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Texas $4.9 Billion Transmission Plan to Tap Wind

July 23, 2008

Wind advocates applauded the Public Utility Commission of Texas’s (PUCT’s) July 17 approval of a $4.9 billion plan to build more than 2,300 miles of new 345-kV transmission lines that will link vast and largely untapped wind energy resources in northern and western Texas with the state’s hungry electricity load centers.

In a 2-1 vote the PUCT opted to go with the Electric Reliability Council of Texas’s (ERCOT’s) “Scenario 2,” the middle option in terms of transmission build-out aggressiveness for the state to implement its “competitive renewable energy zones” (CREZs). Scenario 2 will add enough transmission capacity for over 11,550 MW of wind, in addition to the approximately 5,500-plus MW currently online; therefore, the new transmission allows for an 18,000-MW wind regime in the state.

CREZs are Texas’s designation, for transmission planning purposes, of suitable land possessing a renewable resource. The CREZ process is considered a model for other regions in the country to solve the “chicken-or-the-egg” dilemma in which developers will not build wind farms in wind-rich areas lacking transmission, while transmission does not get built to areas that lack generation.

The estimated cost for the new transmission is about $4.9 billion, but, according to ERCOT numbers, reductions in fuel needs would bring an annual wholesale power cost savings of $3.4 billion. According to the PUCT, Scenario 2 is expected to cost about $4 per month per residential customer.

“The wind industry applauds the PUC for a hearing process that was open to all views in determining the right level of investment in transmission capacity to carry power from West Texas wind farms to more populated regions of the state,” Paul Sadler, executive director of the Texas-based Wind Coalition, said in a statement. “Our state leadership has been visionary in its approach to growing this clean, renewable energy source. With the eyes of the nation watching Texas, we have developed a process that will serve as a model for the country as we look to diversify our energy fuel mix.”

Added Sadler: “Wind energy is clean, cost-competitive and completely renewable. Today’s historic decision will not only greatly increase wind production in Texas, it will reduce the total carbon output of the power industry and apply downward pressure to electric rates. This multi-billion dollar investment in transmission lines will generate thousands of new jobs, $18 billion in fuel savings over ten years, and billions of dollars in additional revenue for rural West Texas communities.”

The two commissioners voting in favor of the plan, Commissioner Paul Hudson and Chairman Barry Smitherman, said that the more modest “Scenario 1b,” which the PUCT staff in June said it was backing, would leave little room for further wind power growth.

"In my opinion, the central objective of the statutory change contemplated by SB 20 [i.e., the legislation concerning the renewable energy standard and CREZs] was to plan ahead of transmission capacity needs," Hudson said in a July 17 memo. "Given the record evidence in this proceeding, it is my opinion that S1b will fall considerably short in planning ahead for expected capacity and, falling short on that measure alone, is fatally flawed."

Governor Rick Perry (R), a long-time champion of wind power, welcomed the news. “I want Texas to be the epicenter of energy development — wind, solar, clean coal, obviously natural gas, nuclear and biofuels," he said. Perry underscored one important reason for policy to be long-term, stable, and forward-thinking: “You've got to send the message to those people that are going to invest and to the public that's going to pay for it,” he said.

AWEA Executive Director Randall Swisher, meanwhile, issued the following statement in response to the preliminary approval by the PUCT:

“With its decision to approve new, large investments in transmission lines for renewable energy, Texas is not only ensuring that consumers will reap the benefits of more wind power, it is also showing the way forward for the nation.

“We need to improve the way the nation plans for transmission lines, both to increase electric system reliability and to tap our vast wind resource. Texas is pioneering a way to that by establishing ‘Competitive Renewable Energy Zones’ that identify corridors where transmission can be built and ways in which the lines will be funded.

“The state’s leaders, from Governor Perry, to the legislature, to the Public Utility Commissioners, are to be commended for taking on a complex issue and crafting an innovative solution. Their achievement, a culmination of six years of hard work, can serve as a national model for how to cut the Gordian knot of transmission planning today,” Swisher said.

Legislation has been introduced by Senate Majority Leader Harry Reid (D-Nev.) and Representative Jay Inslee (D-Wash.) to create National Renewable Energy Zones, which would bring vast amounts of low-cost renewable resources to consumers and increase grid reliability. In addition, Senator John Thune (R-S.D.) added a transmission-related energy corridors amendment to a Senate energy bill last year.

“Investing in new transmission for renewable energy not only increases our electricity supply, it reduces carbon emissions from power generation and applies downward pressure on electricity costs,” said Swisher. “Based on a study by the Electric Reliability Council of Texas, a transmission investment of $1 billion per year is expected to lower overall payments by customers to power generators by more than $3 billion per year – an overall savings of about $2 billion per year. At the national level, benefits would also far outweigh the costs, making investment in transmission a clear win for our economy, environment, and energy security.

“The leadership that Texas has established in wind power is paying economic dividends in several areas. In addition to meeting its growing electricity demand with clean power, Texas is building a major new industry and creating thousands of jobs in wind farm construction and maintenance, manufacturing, transportation, and services.”

Souce: Wind Energy Weekly, July 18, 2008, Vol. 27, Issue 1298