Oklahoma Renewable Energy Council
May 11, 2011
Jon Baker
Project Development Manager
1
Overview
1. Description of Acciona and how
We Develop
2. Current State of Wind Energy: US
and Oklahoma
3. Reasons for Slowdown in Wind
Construction
4. Why Wind will keep Growing
5. Oklahoma Market Drivers
2
1. 689.5 MW Operating or Under Construction
McGrath Wind Farm
30 MW, Alberta
Chin Chute Wind
Farm
30
MW,Wind
Alberta
Velva
Farm
12 MW, North
Dakota Wind Farm
Tatanka
180 MW, N & S
Dakota
Ripley Wind Farm
76 MW, Ontario
EcoGrove Wind
Farm
100.5 MW,
Blue Canyon Wind
Illinois
Farm
74 MW, Oklahoma
Red Hills Wind
Farm
123 MW, Oklahoma
3
1. Development Steps
Land
Management
Wind
Assessment
Interconnection
Permitting
Power
Marketing
Construction
• For every project the Development steps are the same … but every state, county and
municipality will have different requirements
• Interconnection will differ by Regional Transmission Operator.
• Permitting can have state and federal requirements
- Interface with US Fish and wildlife
- Army Corp of Engineers
- Local Environmental groups
• Power markets are different by Regional transmission operators, state market.
• Construction requirements will differ by county and municipality. There may be restrictions
to noise, congestion, etc
4
1. Development Steps
Land
Management
Wind
Assessment
Interconnection
Permitting
Power
Marketing
Construction
• Land is typically optioned for 5-7 years; Long-Term agreement is typically 20-40
years.
• Land owners typically receive a royalty of the project revenue or fixed prices per MW
installed
• Royalty payments are typically paid every 6-12 months Landowner relations and
community relations is key to having a good 20 year relationship with the community.
• Oklahoma tends to have very savvy landowners due to oil/gas lease experience
• Oklahoma’s large ranches with low density housing are ideal for development
•
Little crop damage, few drain tiles or other irrigation issues
•
Fewer concerns with sound and shadow flicker setbacks
5
1. Development Steps
Land
Management
Wind
Assessment
Interconnection
Permitting
Power
Marketing
Construction
Acciona typically requires 2 years of wind data for any project
• Hub height data is strongly preferred and has become the norm for financing
• Lidar and Sodar are not typically financeable for projects but this may be changing slowly.
• Given the size of the projects it is not uncommon to have 3-4 met towers per project. The
more spreadout the project sthe more met towers required
• An 80m met tower will run $100 – 120 K. If power is not available solar panels and
batteries may be required
• In some areas, permitting to install met towers can take 6-12 months.
6
1. Development Steps
Land
Management
Wind
Assessment
30 Days
Request
~ 70 Days
Interconnection
30 Days
Feasibility
Study
~ 90 Days
Permitting
45 Days
System
Impact
Study
~ 180 Days
Power
Marketing
Construction
40 Days
Facility
Study
~ 180 Days
LGIA
60 Days
• The interconnection process can take 2 years. Depending on the
number of projects in the queue the process could take longer
• The timing of various steps in the process is extremely
unpredictable with few requirement for the ISOs to follow a
schedule
• The cost through the facility study can range from $300K to $1MM
7
1. Development Steps
Land
Management
Wind
Assessment
Interconnection
Permitting
Power
Marketing
Construction
• Permitting in Oklahoma tend to be fairly straightforward. Little NIMBY activity –
general attitude that each landowner controls their land alone
• Generally low population of endangered species or other environmental concerns
•
Whooping Crane Corridor, Eagle, some bat populations, and growing Lesser
Prairie Chicken concerns are top concerns but few show stoppers.
• Concern from wind developers over new USFWS Rules
8
1. Development Steps
Land
Management
Wind
Assessment
Interconnection
Permitting
Power
Marketing
Construction
• Current environment nationwide is nearly all deals require Power Purchase
Agreements (PPAs) to get equity financing
• SPP doesn’t have true real-time markets further limiting Merchant Hedge
Options
Energy
• QF
• Utilities
• Power Purchase Agreement
(PPA)
• Power marketers
• Merchant Hedge
• Merchant Sales
Renewable
Energy Credits
(RECs) /
Carbon
Counterparties
• REC sales
• Carbon offsets (future
potential)
• Financial institutions
• ISO/RTO
•
•
•
•
•
Utilities
Power marketers
Financial institutions
REC aggregators
Corporations
9
1. Development Steps
Land
Management
Wind
Assessment
Interconnection
Permitting
Power
Marketing
Construction
•Requirement for building a wind project will vary by state, county and
local codes
•Costs in Oklahoma tend to be on the lower end due to lower labor rates
and relatively easy transportation requirements
•For 100-150MW project construction should take less than 1 year
10
2. U.S. Wind Installations
In 2009 Wind Energy Generated
nearly 74 million MWh of Electricity
Source: American Wind Energy Association (AWEA)
11
2. Goal of 20% by 2020
Projected US Wind Growth
400
150 GW
Shortfa
ll
350
300
300GW
250
150GW
200
150
110GW
100
US Target:
20% Wind
60GW
50
18GW
0
2007
US wind @
global
install
growth rate
of 9%
30GW
2010
2015
2020
2030
stry needs to scale to 1 turbine every 30 minutes
12
2. Oklahoma Wind Farms
End of 2010: 1,482 MW
Ranked 8th in Nation
3% of electricity from Wind
13
2. Future OK Projects
Wind Farm 66: 150MW
Dempsey Ridge: 132MW
14
3. Natural Gas Prices
Composite Spot Natural Gas Price
($/MMBTU)
Gas Prices Greater Affect Power
Price
•Is the fuel on the “margin” 2/3 of the
time
•Discover of Marcellus Shale
•Financial Crisis kept prices low
SPP Generation at the Margin
15
3. Decreased Demand
US Energy Demand Fell
6.8% between 2007 and
2009
• Only third time since 1949
fell for two consecutive
years
• Only 1979-1983 saw
bigger energy decline
16
3. Decreased Power Prices
CAISO NP15
2009 Average Price: $35.79
2008 Average Price: $71.01
Natural Gas Sensitivity: 0.91
MDU.MDU
2009 Average Price: $23.21
2008 Average Price: $45.28
Natural Gas Sensitivity: 0.57
NYISO Zone E
2009 Average Price: $36.49
2008 Average Price: $67.56
Natural Gas Sensitivity: 0.78
Eco Grove
2009 Average Price: $25.25
2008 Average Price: $48.40
Natural Gas Sensitivity: 0.50
Red Hills
2009 Average Price: $26.90
2008 Average Price: $49.77
Natural Gas Sensitivity: 0.72
ERCOT South Zone
2009 Average Price: $32.63
2008 Average Price: $73.01
Natural Gas Sensitivity: 0.96
17
3. Decreased Power Prices, Continued
Power Prices at
Historic Lows
• SPP Prices
already low
compared with
rest of US
• High Degree of
competitive
pressure on wind
developers
18
3. Transmission Constraints Limit Development
• SPP has enough renewables to
meet RPS Standard
• Transmission Expansion would
allow for export of power
• National RPS could make RECs
into a commodity
• Typically windy spots are not
near population centers
• Transmission from wind projects
expensive
• Free-rider problems and cost
assignment issues can stall
needed transmission
19
4. Increasing RPS Standards in SPP
20
4. Transmission Expansion
Expanded Transmission:
• Reduces bottlenecks
• Expansion of Wind
• Value could exceed cost
21
4. New Environmental Standards
New Rules being put forth by EPA
• HAP MACT (Maximum Achievable Control Technology)
• Target HCl and heavy metals
• Could increase coal price by $3-8/MWh
• Dependent upon technology being used
• TVA announced it was shutting down 1,000 MW of Coal
• National RPS standard or carbon regime would affect prices even more
SPP Generating Capacity (% of MW)
22
4. Cost Competitiveness
Wind farms are increasingly cost effective, especially in SPP
• Result of more efficient turbines, strong wind resource, and decrease in price of
turbines and construction
• If prices remain low, utilities may add more than required by RPS standards
• Could be used as an effective hedge against price fluctuations
23
4. Wind a Large Part of SPP Queue
24
5. Key Drivers for OK Wind
•
High Net Capacity Factors – 40% Plus
•
State Zero-Emission Facility Production Tax Credit
– Facilities placed in service on or after January 1, 2007 and before January 1,
2016 the credit is $0.0050/kWh for the first ten years
– Fully transferable – allows monetization at about 90% of value for companies
without a tax appetite
– Payments temporarily suspended through moratorium in 2011
•
Property Tax Exemptions (5 years) – reimbursed to the Counties from State
•
Sales tax exemption as qualified manufacturer
•
RPS Goal of 15% - goals are sometimes effective if treated more like a
mandate or it ensures cost recovery for utilities
25
5. Risk to Oklahoma
Risks to Oklahoma
• State government currently considering proposal to
eliminate dozens of tax breaks
• Already 1 year moratorium on wind PTC
• Five year tax abatement also may be eliminated
• Would likely be replaced by PILOT payments
• HB1821: Oil and Gas Exploration Rights Act
• Would require consent of mineral rights owners
before developing wind
National Risks:
• Expiration of PTC and ITC
• No movement on Transmission
• No national RPS or carbon tax
26
5. Risks Continued
27
Final Thoughts
•
How will we address externalities?
– Will GHGs and other pollutants be factored into price of electricity?
– How will we value renewables as a price hedge?
•
Public Policy
– What is the likelihood of a national RPS?
– In absence of that, will SPP states increase requirements?
– How will Transmission be addressed?
•
Will Oklahoma continue policies that encourage wind development?
– Oklahoma PTC
– Ad Valorem tax abatement
– Mineral Right owner approval
•
What impact will disruptive technologies or breakthroughs have?
– Electric car adoption  increased off-peak demand
– Continued improvements in wind, solar and other costs
– Storage
28