Schnurman: Wind power is a blowing force in Texas
By Mitchell Schnurman
The wind is blowing Texas' way.
While shale gas gets the most credit for the state's cheap, abundant energy, wind power has become a force, too. One evening this month, wind generated nearly 28 percent of electricity in the state grid, enough to power more than 4 million homes.
That’s a record high, the result of strong winds and steady growth in wind farms and transmission lines. In the last five years, wind generation has more than tripled in Texas, while natural gas grew 5 percent, and coal and nuclear declined.
Fossil fuels still dominate Texas power. In 2012, natural gas and coal plants provided more than three-quarters of the generation in ERCOT, the grid that serves North Texas and most of the state. But wind power’s share has grown sharply in the last decade, from less than 1 percent of the annual load to 9.2 percent last year.
Thanks to wind power, Texas has already shot past its renewable energy goal for 2025. With more transmission lines and an extension of federal tax credits, wind capacity in ERCOT is projected to grow by double-digits this year, and nearly as much next year.
This not only helps the environment, it’s driving down electricity prices.
"It is having a significant impact on power prices already and has been for the last three or four years," John Young, CEO of Energy Future Holdings told analysts last week.
Dallas-based EFH is the state’s largest power company, and it’s struggling with crushing debt and low natural gas prices. Add wind power to its problems. Young said he expects more pressure on wholesale power prices, because the so-called CREZ transmission lines are scheduled to be finished this year. At a cost of $5 billion, the lines will handle more than twice as much additional power from windy West Texas.
Young also mentioned subsidies and the risk of distorting the market. Another executive described periods of negative pricing last year, when wind power was essentially free, save for the tax credit.
It’s worth noting that EFH is heavily invested in coal, natural gas and nuclear -- and it shut two coal units for the winter at its Monticello facility. It cited low power prices and other market conditions.
While wind boosts the commodity market, it won't solve a pressing issue for the state: How to keep the lights on during the peak demands of a summer heat wave?
Wind gusts in West Texas decline during the hottest months, when Texas needs more generation. Last August, wind generation was 43 percent lower than in December, according to ERCOT.
That’s when power companies fire up so-called peaking plants, fueled by natural gas. Regulators in Austin are trying to spur more such plants by raising the cap on peak prices, and they’re also considering other approaches to boost reserves.
Wind farms along the Texas coast hold some promise, because they appear to run strong during summer, and they’re growing, too.
The cost of installing wind power remains at least 25 percent higher than natural gas, not including the tax credit. In December, the fiscal cliff debate put the tax break in jeopardy. Companies rushed to get wind farms completed before the incentive ended, and turbine-makers were cutting workers in anticipation of a slowdown. But the credit was extended through 2013, despite critics who wanted the industry to stand on its own.
Wind producers get a tax credit of 2.2 cents per kilowatt hour for 10 years, making the high cost of installation more competitive with gas plants. The tax break totals about $1.6 billion a year, helping spur $25 billion in investments last year, according to the American Wind Energy Association.
Texas added more wind power than any state in 2012 and has more than twice the installed capacity of the next-closest state, California. This may surprise some, because of Texas' roots in oil and gas. But Texas didn’t become a clean energy leader by chance.
The spark stemmed from electricity deregulation and a nod to environmentalists. In 1999, lawmakers mandated 400 additional megawatts of renewable energy by 2003. (That’s less than a quarter of the wind power added last year alone.)
As with oil and gas, Texas has a lot of wind. Throw in a deregulated market and tax credits, and rapid growth was soon under way. In 2005, lawmakers doubled the goal for renewable energy and almost doubled it again for 2025. We’re well past the most aggressive mark already.
And wind seems destined to grow more important. Wind farms don't use water like coal and natural gas plants, a big advantage. And since January, two battery storage projects were started in West Texas, aimed at releasing wind power when it's needed most.
If there's an abundant supply of clean energy, people will find a way to use it.