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Rick Perry’s $7 Billion Problem (Texas wind transmission project 38% over budget–$270+ for every citizen in the state)

“He has been a stalwart in defense of wind energy in this state — no question about it.”

- Paul Sadler, executive director of the Wind Coalition, quoted in Kate Galbraith, “As Governor, Perry Backed Wind, Gas and Coal,” New York Times, August 21, 2011, p. 21A.

Texas curtailed electricity customers this Wednesday in the face of abnormally high temperatures and insufficient capacity. And as is to be expected this time of year, windpower is producing at its yearly lows–on Wednesday, about 9 percent of capacity (880 MW out of nearly 10,000 MW capacity), down from 18 percent earlier in the week.

As Texas revs up mothballed plants, one can only imagine how much state-of-the-art, high-utilization capacity the state could have ‘bought’ instead of wind power, which produces most of its juice when it is not needed.

CREZ Transmission Project

New transmission to rescue wind power that cannot reach the cities? That introduces another problem–wildly uneconomic costs where good money has been thrown after bad.

The Competitive Renewable Energy Zones (CREZ) line, authorized in 2005, began at just under $5 billion and is now estimated to cost $6.8 billion upon completion in 2013. This bill comes to $270 for every Texas citizen—man, woman, and child—and counting.

Governor Rick Perry has a lot to do with the project. According to Texas’s State Energy Conservation Office:

In October 2006, Texas Governor Rick Perry announced commitments of $10 billion from private companies to increase wind generating capacity in the state by 7,000 megawatts, contingent on the Texas Public Utility Commission (PUC) approving construction of additional transmission capacity to windy areas of the state. In July 2007, the PUC announced its approval for additional transmission lines that could deliver 10,000 more megawatts of renewable power by 2012. New transmission infrastructure will allow all Texans to access the the state’s vast wind resources.

Mr. Windpower could not have done Barack Obama and the Environmental Left a bigger favor. And thus Gov. Perry joins Ken Lay and George W. Bush as the fathers of the Great Texas Windpower Malinvestment.

Galbraith CREZ Update

Kate Galbraith at the Texas Tribune provides a current snapshot of the CREZ line project.

The cost of building thousands of miles of transmission lines to carry wind power across Texas is now estimated at $6.79 billion, a 38 percent increase from the initial projection three years ago.

The new number, which amounts to roughly $270 for every Texan, comes from the latest update on the project prepared for the Public Utility Commission (see page six). Ratepayers will ultimately be on the hook for the cost, but no one has begun to see the charges appear on their electric bills yet because the transmission companies building the lines must first get approval from the commission before passing on the costs to customers.

A commission spokesman, Terry Hadley, says that the first of these “rate recovery” applications may be filed before the end of the year. Ultimately, the commission says, the charges could amount to $4 to $5 per month on Texas electric bills, for years.

In 2008, when the Public Utility Commission approved the project, it was estimated at $4.93 billion. Gov. Rick Perry, who appoints the three Public Utility Commissioners, has strongly backed the build-out, which will result in several thousand miles of new transmission lines carrying wind power from West Texas to large cities hundreds of miles across the state.

This is expected to spark a further boom in wind farm development, particularly in the Panhandle. Texas already leads the nation, by far, in wind power production. Electricity generated by other sources, like natural gas, coal or solar, can also use the lines.

However, deciding the routes for the lines — a painstaking process that played out in the hearing room of the Public Utility Commission — stirred controversy, as landowners in the Hill Country and other parts of the state tried to prevent them from going through their property. The transmission companies pay a one-time sum to the landowner for an easement to build the lines across his or her property, but ultimately the companies have the power of eminent domain if the landowner resists. Hill Country landowners did succeed in stopping one line and a portion of a second, after grid officials determined that it was possible to upgrade existing infrastructure, but serve the same purpose, more cheaply.

The new lines are all expected to be completed by December 2013, although delays could still occur. Construction of the lines is at various stages; one company, Wind Energy Transmission Texas, plans to begin building 378 miles of lines next month, for example.

Among the reasons for the increased costs, according to the new report, are that the original 2008 estimate used straight-line distances to calculate the cost of the lines. However, as the process played out, the Public Utility Commission often requested that the lines follow fences or roads in order to minimize the intrusion. So the distances will probably be 10 percent to 50 percent longer than the original planners allowed for, the report says. Inflation also boosts the price tag.

The new estimate, of $6.79 billion, is also subject to change.

“It is likely that costs may fluctuate and change over the next year,” states the report, which was prepared by an engineering services company called RS&H and published in July.

Anyone want to bet against the proposition that the project exceeds $7 billion upon completion? You might find a counterparty–and quickly.

16 comments

1 Jon Boone { 08.26.11 at 11:27 am }

No one should take that bet, Rob. Thanks for this timely article. Anyone who has followed Perry’s wind pushing should be appalled that he is now, according to recent polls, the leading Republican candidate for the presidency. This phony pol, but quite real crony capitalist, continues to dun rate and taxpayers out of billions.

I’ve looked at the most recent decade of IEA data for ERCOT–and can find little clear evidence that wind has caused reductions of fossil fuel–indeed, any conventional power, including nuclear and hydro–throughout that region. Coal especially has remained remarkably steady during this decade, despite the presence of nearly 10GW of installed wind.

But I’m certain that Perry’s “friends” have pocketed a bundle from their wind investments, growing wealth from dysfunctional “power” and relying on dimwitted media to get people to think all is well behind the green curtain in Oz….

2 Kermit { 08.26.11 at 2:24 pm }

In a conversation yesterday with an individual now in Louisiana, whose father was a longtime lobbyist in Austin, I have a big question on Texas’ political power structure.

Per this fellow (a self avowed FDR type Liberal Democrat) the Lt. Gov. has the real power as being head of the state senate. He (or she) has control over which legislation reaches the floor and in what form.

Does this make Perry responsible for much of “W” gets credit for as governor? Does this make Dewhurst responsible for much of what Perry gets credit for?

Please clarify for me. Though I lived in Houston during the 1980′s, I am void of knowledge of Texas’ power structure. Here in Louisiana, the governor always hand picks the heads of both houses of the state legislature.

3 Eric Anderson { 08.26.11 at 3:37 pm }

Just a question for clarification: The nearly 10,000MW capacity is for the whole state, whereas the 880MW generation on Wednesday seems (as near as I can tell from the article) to be in the ERCOT system, which is stated as managing “three-fourths of the state.” Do we know what the actual nameplate capacity for the ERCOT area is, so we can compare the 880MW (or about 1500-1600MW average)?

4 Jon Boone { 08.26.11 at 6:45 pm }

Rob will have to answer for how Texas politics works, Kermit. But Rob–and Glenn Schleede–have made public documents that show Bush W and Ken Lay colluding in the 1990s to push wind–without any mention of Perry. Somewhere in MR’s archives there’s an article about this. Meanwhile, Bush W has been a keynote speaker for AWEA since leaving the presidency:http://tinyurl.com/3epb8eo. The record about Bush’s involvement with wind predates and postdates Perry.

5 Kermit { 08.26.11 at 9:38 pm }

Jon, thanks for the comment. I had thought that Lay had sold Bush on the idea, but not sure how the actual politics worked.

Also, as I stated, the fellow is a diehard self admitted big government kinda guy. Also, his father was a lobbyist for AFL-CIO, even though he himself was an electrical engineer and is now retired.

6 Jon Boone { 08.26.11 at 10:37 pm }

Eric A:
http://www.ercot.com/content/meetings/board/keydocs/2011/0419/Item_12e_-_Grid_Operations_and_Planning_Report.pdf

According to ERCOT, the grid had 9400MW of installed wind as of March 31, 2011, and I believe added over 300MW of wind by May, for a total of 9727MW of installed wind. The present total is likely around 10GW–installed capacity.

ERCOT experienced a record peak demand on August 26: 66552MW, which is what wind performance should be measured against.

7 Jon Boone { 08.27.11 at 10:18 am }

Correction:
ERCOT peak demand was 68,294MW, recorded this year on August 3. See:http://www.khou.com/news/texas-news/ERCOT-Level-1-power-emergency-in-Texas-128339093.html.

8 Wind, well… just blows | JunkScience Sidebar { 08.29.11 at 1:20 am }

[...] Rick Perry’s $7 Billion Problem (Texas wind transmission project 38% over budget–$270+ for every… Robert Bradley Jr. “He has been a stalwart in defense of wind energy in this state — no question about it.” [...]

9 Rolf Westgard { 08.29.11 at 5:50 pm }

ERCOT uses an 8.7% capacity factor for wind in the summer. ERCOT’s data shows that wind is providing about 1% of Texas electric demand.
Of course winds capacity value is zero, since you can’t count on it for any time in the future.

10 Rolf Westgard { 08.29.11 at 5:52 pm }

Industrial wind is not quite as big a scam as corn ethanol, but it is close.
ERCOT’s forecast to 2016 has wind still at about 1%.

11 Kermit { 08.29.11 at 6:54 pm }

All that I really know is that driving on IH-10 to West Texas enroute to SE New Mexico there is a 10 mile stretch of nothing but wind turbines on both “north” and “south” sides of the highway. I’ve driven that stretch twice (coming and going) on two separate trips. I’ve never seen more than 50% actually turning even though there was a crosswind on the highway. Those turning were rather lazy about it. Both round trips were pre-2005.

12 rbradley { 08.30.11 at 7:58 am }

Robert B ryce comments on the Texas wind situation at NRO: http://www.nationalreview.com/articles/275673/texas-wind-energy-fails-again-robert-bryce#

13 Energy and Environment News { 08.30.11 at 10:08 am }

[...] Federal Environmental Employee: Integrity Not Required Chris Horner, AmSpecBlog, 27 August 2011Rick Perry’s $7 Billion Problem Robert Bradley, Jr., Master Resource, 26 August 2011 Cancel replyLeave a CommentName *E-mail [...]

14 Albert Finnegan { 08.30.11 at 12:16 pm }

Perry promoted wind, coal, and gas? Well two out of three ain’t bad! In fact if Perry sat down and did a mea culpa on the wind and global warming catastrophe scams, and how he was taken in by the lowlife climate grifters, he could come out smelling sweet as a rose!

Compared to Obama’s blatant energy starvation policies, Perry is looking quite good right now.

15 Jon Boone { 08.30.11 at 6:51 pm }

Thanks for the link to Robert Bryce’s article, Rob. But having 880MW of wind at peak demand–66,600MW+ –is, for ERCOT and ratepayers, a good thing. It is when wind is producing well that even worse things happen, brought on by the need to balance and secure against all that skitter. Imagine having to also negotiate 6000MW of wind during the tumult of peak demand , which is reduced in the next minute to 5500 and, in the next five minutes, up to 5700, then back to 490 a few minutes after that–over and over for a few hours, after which a surge down to 2500MW over a 30 minute period. ETC, ETC, ETC. The thermal cycling involved in the effort to “integrate” all that routine volatility helps explain why wind in Texas, over the decade from 2000-2009, has hardly affected coal generation at all. The data could indeed be interpreted to show that all that wind was actually increasing coal usage beyond what it would have been without any wind. Of course, all this super engineering activity has an over the top cost passed along to–uh–you know who–as Bryce says. And this is above and beyond the incredible, utterly unnecessary wind transmission expense born by Texas ratepayers.

16 Power Engineer { 09.04.11 at 4:03 am }

New England will have the same transmission cost problem. The ISO plan obtain 23% of energy from wind is estimated to cost $63B or 25 cents per kWh. Eight times the 3 cents/kWh cost of the natural gas it displaces. I requires 4700 circuit milea of 500kV transmission estimated to cost somewhere from $17B to $24B. Like Texas who knows what it will actually cost as the lines encircle New England and will likely face opposition in the suburbs of Boston and Hartford and the mountains of Vermont and NH. $17B equates to 6.6 cents per kWh for the transmission. The transmission alone costs twice the cost of the natural gas that would be displaced.

If the concern is reducing CO2 emissions, the studies show that you can have the same reduction in CO2 by spending $5B to retire old plants rather than spending $63B to build wind.

It is interesting to note that the coal units are still running after spending $63B on wind as the coal units are unable to cycle to accommodate the wind variations.

The $63 billion translates to $450 per ton of CO2 removed or about 10 times the expected CO2 market price. I suggest that other calculate the cost of CO2 removal by wind as it is and enlightening metric which demonstrates the efficiency of government mandated solutions.

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