Uncertainty over a key federal tax credit in 2012 led to a steep drop in the number of wind farms installed this year, but the pipeline is starting to fill back up with Oklahoma at the forefront.
The latest market report from the American Wind Energy Association shows utilities signed deals this year for 1,049 megawatts from planned Oklahoma wind farms. That's about 14 percent of the 7,500 megawatts in wind power purchase agreements signed nationally so far this year.
“Oklahoma is really leading the country for new wind builds over the next few years,” said Emily Williams, senior policy analyst with the association. “Oklahoma and Texas are really going to be the heartland of a lot of wind activity.”
Wind farm construction completed this year has amounted to just 71 megawatts, Williams said. That compares to more than 13,000 megawatts that came online in 2012. She said this year's decline can be attributed to uncertainty over renewal of the federal production tax credit, which gives producers a 2.3 cent credit for every kilowatt hour of electricity generated from wind.
“Because of that, developers didn't place turbine orders and they didn't start construction on projects, and we really saw a halt of the industry,” Williams said.
Congress renewed the production tax credit for electricity from wind production shortly after it expired at the end of 2012. The renewal is for one year and expires again Dec. 31. It includes a new provision that allows projects to qualify if they start construction in 2013 but aren't yet generating electricity.
Most of the planned wind capacity for Oklahoma comes from Tulsa-based utility Public Service Co. of Oklahoma, which last month announced agreements for 600 megawatts from three wind farms to be built in the state. One megawatt can power about 200 homes during peak demand times.
PSO, a unit of American Electric Power Co. Inc., originally asked wind providers to bid for 200 megawatts but signed deals for three times that amount. PSO will begin taking electricity from planned wind farms in Seiling, Balko and Goodwell in 2016. The utility filed an application with the Oklahoma Corporation Commission last week to begin the process of cost recovery for the wind power purchase agreements.
Utilities typically don't disclose the amount they pay for power purchase agreements, but PSO spokesman Stan Whiteford said recent prices were competitive with coal, usually the cheapest type of fuel for electricity generation.
“Our people said these were the lowest prices we've seen for wind,” Whiteford said.
Among other Oklahoma wind purchase agreements are a 100-megawatt contract at EDP Renewables' Arbuckle Mountain project and 200 megawatts from NextEra Energy Resources at Mammoth Plains in Dewey and Blaine counties.
Williams, with the American Wind Energy Association, said wind prices have been the lowest in the nation in the Southwest Power Pool, the regional transmission organization that operates the electric grid in Oklahoma and eight other states.
The association is working to get the federal production tax credit renewed, Williams said. Discussions over broader tax reform and work in the Senate on the budget may be good legislative places for a renewal of the credit.
“We are doing everything we can to get a PTC (production tax credit) extension for as long as possible,” Williams said. “2013 shows the industry needs stability and without it, the investments just aren't made. We need this policy in place to have a vibrant industry, to support our manufacturers and to bring a clean, diversified fuel source to consumers.”
The tax credit already in place will cost about $7.7 billion from 2013 to 2017, according to February estimates from the Joint Committee on Taxation. The American Energy Alliance and other free-market groups oppose the extension of the wind production tax credit, calling it an inefficient handout that clutters the federal tax code.