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Is Texas Souring On Wind Power?

By: Loren Steffy |

Texas has more wind power generation than any other state, so it’s only fitting that Texas regulators are starting to ask some tough questions about wind power subsidies. The head of the state’s Public Utility Commission, Donna Nelson, is calling for a study to consider whether wind generators should start paying their share of transmission costs.

Texas already invested $7 billion in high-capacity power lines that the state built to connect West Texas wind farms with the more populous cities in the east — such as Dallas and Houston. But wind power, as an intermittent resource, can create additional transmission costs, and those costs are borne by all the electricity customers in the deregulated market, which is about 85 percent of the state. Part of the study will determine the amount of the extra transmission costs and what, if any, remedy is needed, a PUC spokesman said.

Wind power developers warn that making wind companies pay the same transmission rates as other generators will destroy Texas’ lead in wind power and undermine the economics of wind generation. Nelson, however, claims that giving wind companies a pass is no longer necessary because the industry has been around long enough to figure out its economics.

In fact, Texas may actually have a greater supply of wind energy than the new transmission lines can handle, so it may be the perfect time to consider a little pruning. Already, other alternative energy supplies, such as solar power generators, have had difficulty accessing the publicly financed lines.

For Texas, the stakes are high. The issue isn’t just power, but also water. With much of the state in a years-long drought, Texas is looking for ways to conserve water, and wind power could go a long way to reducing the huge amounts of water currently used in generating electricity — but only if wind can compete.

What Nelson is considering is whether wind companies should be treated the same as other generators when it comes to accessing the grid. Texas has a fragmented and deeply troubled “deregulated” electric system. Generators compete to sell power to retailers, who in turn compete for customers. But the transmission portion of the grid remains regulated. That means that the PUC must approve new transmission lines or upgrades. The transmission companies then finance the construction, and they are allowed to recoup those costs through transmission fees that are ultimately passed on to the consumer. Wind power, of course, gets distributed across the grid the same as any other generation.

As a result, consumers in Texas are getting something of a double-whammy from wind. They pay the cost of maintaining the system in their bills, while paying part of their taxes to subsidize the construction of the additional lines to the wind farms.

The three-member PUC has been at odds over ways to improve the many failing of Texas’ deregulated electricity experiment. Nelson, for her part, has no been a big fan of renewables in general. It’s not clear how her fellow commissioners will feel about the wind subsidy study or what actions, if any, they might take.

But Nelson is right about one thing: it’s time to start asking some tough questions about wind power. Other states have been less generous in supporting it, and Congress last year refused to extend wind’s production tax credit, which caused wind farm construction to plummet.

Consider what Warren Buffett told his shareholders at Berkshire Hathaway ’s annual meeting in Omaha this year:

 On wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.

But what about wind generation that’s already built? Texans have already invested billions, and they deserve to know if wind power can stand on the same competitive footing as other forms of power generation. If can’t, the state will have to ask itself some other tough questions: what will it take to make it viable, and for how long will we be willing to pay the price?