Wind Development in Texas: History and Future Growth
Wind Development in Texas: History and Future Growth November 9, 2011!Legislative advertising paid for by: John W. Fainter, Jr. • President and CEO Association of Electric Companies of Texas, Inc. 1005 Congress, Suite 600 • Austin, TX 78701 • phone 512-474-6725 • fax 512-474-9670 • www.aect.net
AECT Principles! • AECT is an advocacy group composed of member companies committed to: - Ensuring a modern, reliable infrastructure for the supply & delivery of electricity. - Supporting efficient competitive markets that are fair to customers and market participants. - Supporting consistent and predictable oversight and regulation that will promote investment and ensure the stability of Texas’ electric industry. - Promoting an economically strong and environmentally healthy future for Texas, including conservation and efficient use of available resources. • AECT member companies remain dedicated to providing Texas customers with reliable service and are committed to the highest standards of integrity. The Association of Electric Companies of Texas, Inc. (AECT) is a trade organization of investor- owned electric companies in Texas. Organized in 1978, AECT provides a forum for member company representatives to exchange information about public policy, and to communicate with government officials and the public. For more information, visit www.aect.net. 2
U.S. Divided into Eight!Reliability Regions! • The eight reliability regions in the FERC continental U.S. are subject to the oversight and enforcement authority of NERC the North American Electric Reliability Corporation (NERC), which is subject to the Federal Energy Regulatory Commission’s (FERC) oversight. NERC is responsible for developing standards to ensure and improve reliability for delivery of electricity on the bulk power system.• Electric systems in Texas are located within four separate reliability regions: - Texas Reliability Entity (TRE), which oversees participants in the Electric Reliability Council of Texas (ERCOT); - SERC Reliability Corporation; - Southwest Power Pool (SPP); and - Western Electricity Coordinating Council (WECC). (ERCOT) 3
AECT Member Companies!Within ERCOT! Retail Electric Providers Transmission and Distribution Utilities Generation Companies 4
AECT Companies!Outside of ERCOT! SERC Reliability Corporation Southwest Power Pool (SPP) Western Electricity Coordinating Council (WECC) 5
ERCOT: Separate companies provideretail, transmission & distribution andgeneration services! Power Flow Financial Flow Regulated • In competitive markets, consumers have multiple retail electric providers (REPs) and service plans to choose from. • Wholesale and retail prices are set by competitive market forces, while the PUC sets transmission and distribution rates. 6
ERCOT: Separate companies provideretail, transmission & distribution andgeneration services! Power Flow Financial Flow Regulated • Because wholesale electric prices are set by the competitive market, the risks associated with the cost of construction, operations and maintenance of a generation plant are borne entirely by the generator and its investors, not by end-use customers. 7
Outside ERCOT: A single companyprovides retail, transmission & distributionand generation services in each area! Power Flow Financial Flow Regulated • In fully regulated markets, the PUC sets retail rates charged to end-use customers. • Each of these service areas is part of multi-state electric grids, with differing regulations. In many cases, vertically integrated utilities purchase wholesale power from certain unregulated entities. 8
Outside ERCOT: A single companyprovides retail, transmission & distributionand generation services in each area! Power Flow Financial Flow Regulated • New power plants in these regions can be built by both regulated entities and certain unregulated entities or qualifying facilities. • Regulated utility power plants, however, must be approved by the PUC after a rigorous review of need and siting. 9
Wind-Powered GenerationType of Generation+ Wind is plentiful in certain parts of Texas.- Wind blows intermittently, making it a less reliable power source.Environmental Issues+ No air emissions.- Can affect migratory birds.- Concerns about aesthetic impact.Cost of Construction and Fuels+ No fuel cost.- Limited ability to replace other generation to satisfy reserve margins.- Imposes other costs on the system, such as increased ancillary service requirements, backup capacity and the need for transmission lines to reach rural wind farms. 10!
Texas Generation Mix Compared to U.S. Average! Texas U.S. Average Renewable Petroleum Other (Mostly Petroleum) Energy (MWh) (Mostly Wind) Renewable 5.6% (Mostly Hydro) 0.9% 0.4% Natural Gas Nuclear 10.1% 10.5% 23.3% Nuclear 47.6% 20.2% 35.0% Natural Gas 44.5% Coal Coal Renewable Petroleum Other (Mostly Summer Capacity (MW) (Mostly Wind) 9.9% Petroleum) 7.7% Natural Gas Nuclear 4.8% 0.2% Renewable (Mostly Hydro) 12.4% 39.1% 19.7% Nuclear 9.9% Coal 64.9% 30.7% Natural Gas CoalNote: Numbers may not add up to 100% due to rounding.Source: EIA (2009 Data) 11
Renewable Development:!Legislative and Regulatory Steps• The Texas Legislature mandated steady increases in renewable power in TX76RSB 7 (1999) and TX791RSB 20 (2005). – Starting Line: 880 MW in 1999 – Old Goal 1: 2,880 MW by 2009 (Achieved by 2007) – New Goal 1: 5,880 MW by 2015 – New Target 1: 10,000 MW by 2025 – New Target 2: 500 MW non-wind renewable generation 12!
Renewable Development:!Legislative and Regulatory Steps• TX791SB 20 (2005) also required PUC to: – designate Competitive Renewable Energy Zones (CREZs) in areas in which renewable energy resources and suitable land areas are sufficient to develop generating capacity from renewable technologies; – develop a plan to construct necessary transmission capacity in a manner that is most beneficial and cost effective to customers; and – take into account transmission constraints, the need for generation and the level of financial commitment by generators when defining CREZs.• PUC adopted Substantive Rule 25.174 in December 2006, which creates framework for determining CREZs.• Texas currently has 10,135 MW of installed renewable generation capacity (March 2011). 13!
Map of Adopted!Competitive Renewable Energy Zones! 14!
Texas Has the Most Installed !Wind Energy Capacity 23% of the nation’s installed wind generation capacity is located in Texas.Source: American Wind Energy Association, Through Q3 2011 15!
Wind Filling Energy Needs in ERCOTERCOT Overview The ERCOT market covers roughly 85% of Texas overall power usage Record peak demand: 68,379 MW • Occurred on August 3, 2011 Total installed wind capacity of 9,500 MW • 33,921 MW of new wind capacity generation requests under review Wind generation record: 7,400 MW • Representing 15.2% of load • Occurred on October 7, 2011 at 3:06 pm Source: ERCOT, “ERCOT Successes and Challenges,” Presentation to the Texas Renewable Energy Industries Association, November 7, 2011 16! Nov. 7, 2011 2 Texas Renewable Energy Industries Association
Wind Filling Energy Needs in ERCOTSummer 2011 – A Record-breaking Year New Peak Demand Record: 68,379 megawatts, August 3, 2011 68 379 megawatts 3 - 4 percent increase over 2010 record The 2010 peak demand – 65,776 MW, Aug. 23, 2010 – was broken 3 consecutive days: - Aug. 1 66,867 MW - AAug. 2 67 929 MW 67,929 - Aug. 3 68,379 MW New Weekend Record: 65,159 MW, Sunday August 28 y g - 5 percent increase over 2010 previous record – 62,320 MW ERCOT Monthly Records since May 2011 September – 63 184 MW (Sept. 2); beats previous record of 59 524 MW by 6 1 percent 63,184 (Sept 59,524 6.1 July – 65,195 MW; beats previous record of 63,400 MW (July 13, 2009) by 7.8 percent June – 63,102 MW; beats previous record of 62,278 MW (June 25, 2009) by 3.8 percent May – 57,356 MW ; beats previous record of 56,344 MW (May 23, 2008) by 4.8 percent Source: ERCOT, “ERCOT Successes and Challenges,” Presentation to the Texas Renewable Energy Industries Association, November 7, 2011 17! Nov. 7, 2011 3 Texas Renewable Energy Industries Association
Federal Production Tax Credit!Set to Expire!• The federal production tax credit (PT) began with the Energy Policy Act in 1992. – PTC is a 10-year inflation-adjusted tax credit that started at 1.5¢/ kWh – Credit based on amount of electricity produced.• Wind PTC set to expire on December 31, 2012• Legislation has been filed to extend the tax credit. 18!
Federal Production Tax Credit!Strongly Inﬂuences Investment! Wind Investment by Year Wind PTC Allowed to Expire in 2000, 2002 and 2004 Source: American Wind Energy Association 19!
Web: AECT.netBlog: AECTnet.wordpress.comTwitter: twitter.com/AECTnetFacebook: Association of Electric Companies of Texas, Inc.Email: email@example.com 20!