|The 120 MW Centennial wind farm supplies renewable energy credits to OG&E’s customers. Courtesy: OG&E|
By Sharryn Dotson, online editor
Oklahoma, a state once known for oil and gas production, has quickly established itself as a major wind resource in the power generation industry. With the help of transmission lines, the state has been able to prepare a hedge in case the Production Tax Credit (PTC) expires on Dec. 31, but many officials say they believe Oklahoma will continue to develop wind power with or without the PTC.
State officials back wind and PTC
Gov. Mary Fallin sent a letter in February to members of a Congressional conference committee saying that the PTC needs to be extended.
“Our states have experienced the economic benefits of wind energy first hand, and I cannot overstate the importance of extending this tax provision early in the year so the wind industry has the certainty to grow,” Fallin said in the letter.
The state was not always a big source of wind power projects, but a leader in oil and gas, and that may be what helped to add on wind.
“Our history and experience with the oil and gas industry helped us to understand the energy industry, so adding wind to the generation mix made logical sense,” said Kylah McNabb, wind development specialist out of the state Energy Office at the Oklahoma Department of Commerce.
McNabb said the state has 7,000 MW of wind energy in the queue and more that are reaching the development phase. The addition of transmission lines has also helped to expand the industry, including the proposed 800 mile-long, 500 kV Clean Line Energy Plains and Eastern transmission line, which would be built from wind farms in Guymon in the Oklahoma panhandle to the Tennessee Valley Authority in Memphis. The line is expected to open up 3,500 MW of wind capacity for export. Construction is expected to begin in 2014, with service scheduled to begin in 2017. The Federal Energy Regulatory Commission (FERC) approved construction of the line Sept. 13, and granted Clean Line Energy Partners LP to subscribe up to 75 percent of its line capacity with anchor tenants, according to an article in the Tulsa World.
“The state has been very supportive of the Clean Line development,” said state Energy Secretary Michael Ming.”The line is privately funded, and the Oklahoma Corporation Commission is behind it by granting utility status for building the line to Clean Line.” Utility status puts Clean Line one step closer to raising the funding required from private and public investors for actual construction of the project.
Some officials from the Department of Commerce attended the European Wind Energy Association show in Copenhagen, Denmark in April to let the industry know that Oklahoma wants to help the industry grow.
“We have been attending the show for the past several years,” McNabb said.”Wind is growing in Oklahoma, and we wanted to reach out to industry partners and let them know we are here and we are business friendly.”
One European company, Enel Green Power SpA, recently was awarded $220 million in investments from a group – including JPMorgan Chase, Wells Fargo and GE Capital – for the 235 MW Chisholm View wind project in Oklahoma. The wind farm, when it is completed, will sell the output to Alabama Power, a unit of Southern Co., under a 20-year power purchase agreement.
Businesses that have opened manufacturing facilities include Siemens, which opened a facility in Woodward in February 2012.
The 64,000 square-foot wind service distribution center will store and distribute main components and spare parts, including wind turbine blades, drive assemblies and generators. Siemens said it plans to create up to 40 jobs at the facility over the next five years.
“We worked out the deal with Siemens through our work with the European show and AWEA,” said McNabb with the Commerce Department.”It was about making the pieces fit. Oklahoma is the place to be.”
Oklahoma Energy Secretary Ming said the location is “at the epicenter of world class wind resources in the mid-continent.”
Oklahoma is where Siemens is testing its newest wind turbine, the SWT–3.0-101 direct-drive turbines, which have a rated capacity of 3 MW and features a permanent magnet generator and a 101 m diameter rotor. According to Siemens, it will offer 25 percent more power than the 2.3 MW turbine, but with a lower weight and only half of the parts.
Three direct-drive turbines are currently being used at the 227.5 MW Crossroads wind farm, which was completed in January 2012 in northwestern Oklahoma. It connects to Oklahoma Gas & Electric’s (OG&E) Windspeed transmission line, a 120 mile-long, 345 kV line that stretches from Oklahoma City west to Woodward.
The American Wind Energy Association said in its annual report for 2011 that Oklahoma ranked eighth for wind projects under construction and 10th for states with wind as a percentage of their portfolio. But the state did not reach the top 10 for overall wind jobs. Commerce’s McNabb said the reason for the disconnect is the difficulty in reporting wind jobs.
“We had more workers on the ground when projects were being developed, and a bulk of the new jobs are now in manufacturing,” McNabb said.”The resource is here, and that’s what we are focusing on right now. That’s what drew in Siemens.”
State’s Energy Plan
Ming said the state plans to have 3,000 MW of wind energy online by the end of 2012, which will beat the state’s mandate of 15 percent renewable energy by three years with more projects to come online in the future.
“The Clearline transmission project is our next big thing we are working on,” Ming said.”Utilities are embracing wind. PSO just bought a chunk of the Canadian Hills project. The Grand River Dam Authority also bought power from the Canadian Hills wind project. The first project to export wind is currently in progress and it’s in north central Oklahoma, not out west like the rest are.”
The Energy Plan aims for the state to have 15 percent of its electricity generation from renewables by 2015. However, it is not a mandate, and the state actually has surpassed that goal in 2012.
“It’s a standard and not a mandate, so it allows market involvement and keeps us as a low-cost electricity state,” said state Energy Secretary Ming.”We are able to grow without adverse rates.
“It also makes PPAs price mitigaters.,” Ming said.”Last summer shows how wind does not need cooling water, especially since we were in a severe drought.”
McNabb said, “It shows that wind can work in fair market conditions.”
Making the switch
Utilities in the state have not had issues in adding wind power to their generation sources. Building new transmission capacity helped with the transition.
“We had state incentives and transmission and enough injection points,” Ming said.”That contrasts with other states that built wind but no transmission. Also, wind and gas make good partners in terms of integration.”
Another point that helped ease the addition of wind is the backing of landowners.
“The landowners are pro-development as well,” Ming said.”They like oil and gas, so they want oil and gas. They like wind, so they want wind.”
McNabb said many landowners do not mind having wind turbines built on their properties because it helps their bottom line.
“A lot of these landowners look at wind, gas and agriculture as retirement plans, because they know at least one of them will be making them money at some point,” McNabb said.
OG&E embraces wind
|The 227.5 MW Cross Roads wind farm was completed in 2012 and uses three, 3 MW Siemens direct-drive turbines. Courtesy: OG&E|
OG&E set a goal in 2006 to add wind to diversify its generation mix. The Oklahoma City-base utility also owns the 120 MW Centennial, the 101 MW OU Spirit and the 227.5 MW Cross Roads wind farms. The company has PPAs with the 50 MW Sooner, the 152 MW Keenan and the 130 MW Taiga wind farms. OG&E is working with a developer on the construction of the 60 MW Blackwell wind project in northwestern Oklahoma, which the company also has a PPA with.
OG&E Treasurer Max Myers said the projects were part of the company’s goal of diversifying the generation mix in 2006 to include natural gas, coal and wind for customer net benefit.
One of their customers is Oklahoma State University in Stillwater, which signed a PPA for the output from the Blackwell wind farm, currently under construction by NextEra Energy. The Siemens wind turbines will help to replace the university’s 62-year-old cogeneration facility on campus. A new boiler and chiller were constructed as well.
“They were interested in wind and renewables,” Myers said.”The PPA creates a hedge for fuel costs, and it led to negotiations with the developer and OSU to provide the output.”
If the wind isn’t blowing, OG&E provides the power. Conversely, if there is excess power that the campus does not use, it goes to OG&E customers.
Myers said the company does not currently have plans for additional wind projects because of the uncertainty of how they will fit in with environmental regulations and the low price of natural gas.
“We have a couple of sites in the infancy of development, but ultimately it will depend upon environmental regulations and the economic justification of wind in light of natural gas prices as to whether or not they are developed.”
However, transmission projects have helped OG&E bring wind power to their customers.
“Before 2007, there was very little transmission capacity in northwest Oklahoma,” Myers said.”Now, there’s a new 345kV line called Windspeed and the Southwest Power Pool has issued notices to construct to OG&E for additional lines stretching toward the panhandle and up to Kansas from Woodward.”
Myers also said the advancement of wind technology is helping to advance the industry.
“Capacity factors are going up due to technology advancements and Oklahoma has very competitive wind resources,” Myers said.””This combination should bode well for wind development in Oklahoma if the federal PTC’s are extended or if natural gas prices rebound.”
Since 2009, OG&E has offered a program that allows customers to buy renewable energy credits that are supplied by the Sooner and Centennial wind farms. The customer can buy as small as a 25 percent piece of their usage for $0.009/kWh and up to 100 percent at $0.007/kWh.
“Although our program is not a direct fuel hedge, it provides customers the opportunity to purchase up to 100 percent of their electric usage via a carbon-neutral generating source, which many people appreciate,” Myers said.
Public Service Co. of Oklahoma (PSO), a unit of American Electric Power, offers WindChoice, a program similar to OG&E’s WindPower, where customers can buy 100 kWh blocks for $1.72 per block that would be added to the bill. The difference is that it is a hedge against the cost of natural gas, so if natural gas prices go up, the price customers are paying for the wind power will not.
“Our focus now, along with continued goals to increase residential use, is that we’re beginning to target larger commercial users,” said Stan Whiteford, corporate communications director with PSO.
A portion of the 99.2 MW Minco Wind Farm, located north of Chickasha, is what is used for the WindChoice program. PSO has long-term PPAs with seven wind power projects in Oklahoma and Texas. Since 2005, PSO has added wind power to its grid and sold the RECs. The portion of the Minco project used for customers is not sold as RECs.
“It became price competitive,” Whiteford said.”We could make it part of our fuel mix, and since that time, there has been the development of the state’s renewable energy goal.”
Whiteford said that even though wind is becoming a big part of their generation mix, it is not the main generation source.
“We have been quite adamant about our position that wind is not a baseload generation for us,” Whiteford said.”We have to have that generation that we can count on, and right now, that’s natural gas and coal.”
However, because of an agreement with the U.S. Environmental Protection Agency (EPA), the state of Oklahoma and the Sierra Club, PSO will shut down two coal-fired units at the Northeastern Station in Oologah, Okla. by 2026. Whiteford said the capacity lost from those units will be replaced by PPAs with gas-fired power plants or new builds.
“We are definitely not getting away from those traditional sources of generation, and we are supplementing as appropriate,” Whiteford said.
Whiteford said PSO is always looking for contracts to sign for more renewable energy, though.
“We continue to keep our options on the table as far as additional PPAs, but the main question is ‘What’s the price?'” Whiteford said.”Can we do something that is advantageous, provide them with a good deal and be a driver for continued development?”