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First big project for New Mexico -- Xcel meets RPS obligations

A Texas-based developer is to begin building an 80 MW project in eastern New Mexico in March, although the final timing is subject to an extension of wind's federal production tax credit past the end of this year. Output from the Caprock Wind Ranch in Quay County will be sold to Xcel Energy.

Texas-based Cielo Wind Power will begin building an 80 MW project in eastern New Mexico in March, although the final timing is subject to an extension of wind's federal production tax credit (PTC) past the end of this year. Output from the Caprock Wind Ranch, to be located in Quay County, will be sold to Xcel Energy.

The power will not only help Xcel's southwest operations meet their baseload demands, but also a large part of the utility's 2011 obligations under New Mexico's recently enacted renewables mandate.

Caprock Wind is Cielo's first large wind project since 2001. Earlier this year Cielo had put off its planned 240 MW Noelke Hill wind project near McCamey, Texas, citing difficulties in financing the development. The company's Walter Hornaday says out-of-state financiers balked at lending money for 240 MW while transmission constraints into east Texas markets were still forcing curtailments of the output from wind farms near McCamey.

Texas back on track

Transmission improvements in the area will be completed this month and Hornaday predicts construction of Noelke Hill in 2004. "Our development work was a little ahead of the transmission improvements," he says.

Given the recent financial setbacks of Xcel's parent company, Cielo could also have faced financing difficulties with the Caprock project if lenders had felt insecure about the utility's ability to pay for the wind power. But Cielo was able to skirt the issue: each of Xcel's operating utilities is a separate state-regulated subsidiary with its own financial rating, providing a firewall of sorts between the parent.

Xcel now buys the 660 kW output of Cielo's Llano Esticado Wind Ranch, New Mexico's first commercial turbine, for its green pricing program in New Mexico. It will increase its purchases when Cielo triples the project's size this year. In addition, it buys the output of the 80 MW White Deer project in Texas, also developed by Cielo.

Mandate met

The expanded Llano Esticado project and a portion of each of the other two projects puts Xcel over the 55 MW of renewables it needs to meet the New Mexico mandate for renewables purchases by January 1, 2006, says Xcel's Bill Crenshaw. To meet the 2011 target, it needs 110 MW. Although Xcel asserts "the incremental generation of any kind should be driven by market forces," not a mandate, Crenshaw says it fully intends to comply with the state renewables portfolio standard rule.

"We're blessed with an abundant wind resource that allows developers to bring their product -- although subsidised -- to the market," Crenshaw says. "In other words, the wind is so good, the price is low." The subsidy referred to by Crenshaw is a $0.01/kWh tax credit provided by the state along with the federal PTC.

Xcel's southwest operations serve about 400,000 customers in sparsely populated areas of eastern New Mexico, western Texas, Oklahoma's panhandle and southwest Kansas.

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