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United States

Developers prepay to secure Texan transmission build

US: A breath of new life is being felt in West Texas as the state's big transmission build-out takes a turn that could lead to over 2.5GW of new wind projects in the Texas Panhandle region.

Ten wind plant developers have been instructed to start making collateral cash payments to support the construction of much-needed transmission lines in the area.

State regulator, the Public Utilities Commission of Texas (PUCT), says the financial commitments made so far indicate that there is enough developer support to include the Panhandle among major new transmission upgrades to bring more wind online. Developers have been instructed to make the payments directly to the transmission firms already approved to build the upgrades.

This is part of the state's Competitive Renewable Energy Zone (Crez) programme., which aims to build transmission lines throughout Texas more quickly by coordinating transmission construction with wind and other generation developers (Windpower Monthly, December 2009).

The plan hinges on developers making upfront financial commitments to support the construction. The programme already has nearly $5 billion allocated by the state.

The Panhandle region (see map, left), at the northernmost tip of Texas, is a wind developer's paradise: strong, consistent winds with flat, rural terrain that can be leased cheaply from landowners. Its weakness has been a lack of transmission capacity to carry new wind power to populous areas of high energy demand to the south.

Existing projects that operate in the region often see their output curtailed by grid operators when more wind power is generated than can be exported by the existing wires.

Until now, prospective developers in the Panhandle region hoping to get on new Crez transmission lines were required to provide letters of credit or proof they could pay cash as collateral to back transmission construction. The state did not want to embark on construction of new wires without some certainty that new projects would be built to use the lines.

Developers must pay either $15,350 per megawatt of planned project capacity, or $10,000 per megawatt if the capacity is supported by 20-year land-leasing agreements. Nine developers intend to put up cash to support construction of transmission lines.

Companies including E.On Climate and Renewables, Horizon and Higher Power have planned more than 2.2GW. Some of Invenergy and RES America's existing wind assets in the region are also taken into account.

The proposed Panhandle transmission upgrade is split into two sections. Wind developers' commitments have reached the required threshold of filling up at least half of the new wires' capacity. For Panhandle A, the 50% level equates to 1.5GW and for Panhandle B it is just over 1GW.

For a typical 100MW project, this requires putting down around $1-$1.53 million. For some developers, this was too much of a commitment. "They're asking for a big chunk of change," says Jim Swafford, CEO of Scandia Wind Southwest, one of the developers.

Swafford says the collateral requirement narrowed the pool of developers to the point that there was some concern not enough would remain to support new wires in the Panhandle, but these recent commitments show that the wires are likely to be built, and probably completed between 2012 and 2013.

Many parts of the proposed upgrades must still secure right-of-way and final permitting before construction can be considered.

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