A Massive 2GW Wind Farm Is Coming to Oklahoma, and AEP Wants to Own It
Utility interest in the Wind Catcher project highlights just how far the wind industry has come in terms of cost and reliability.
Oklahoma, historically known as a hub for fossil fuel production, will soon become home to one of the largest wind farms in the nation.
Invenergy and GE North America announced yesterday they’re building a 2,000-megawatt wind project in the Oklahoma panhandle, which, upon completion, could hold the title of second-largest wind farm in the world.
The Wind Catcher facility will generate electricity from 800 of GE’s state-of-the-art 2.5-megawatt turbines that will be installed, owned and operated by Chicago-based Invenergy. The project is already under construction and expected to be fully on-line by 2020.
The Wyoming Chokecherry-Sierra Madre wind farm, which boasts a nameplate capacity of 3,000 megawatts and started construction at the end of last year, is also scheduled to come on-line in 2020 and could claim the crown of largest wind farm in the U.S. But the Wyoming facility may face delays due to its sheer size. The Wyoming project is also being built in two phases, which will make Wind Catcher the largest U.S. project to be built in one go.
These mega-sized projects are indicative of the boom taking place in the U.S. wind industry, which saw development jump up 40 percent in the second quarter compared to the same period last year, according to new figures released today by the American Wind Energy Association. The U.S. Wind Industry Second Quarter 2017 Market Report shows that nearly 80 percent of current wind turbine construction and advanced development activity is found in the Midwest, Texas and the Mountain West, as rich wind energy resources draw even more business to heartland states.
The new Oklahoma wind farm is part of the $4.5 billion Wind Catcher Energy Connection, which also includes an approximately 350-mile high voltage transmission line to carry the power to customers in Tulsa.
Once all of the turbines are up and operational, American Electric Power (AEP) subsidiaries Public Service Co. of Oklahoma (PSO) and Southwestern Electric Power Co. (SWEPCO) want to purchase the entire Wind Catcher project. The utilities are seeking regulatory approval in Louisiana, Arkansas, Texas and Oklahoma to buy the wind farm from Invenergy upon completion and build the high-voltage power line to serve PSO and SWEPCO’s more than 1.1 million customers.
This represents a new business model for utilities, as Bloomberg reported. Instead of purchasing wind and solar through power-purchase agreements (PPAs), utilities are now asking state regulators for approval to buy the projects outright and rate-base the costs.
“We keep wondering why utilities are always signing PPAs that pass the cost through to customers,” said Amy Grace, analyst at Bloomberg New Energy Finance. “If you put it in your rate base, you can get a guaranteed return on it. There’s a big upside to ownership.”
Rapidly falling costs combined with federal and state incentives have made solar and wind increasingly attractive investments for utilities, especially since low electricity demand growth is reducing the need for traditional investments. AEP CEO Nicholas Akins said on an earnings call today that the $4.5 billion Wind Catcher purchase, which relies on $2.7 billion in U.S. wind production tax credits, will not require a rate increase.
The utility expects to file its request with regulators on July 31, and is hoping for approvals by April 2018.
Utility engagement comes at a critical time
Wind Catcher will not benefit from Oklahoma’s state tax credit, which played a significant role in launching the state’s robust wind market, since legislators recently voted to close the program for new projects starting July 1. Meanwhile, federal tax credits for wind production are currently being phased out and will end after 2019.
“AEP’s engagement comes at a critical time, when renewable energy is seeking more commercial support as federal policy support wanes, and even state level support in light of the recent elimination of Oklahoma’s state zero-emission tax credits,” said Daniel Shreve, partner at MAKE Consulting, a Wood Mackenzie company.
“The financial strength and buying power that major utilities have in these mega-projects aid in reducing the levelized cost of electricity for these projects, especially when leveraging the expertise of experienced developers like Invenergy,” he said. Shreve added that the project serves as a big boost for Invenergy, which will continue to provide O&M services to Wind Catcher after it’s built.