Austin Energy is looking to cultivate its own wind farm in West Texas as a way to ensure permanent access to wind power.
Owning the wind turbines – rather than contracting for the power – would guarantee a supply of wind power into the future and give the utility more control over cost and other market factors, said Michael McCluskey, deputy general manager of Austin Energy.
All of Austin Energy’s wind power comes from long-term contracts with independent producers. The first contract is set to expire in 2011.
The first step toward a wind farm would be to reserve the leasing rights to about 20,000 acres in Pecos County where wind turbines can be erected in the future.
In coming weeks, the City Council is expected to approve $120,000 to option the West Texas land and begin studying the wind generation option.
The change in approach is being driven, in part, by the rising cost of the power purchase agreements that Austin Energy has used to secure a wind supply since its GreenChoice program began in 2001.
The price of wind under Austin’s 2001 contract was 1.7 cents per kilowatt-hour. Under the latest contract, which took effect at the beginning of the year, the cost is 5.5 cents per kilowatt-hour.
The average home uses about 1,000 kilowatt-hours per month.
When the first contract expires in 2011, Austin Energy will have to negotiate another agreement at market rate to keep the same amount of wind blowing into the system.
Skyrocketing construction costs and high demand for wind turbines have played a major role in the price increase of wind power.
But the larger energy market is also a factor, McCluskey said. As natural gas prices have risen, customers have been willing to pay more for wind, so the market rate has gone up accordingly.
By owning the wind turbines, McCluskey said Austin Energy can provide power to its customers that is based solely on the cost of production, and without the markup.
Ryan Wiser, a scientist with the Lawrence Berkeley National Laboratory in California, said that “the days of the two-cent wind contract are currently over,” so it makes sense for Austin Energy to look for alternative ways to get its wind. Whether the ownership arrangement will lead to cheaper wind power is unclear, Wiser said.
As a public utility, Austin Energy has access to low-cost financing for the construction of the wind farm.
But Austin Energy cannot take advantage of some key federal incentives that private wind developers have used to lower the cost of producing wind.
“The real question is whether Austin Energy’s lower financing costs … are enough to cover the disincentive,” Wiser said.
The ideal arrangement, Wiser said, would be for Austin Energy to partner with an experienced wind developer to take advantage of both the incentives and the low-cost financing.
Michael Sloan, a renewable energy consultant with Austin-based Virtus Energy and a wind power advocate, is concerned that Austin Energy has no experience in wind generation. That concern can be alleviated by a careful selection of a development partner, he said.
“It’s great that Austin Energy is continuing to support wind power, including building their own,” Sloan said. “I am hopeful they will continue down this path.”
Specifics such as size and total project cost are not available. It’s too early to say what proportion of the utility’s energy supply could come from a wind farm.
Most of the project’s cost will be in upfront construction expenses; ongoing costs will be relatively small. The wind to turn the turbines, of course, will be free.
How Austin will fuel its future has been an issue of much debate.
This week, the Austin City Council turned down an offer to own a minority stake in the expansion of the South Texas Project nuclear plant because council members said they had too little time to evaluate the proposal.
Austin Energy will soon begin an extensive public process to get community input into future power options.
By Kate Alexander
16 February 2008
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