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Wind energy industry recharged by renewal of federal tax credit

Last Christmas, about midafternoon, high winds that brought yet another cold front through Texas contributed to a new wind power record, at one point providing about 26 percent of the electricity on the state’s grid.

The power registered from the turbines just after 3 p.m. on Dec. 25 was 8,638 megawatts, or enough to power just over 4.3 million homes.

But midafternoon on a cold December day isn’t a time of high electricity use. Most Texas homes are warmed by natural gas, and the sun would have been high enough in the sky that televisions and other appliances — not lights — might have consumed the most electricity.

In August, by contrast, when electricity use is high due to amped-up air conditioning and when breezes for driving wind turbines are light, wind provided 5 percent of the power on the electric grid.

Still, the Christmas contribution showed how serious a player wind power had become. A week later, Congress stopped short of the fiscal cliff, agreeing to a tax package that included the renewal of the tax credit that rewards developers of wind turbines.

That means, in other words, more wind power.

The renewal of the production tax credit, as it is known, had been up in the air, leading to a nationwide crush of wind power development in the closing days of 2012 as companies rushed to take advantage of what might have been an expiring tax credit.

The deadline in Washington and the rush to meet it were emblematic of the stop-and-start development of wind power in Texas. A combination of state legislative mandate and federal tax credits has spurred the industry, which has otherwise had trouble competing with established and more reliable energy sources such as coal, natural gas and nuclear power.

The renewal of the federal production tax credit has smoothed the way for further development.

Any wind installation under construction in 2013 would be eligible for the tax credit, which is worth 2.2 cents per kilowatt-hour of energy produced during the first 10 years of operation. That subsidy knocks off between a quarter and a third of the cost of producing energy from wind.

The federal Energy Information Administration in 2012 predicted that electricity from a new wind farm in 2017 would cost $96 per megawatt-hour; from a new coal plant, $98 a megawatt-hour; natural gas, $66; and nuclear, $111.

“I expect that the first additional power source we’ll be looking at is some more wind,” Austin Energy General Manager Larry Weis said. “We expect to have some opportunities here in the near future with the tax credit being renewed.”

Austin Energy gets 851 megawatts of power from wind, bringing renewable energy to 27 percent of its overall supply. Its goal is to get 35 percent of its energy from renewable sources by 2020. Citing competitive concerns, the utility declined to say how much it currently pays for wind energy.

Companies are investing in wind, too.

Google announced in January that it had invested $200 million in a Panhandle wind farm called Spinning Spur.

“We believe that government incentives like the production tax credit play an important role in fostering private investment in clean energy, in order to transform our economy over the long-term and achieve energy independence,” said Kojo Ako-Asare, a member of the Google corporate finance team that worked on the wind project.

Spinning Spur was able to reach commercial operation in late December 2012, so the extension of the tax credit wasn’t a factor in the financing arrangement with Google, said Sandi Briner, director of communications with EDF Renewable Energy, which built the project.

“However, at least in the near-term, the production tax credit extension is critical for the future of new wind energy and will help revive the development and supply chains that eroded due to the uncertainty caused by the delay in the production tax credit renewal,” Briner said.

The Electric Reliability Council of Texas, or ERCOT, the operator of the state electric grid, oversees more than 10,000 megawatts of wind power capacity, most of it in West Texas.

One megawatt is enough electricity to power about 500 homes during periods of typical consumption.

High-voltage power lines — unpopular among those living nearby — stretch across vast swathes of Texas to connect far-flung wind farms with cities where the electricity is consumed and should increase that capacity. Those lines, which cost more than $5 billion, are designed to accommodate a total of 18,500 megawatts of wind generation.

A December report by ERCOT anticipates 1,472 megawatts of new wind power by the end of this year, 1,127 megawatts more by the end of 2014 and an additional 249 megawatts by the end of 2015.

During the height of wind power generation on Dec. 25, more than 6,600 megawatts hailed from West Texas wind farms, and more than 1,600 megawatts came from turbines along the Texas coast. About 3 a.m. on Jan. 29, the Dec. 25 record was broken when wind power generated 32 percent of power on the grid.

But the wind doesn’t blow consistently.

“Unlike traditional power plants, wind power output can vary dramatically over the course of a single day, and even more so over time,” Kent Saathoff, ERCOT’s vice president of grid operations and system planning, said in a statement at the time. “With new tools and experience, our operators have learned how to harness every megawatt of power they can when the wind is blowing at high levels like this.”

In January, Duke Energy and Kyle-based Xtreme Power announced a battery storage project near Odessa that’s meant to absorb power from an adjacent wind farm during times of low demand and release it when it is needed on the grid. If successful, the battery project could point the way to a more consistent supply of energy from wind turbines.

In 2012, wind provided 9 percent of the energy used in Texas. Forty-five percent came from natural gas, 34 percent from coal and 12 percent from nuclear. With the new turbines that are forecast, the percentage of wind power could creep up in 2013, as it has every year over the past decade.

“We’re seeing companies choosing projects to go ahead and seeing increased tempo,” said Jeff Clark, executive director for the Wind Coalition, which lobbies on behalf of developers. “People are definitely ramping up, continuing expanding.”

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Copyright 2013 – Austin American-Statesman