

    Perhaps the biggest news was NextEra Energy Partners’ completion of the wind industry’s first YieldCo deal. YieldCo shares only have value to investors if they offer long term reliable returns. This investor buy-in provides financing for further development and a lower cost of capital. Wall Street is watching.

    Utility leaders

    Although some utilities haven't yet taken advantage of low-cost wind options,many have recognized the opportunity, especially those nearest to the midcontinent wind corridor.

    The top 20 investor-owned utilities (IUOs) for wind have over 30 GW, accounting for 46% of U.S. wind, either owned or under contract. Of the 192 IOUs, 18 have at least 500 MW of wind and 64 own or have contracted for at least some wind. IOUs will procure at least 2,200 MW of 2014’s under-construction wind.

    The top 10 public power utilities and public utility districts have procured 6,600 MW, 10% of U.S. wind. San Antonio’s CPS Energy leads public utilities with more than 1,059 MW.

    At least 43 Rural Electric Cooperatives owned or contracted for wind in 2014 and, in total, have procured at least 4,600 MW, 7% of U.S. wind. Co-ops contracted for over 770 MW of new wind in 2014, 23% of the 3,300 MW of PPAs signed during the year. The top 10 are all generation & transmission (G&Ts) Co-ops. They supply wind to 313 member Co-ops in 17 states. North Dakota’s Basin Electric Power Cooperative leads all others with over 700 MW of wind.

    Xcel Energy leads all utilities with 5,736 MW of wind under direct ownership or contract on its system. It is the only utility with over 5,000 MW, a total matched only by nine countries. On a day in May 2013, Xcel’s wind supplied 61% of Colorado’s electricity. Berkshire Hathaway Energy is the second leading utility in the sector with 4,992 MW.

    Southern California Edison, American Electric Power, and Pacific Gas & Electric are the others in the top five.

    Of wind’s top 10 electric utilities, seven are IOUs, two are publicly owned, and the Tennessee Valley Authority is a federal power agency.

    The Warren Buffett subsidiary Berkshire Hathaway Energy, which includes MidAmerican Energy, PacifiCorp, and NV Energy, by far leads all utilities in direct ownership of wind with 3,862 MW. Puget Sound Energy, Portland General Electric, Minnesota Power and Alliant Energy are the others in the top five but together only own 2,480 MW of capacity.

    Even as institutional and corporate investments in wind energy accelerate, don't expect utilities to let them take over wind consumption. More and more, power companies are recognizing the benefits that low-cost wind can offer.

    After the Oklahoma Corporation Commission approved three PPAs for Public Service Co. of Oklahoma, CEO Stuart Solomon said the contracts represented “extraordinary pricing opportunities that will provide substantial savings for our customers.”


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