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Texas breaks out of the box

Texas, which last year overtook California as the state with the most wind capacity, is expected to cement that lead in the coming years through a unique transmission plan. Quiet progress is underway on the formation of Competitive Renewable Energy Zones (CREZ), following a law passed in 2005 with the aim of short-circuiting the "chicken or the egg" challenge of wires for wind (main story). The law requires the Public Utilities Commission of Texas (PUCT) to define and designate corridors where construction should begin soon on transmission to accommodate new wind power development. Generators, whether wind or fossil fuel-based, will compete for capacity on the new wires.

Texas is unique in the US since roughly 85% of its electricity transmission system does not cross state lines and therefore is not subject to regulation by the Federal Energy Regulatory Commission (FERC). The state's separate electric grid is controlled by the Electric Reliability Council of Texas (ERCOT), an independent service operator (ISO), which has come to define the Texas electricity market. CREZs are partly the result of this Texas market peculiarity that allows the state to act almost entirely independently on electricity matters.

Each CREZ is anticipated to support approximately 1000 MW of potential wind development and the costs for the transmission will be paid for by ratepayers. But nearly everything else about CREZs is being slowly defined by ongoing legal proceedings, which one industry insider describes as "contentious" in nature. With a potential for thousands of new MW of wind coming online, and vast upgrades to state wires, there are many parties who stand to benefit or be affected.

The coal conundrum

Currently, stakeholders with an interest in how CREZs will be defined and where they will be located have until February 5 to formally request the PUCT to consider them as intervening parties in the ongoing CREZ finalisation. After considering stakeholder input, the PUCT will rule on July 5 on an unspecified number of CREZ corridors that are not necessarily limited only to the ERCOT grid.

Industry insiders suspect more than one will be designated. Wind developers who have requested a hearing in the process include Horizon Wind Energy, Airtricity, Shell Wind Energy, West Texas Wind Energy Consortium, and Great Plains Windpower. Other stakeholders are predominantly transmission companies who could play a role in construction of the lines or distribution of new wind power. Among utilities filing an interest is TXU, which recently proposed 14 new coal plants in Texas. These are being considered for fast-track permitting.

Although specifics will be ironed out between now and July, one industry insider expects a few generalities: construction will begin shortly after CREZ designation; the up front cost of the transmission will ultimately be paid for by ratepayers through a cost recovery mechanism; and once the lines are built, the PUCT will take a hands off approach and allow the competitive market to decide which new projects take advantage of the new potential.

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