Utilities Cash In on Green Energy Subsidy for Bigger Wind Farms
By Katherine Blunt
Utilities across the country are seizing a fast-expiring green
energy subsidy to boost the efficiency of aging wind farms as they
set ambitious goals to reduce their carbon emissions.
Xcel Energy Inc., a Minneapolis-based utility company serving
customers in eight states in the West and Midwest, recently
announced plans to invest as much as $1.4 billion to refurbish some
of its older wind farms as it pushes to provide carbon-free
electricity by 2050. The projects, which will qualify for a
gradually diminishing federal tax credit set to expire this year,
involve retrofitting outdated turbines with bigger blades and new
technology to boost efficiency.
Analysts say the subsidy could be extended, but some companies
aren't leaving anything to chance in an election year. Tax credits
from the policy can save companies tens of millions of dollars
Xcel Chief Executive Ben Fowke said many projects slated for
"repowering" were built about a decade ago, when new wind projects
generated power for at least $60 per megawatt hour -- roughly three
times the average cost today. Mr. Fowke said retrofitting such
projects can substantially reduce their higher generation costs and
extend their useful lives by a decade or longer.
"You take a project that is using older technology, outfit it
with the new technology, and we're able to bring down the cost by
20%," Mr. Fowke said. "It's really a compelling economic
Many U.S. utilities recognized the potential to refurbish their
older wind farms in 2016, after Congress extended a federal subsidy
that allows wind-energy producers to earn tax credits based on
electricity output over a 10-year period. By refurbishing a
project, utilities can restart the clock on the credits and likely
earn more of them by boosting output. Companies must start
construction this year on eligible projects or have stockpiled
equipment to qualify.
The federal subsidy, first implemented in 1992, has generated $2
billion to $5 billion in tax credits each year since 2015, when
wind development began to accelerate, according to a report this
year by the Congressional Research Service.
Future investments in the nation's aging wind fleet largely
depend on whether Congress moves to extend the production-tax
credit, analysts say. Democratic presidential candidate Joe Biden
has said he would prioritize the expansion of renewable energy
subsidies under a $2 trillion plan to accelerate infrastructure
spending and carbon-reduction goals.
The Trump administration last year extended the wind-production
tax credit by a year, just before it had been set to expire. It
might consider a longer extension as part of an effort to regain
jobs lost as a result of the coronavirus pandemic, said Timothy
Fox, vice president at ClearView Energy Partners LLC.
"Under both presidential administrations, there seems to be the
possibility of an extension," Mr. Fox said. "An economic recovery
bill could give lawmakers a reason to look at the high labor
intensity of wind and solar resources."
U.S. utilities and renewable energy developers have targeted 14
gigawatts of wind projects for refurbishment since 2016,
representing nearly 15% of domestic production capacity,
research-firm Wood Mackenzie estimated. Principal wind-energy
consultant Aaron Barr said companies would look to repower an
additional 17 gigawatts of wind capacity if the tax credits are
extended, notably in places where power-grid congestion has made it
difficult to build new projects.
"Repowering has really transformed the industry in a big way in
the last few years," Mr. Barr said. "It's the most cost-effective
way to gain incremental increases in renewable generation."
PacifiCorp, a utility company owned by Warren Buffett's
Berkshire Hathaway Inc. that serves customers in six Western
states, is working this year to finish repowering its entire fleet
of 13 wind farms, a $1.1 billion investment eligible for the
federal tax credit. Since 2018, the company has been installing
larger turbines and replacing faulty components that had led to
higher maintenance costs.
"You're getting, on average, about 30% more energy out of these
projects, " said Mark Sturtevant, PacifiCorp's vice president of
renewable energy. "The technology advances in the past 10 years
have allowed for this kind of improvement."
PacifiCorp is now finishing upgrades to its first-ever wind
farm, which has been operating in Wyoming since 1999.
The company is replacing the original 68 turbines with 13 newer,
more powerful ones that will boost the facility's power output by
more than 50%. The change in technology, Mr. Sturtevant said, is
like going "from a Model T to Star Wars."
Write to Katherine Blunt at Katherine.Blunt@wsj.com
(END) Dow Jones Newswires
August 16, 2020 08:14 ET (12:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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