The primary aim of this Competitive Renewable Energy Zone (CREZ) process, set rolling by lawmakers in 2005, is to get large volumes of new wind generation online. Big wind companies like Horizon, Airtricity, FPL Energy, BP, PPM, Invenergy, AES, Shell, Babcock & Brown and others are busy lobbying the PUC with legal submissions and comments, all with the aim of ensuring that each CREZ is in the right place for their plans. Alongside that process, land lease speculation is running rife.
Farmers, ranchers and landowners are playing their part of the game. Mike Sloan, of Virtus Energy Research Associates in Austin, describes it as a "PIMBY" situation: "please, in my backyard." An ongoing land grab in Briscoe County, where Shell is proposing 2000 MW and Horizon 600 MW, even attracted the attention of The Wall Street Journal. It reports that a third competitor, BP, decided to withdraw. The reason, BP's Robert Lukefahr told the Journal, was because of "Shell and Horizon bidding up the properties to what we think may be unsustainable levels."
The newspaper reported steep rises in land lease contracts. From typical levels of $3 an acre and annual royalties of 3% of wind farm revenue, they have increased to $50-$80 an acre, with royalty payments of about 6% annually, according to the newspaper.
More than 60 entities are involved in the CREZ process, including transmission providers, electric companies, local economic development organisations, and at least 21 companies that have expressed interest in developing wind projects. "Some pretty big things have happened," says Sloan. "In a nutshell, it has stimulated a lot of parties in Texas to think really big with lots of transmission plans, and wind plans. It's pretty exciting that it has fostered so much creative thinking."
Exactly how the PUC will lay the boundaries for a CREZ is unclear. All may be revealed at a PUC meeting scheduled for July 5. It is widely expected to yield a CREZ designation and many particulars on how the entire process will unfold. "It remains to be seen how the PUC will pick and choose," says Sloan. "All these new companies are lining up and they have money to spend. It's not clear how this will turn out. Texas is breaking new ground, they have never done this before -- no one has ever done this before."
One key feature likely to be a part of a final ruling in July, says Sloan, is a requirement that wind developers who want their projects considered for a CREZ corridor must pay up front for 10% of the anticipated cost of the transmission lines. With a CREZ zone likely to accommodate 1000 MW on the low side and over 4000 MW on the higher side, the transmission investments will be substantial. A billion dollar transmission line would require wind developers to post $100 million.
"This may impact the types of players that can play in the CREZ game. But there are a lot of big companies in wind right now. Some of the smaller players might partner up," says Sloan. In Texas, however, there are not many of those left.
Among the big players and big thinkers is a consortium led by Airtricity and Babcock & Brown. It is calling for a CREZ designation of for its so-called Panhandle Loop transmission plan, which would accommodate 6000 MW of generation, roughly 4200 MW of wind and 1800 MW of coal. It is just one proposal among many that Sloan refers to as creative.