Renewables, Wind

Kansas Wind Farm Contract Canceled

Issue 8 and Volume 110.

The American Wind Energy Association (AWEA) reports that at the end of 2005, more than 9,000 MW of wind energy generating capacity was installed in the United States. The organization also reports that installed capacity is expected to grow to more than 2,500 MW by the end of 2006, making wind energy one of the fastest growing generating technologies in the country.

That doesn’t mean, however, that every new wind project announced is successful.

In early July, Sunflower Electric Power Corp., Hays, Kan., announced it was terminating a power purchase contract with Renewable Energy Systems (RES), Kings Langley, England. The original agreement, announced in February 2003, called for Sunflower to buy 30 MW from the facility, which was to be built near Marienthal, Kan.

According to a press release issued by Sunflower, it agreed to several amendments to the original contract, at the request of RES, in an effort to facilitate construction. However, RES was unable to acquire the necessary financing to allow construction to begin by a June 30 deadline.

Earl Watkins, Sunflower’s president and CEO, commenting on the announcement said, “We worked long and hard to make this wind farm a reality, but in the end, the economics of this project were simply not attractive to the investment community.”

A representative from RES could not be reached for comment. But a wind industry financial expert who requested anonymity, said it is not unusual for projects based on earlier power purchase agreements to be scrapped. “Usually, when these type projects are abandoned, press releases are not issued,” he said. The source was not directly involved in the Sunflower project.

The source said that wind turbine material and construction costs have continued to climb in recent years and that the cost of a project like Sunflower may well have grown higher than it was in 2003 when the original power purchase agreement was signed.

“Things change and project developers want to keep passing the costs along to the utilities,” the source said. “At some point, the utilities say ‘Wait a minute, these are not my problems, they are yours. I’m not paying anymore.” Without a power purchase agreement, a project becomes uneconomical and investors decline to participate.

With considerable capacity coming from baseload coal-fired plants, the Midwest has some of the lowest power purchase rates in the country, making it a competitive market for any new independent power project-no matter the generating technology.

Sunflower said it intends to continue to search for feasible renewable energy solutions in western Kansas, according to Bob Johnson, Sunflower’s executive manager, engineering and energy services. “We are still committed to making renewable energy a part of Sunflower’s generation portfolio,” he says. “What we are not prepared to do is put Sunflower’s member systems in a position where our reliability is negatively affected, or make decisions we know will unnecessarily increase the wholesale price of electricity.” – Teresa Hansen, Associate Editor