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.