From: Reuters
Published April 11, 2008 07:42 AM

Low prices may hamper Texas wind projects

HOUSTON (Reuters) - Problems integrating a rising amount of wind-generated electricity into the Texas wholesale power market may slow development of new wind farms, but won't deter their long-term prospects, industry experts said on Thursday.

Wind generated electric output in West Texas this Spring has been unable to flow to customers as major transmission lines undergo seasonal maintenance. The lack of sufficient transmission capacity to move wind power from sparsely populated West Texas to densely populated North Texas has led to low on-peak prices and some negative off-peak prices in trading in the ERCOT West zone and for "seller's choice" power.

"Small companies may get spooked" by the low prices, said Declan Flanagan, chief executive of E.ON Climate & Renewables North America, which hopes to double its U.S. wind generation to 1,150 megawatts by early next year.

As market participants and regulators develop large, new transmission lines to take advantage of the state's wind production areas, the market for wind farms will stabilize, Flanagan told the Gulf Coast Power Association conference in Houston.

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"Long-term, ERCOT is a growing market, driven by natural gas" that will continue to attract thousands of megawatts of new wind generation," he said.

The Electric Reliability Council of Texas, the state's independent grid operator, is working to incorporate improved wind forecasting methods with other market measures to deal with the rapid addition of wind turbines.

Texas leads the nation in wind capacity which has swelled to nearly 5,000 MW, outstripping transfer capacity on the existing power grid.

"Variable output should not be confused with a lack of reliability," Flanagan said.

Aubrey McClendon, chief executive officer of natural gas producer Chesapeake Energy, said he would like to see gas-fired units work in tandem with wind and solar power resources to increase the market credibility for the renewable resources which are hard to predict and intermittent in nature.

Developers of wind farms are closely watching the progress of the Texas Public Utility Commission's effort to identify new transmission projects to move wind power to the state's largest cities.

"We will build a lot of transmission related to wind," said PUC Chairman Barry Smitherman.

The commission is set to decide soon on needed high-voltage lines to move from 5,000 to 18,000 MW of additional wind generation from production zones to markets. Cost estimates for the new transmission range from $3 billion to $9 billion.

(Reporting by Eileen O'Grady; Editing by David Gregorio and Carol Bishopric)

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