Last Updated on November 15, 2021 by Mary Pressler
A Snapshot of the Wind Power Industry in Texas
The state of Texas is the undisputed wind power leader in the USA. According to the latest quarterly report by the American Wind Energy Association (AWEA), released on July 26, there are now 90,004 MW of wind power capacity in the country. Texas accounts for 23,262 MW, slightly over 25% of the total.
- If Texas was a country, it would rank 5th globally in wind generation capacity.
- In December 2017, wind generation surpassed coal in Texas, now occupying the second place after natural gas.
During 2018, Texas has continued leading wind power deployment in the country. AWEA reports 1,032 MW of new capacity since the year started, and 664 MW correspond to Texas. Most of this capacity is concentrated in three large wind farms:
- Flat Top (200 MW)
- Rattlesnake Wind (160 MW)
- Santa Rita (300 MW)
There is also a 3.67-MW project called the UL Advanced Wind Turbine Test Facility, owned by West Texas A&M University. The installation sells its electricity output to Xcel Energy, but it also serves research and educational purposes.
The four states that follow Texas in new capacity are Illinois, California, Michigan and Nebraska, adding up 337 MW so far in 2018. Nationwide, wind power projects that are currently in the development phase add up 37,794 MW of capacity, and 21% of them will be installed in Texas.
Why Is Wind Power so Successful in Texas?
The success of the wind industry in Texas can be attributed in great part to the state’s deregulated electricity sector. Customers can choose their electricity providers freely, and this creates intense price competition among power generation companies – since wind turbines achieve some of the lowest kilowatt-hour prices in the industry, they are an obvious choice for large-scale generation. According to the US Department of Energy, the cost of wind power decreased by one-third only between 2010 and 2016 – from $2,361/kW to $1,587/kW.
Texas also has the advantage of being independent from the Federal Energy Regulatory Commission (FERC), and projects can proceed faster simply because they don’t go through the federal approval process. This has allowed the state to deploy transmission and distribution upgrades at a fast enough pace to keep up with the growth of wind power.
How Does Texas Benefit from Wind Power?
Texas provides freedom to locate wind power projects, as long as the developer and the landowner reach an agreement. In fact, wind turbines have become an excellent source of income for farmers, since project developers pay to use farmland portions. When the price of crops is low or yield has been poor due to unfavorable weather, farmers can count on rent payments from wind turbine owners. According to a study by AWEA, Texan farmers received $60 million in lease payments in 2017.
There were concerns that Texas was poorly equipped for the summertime loads in 2018, after several coal-fired power stations were taken offline. However, wind power proved to be a reliable electricity source in July, when Texas was struck by a heat wave. According to ERCOT, the state experienced a record-breaking power demand of 73,259 MW, which can be attributed in great part to air conditioning equipment working against the heat wave. Wind generation exceeded predictions, mitigating the impact of high energy demand.
A fast-growing wind power industry also poses a logistical challenge, since large and heavy wind turbine components must be handled. However, the Port of Corpus Christi has been proactive, opening a new cargo yard, which received its first shipment of wind turbine parts on July 14. Year after year, the Port of Corpus Christi has been handling more cargo related with wind power projects: 2,603 turbine parts in 2015, 2,875 parts in 2016, and more than 3,000 parts in 2017.
The Main Challenge for Wind Power in Texas
According to Forbes, a key challenge for the Texan wind industry is sustaining growth if natural gas prices decrease. Although wind turbines themselves are completely independent from gas, their energy output is sold in the same market where gas-fired power plants compete. Market prices drop when gas prices are lower, and this reduces the potential income from a wind farm. Since natural gas is still the main power source in Texas, the market prices of electricity are very sensitive to gas prices.
Another important aspect to consider is the Production Tax Credit (PTC) for wind power, which applies for all projects that start construction before 2020. After the PTC benefit expires, new wind farms must rely entirely on their income from electricity sales. However, keep in mind this is just one possible scenario, and the conditions for wind power in Texas can also improve. Any of the following events would be beneficial for the wind industry:
- Cost reductions in wind turbine components, or technologies that reduce maintenance expenses and other ownership costs.
- An extension of the PTC benefit beyond the end of 2019.
- High gas prices improve the business case for more wind farms in Texas, since they compete in a market with expensive electricity – beating a high price is simpler.
Texas has the largest wind power industry in the USA, which has been possible in great part thanks to deregulation, and not being under the jurisdiction of the FERC. Wind power demonstrated its reliability during the heatwave that affected Texas in July, and farmers have obtained an excellent income source by renting portions of their land to wind power developers.
The Texan wind industry could slow down if the PTC expiration matches a period of low natural gas prices. However, the outlook is favorable: the state currently has 25% of the USA wind power capacity, and 21% of the new projects under development.