From: Reuters
Published April 3, 2008 07:28 AM

Texas sees higher costs to reap wind power

HOUSTON (Reuters) - The price tag to build new power lines to bring plentiful wind power to Texas' biggest cities could range from $3 billion to $9 billion, the state's electric grid operator said in a report filed with regulators on Wednesday.

Following legislation passed in 2005, the Texas Public Utility Commission began working to speed up construction of high-voltage transmission lines to tap into abundant supplies of renewable power.

Texas leads the nation by far in the number of installed wind turbines, according to the American Wind Energy Association. About 5,000 megawatts are in operation now and the state grid agency expects at least 6,900 MW of wind power to be online in the next couple of years.

But wind farms are located across a wide swath of sparsely populated west Texas, far from Dallas, Houston and San Antonio, where electric demand is concentrated.

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After identifying the areas with the best potential for new wind generation, the commission ordered the Electric Reliability Council of Texas (ERCOT) to design routes to move an additional 5,100 MW to as much as 17,500 MW to the state's big cities.

"The wind generators and the transmission owners have been waiting for this report," said Calvin Crowder, president of Electric Transmission Texas LLC, a joint venture formed by American Electric Power Co and MidAmerican Energy Holdings, a unit of Warren Buffett's Berkshire Inc, to invest in new transmission projects in Texas.

The boom in Texas wind generation has already created congestion on the existing grid, leading to some service disruption and recent wholesale price volatility.

Market sources said the current issues could be exacerbated by additional wind development that occurs before new power lines can be built in about four years.

The PUC's effort "will bring a little more order to the Wild West," said Mark Bruce, director of regulatory affairs for FPL Energy, a unit of FPL Group, the largest wind generator in Texas and the U.S.

New cost estimates are "significantly" higher than the 2006 projection of $3 billion, due to increased costs for steel and other equipment, ERCOT said.

In Texas, transmission costs are paid by customers in areas with the most electric demand, a fact that is bound to create concern that rising construction costs will lessen projected power-plant fuel savings from wind.

The grid agency report did not recommend any of the four wind scenarios, leaving that decision to state regulators.

ERCOT said two scenarios to gather and transfer a total of 12,000 MW on 345-kilovolt lines could cost from $2.95 billion to $3.78 billion, depending on the number of lines built.

A more ambitious plan to bring as much as 18,400 MW into populated areas could cost $4.93 billion, the report said.

The most expensive plan, to bring more than 24,000 MW of wind generation to the eastern half of the state, could cost from $5.75 billion to $6.38 billion, the report said.

Other transmission companies interested in building new lines include ETT and units of Babcock and Brown, ITC Holdings Corp., FPL Group, AES, BP Wind, Shell WindEnergy, CenterPoint Energy and privately held Sharyland Utilities and Energy Future Holdings Corp.

(Reporting by Eileen O'Grady; Editing by Christian Wiessner)

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