A regional market in the heartland -- Brakes on coal in Oklahoma and Kansas stokes wind

Plumb in the middle of America, the refusal of regulators to permit new coal-fired generation facilities in each of the neighbouring states of Kansas and Oklahoma is a sure sign that the winds are changing in two of the country's historically coal-friendly jurisdictions. Both have 1000 MW of wind power well within sight, with plenty more lining up -- and both have already taken care of providing the new transmission capacity needed to take remote wind power to centres of population.

Unlike in most other states, the wind markets of Kansas and Oklahoma are not being driven by mandates for green power but purely by the good economics of wind generation when supported by the federal production tax credit. The two states see a huge potential for exporting wind power to other areas of the country, which is a main reason for the determination to build new transmission capacity that will also benefit wind owners. Kansas is the third windiest state in the country and Oklahoma the eighth windiest.

Kansas made headlines last month when the Kansas Department of Health and Environment (KDHE) rejected a permit for two coal-fired power plants totalling 1400 MW proposed by Sunflower Electric Power Corp. For the first time in American history, a coal plant was rejected formally over concerns of greenhouse gases and climate change. This prompted criticism from Sunflower executives and a local economic development agency that wind power would suffer because a permit denial on one of the coal plants would scrap transmission upgrades in the state needed to unlock wind energy potential.

Not so says Kansas Lieutenant Governor Mark Parkinson. According to news reports, he believes KDHE's decision "creates no obstacles" for future wind or transmission development and refers to "V-plan," a major new 180 mile transmission line to run from Spearville south to the state line and back north to Wichita.

Coal falters

Coal also faltered in Oklahoma when regulators squelched plans for the 950 MW, $1.8 billion Red Rock coal plant proposed by Public Service Company of Oklahoma (PSCO) and Oklahoma Gas & Electric (OG&E). Contrary to utility rhetoric in Kansas, the denial may actually open up more wind development. "Certainly our plans to increase our renewables portfolio have something to do with the Red Rock cancellation," says PSCO's Stan Whiteford.

"We have a need for an additional 450 MW of generation and expect wind to be a portion. As for how many more megawatts we expect and what timeframe, we don't have any particular numbers set to that. But wind projects do go up a little quicker than a traditional power plant." PSCO, which recently connected the 94.5 MW Sleeping Bear facility in Harper County, now has 393 MW of wind power under contract. Total wind capacity in Oklahoma has reached nearly 700 MW.

OG&E, Oklahoma's largest utility, plans to quadruple its wind production from 170 MW to 770 MW over the next five years while building transmission lines to carry wind power from the windy western part of the state. The company is about to seek permission from Oklahoma regulators to issue a request for proposals (RFP) for adding between 200 and 300 MW of wind power.

"Our expectation is that we'd be bringing additional wind capacity online through that RFP process by late in 2009," says OG&E's Gil Broyles. "But we all basically see that where we have the greatest potential for wind is in areas where population is relatively sparse. And that's where we don't have the kind of high-capacity transmission lines that we need."

New wires

OG&E's transmission plans for next year include a new line from Oklahoma City to Woodward and on into the Oklahoma panhandle. Another project will add 40 miles of lines from north-central Oklahoma to Wichita, Kansas, by 2010. Any work would have to be coordinated with the Southwest Power Pool (SPP), which operates the grid in a seven-state area that includes both Oklahoma and Kansas. SPP is currently studying its "X Plan," a massive transmission build-out over the next two decades that will connect Oklahoma with population centres in Texas and Kansas.

"We see it as part of the fulfilment of the X Plan," Broyles says. "We believe that we are uniquely situated, both as a company with experience in developing wind capacity and also a company that knows how to build and operate transmission facilities." The Oklahoma legislature has been particularly keen to access the wind resources in the state's panhandle region, which is just north of some of the strongest wind assets in the Texas panhandle. Strong wind resources coupled with an innovate transmission plan there has fuelled a land grabbing wind boom, which is now trickling northward into both Oklahoma and Kansas.

"The other big thing that's been going on is that landowners in the entire western half of the state are being approached daily for lease agreements," says Clayton Robinson of the Oklahoma Wind Working Group. "It's been a big public education effort between our folks and the Oklahoma Renewable Energy Council -- going out and trying to make sure the landowners are getting the best deals and wind rights speculators aren't taking advantage of anybody," he adds.

Connecting the dots

Meantime, ITC's transmission V-plan in Kansas will help connect the dots with the SPP's X Plan, unlocking wind in Kansas on the same system. "Any new transmission in Kansas would benefit wind as much as anything," says Jim Ploger of the Kansas Energy Office. "But a big hunk of the wind power we can expect to be producing moving forward would be exported into our neighbouring states that don't have the wind resources that we do."

As plans for lines move ahead, so too does deployment of wind capacity in Kansas, which has been stuck on 364 MW since October 2006. But now the 100 MW Smoky Hills Wind Project is about to go online and Westar, the state's biggest utility, plans to connect nearly 300 MW of wind power by the end of next year. Smoky Hills, a 100 MW combined project for Tradewind Energy and Italy's Enel, is to bring its Vestas 1.8 MW turbines online in Lincoln and Ellsworth counties within weeks.

Westar is working on three major projects with three developers. "The thing that may be unique about our portfolio of projects is that we'll own roughly half of those megawatts," says Westar's Greg Greenwood, who adds that the other half will be sourced through power purchase contracts (PPA). "We've elected to mitigate the risk by doing both types of structures."

RES America will develop the 99 MW Central Plains Wind Farm in Wichita County, which Westar eventually plans to own. BP Alternative Energy will handle the 100 MW Flat Ridge Wind Farm in Barber County; Westar will own half and purchase the remaining 50 MW under a PPA. And Westar will buy output from 96 MW of Horizon Wind Energy's 201 MW Meridian Way Wind Farm in Cloud County, a project that will employ 3 MW turbines from Vestas -- the Danish turbine maker's largest North American order to date. Westar intends to add another 200 MW of wind by the end of 2010.

Without a mandate

Market growth in Kansas and Oklahoma is happening without state renewable portfolio standard (RPS) laws mandating the take-up of wind power, which in a variety of forms are a key driver in 25 US states. "Whether you're a supporter or opponent of RPSs, I think most everyone would agree that it would be extremely difficult to get a portfolio standard through the Kansas legislature," Ploger says. "Our policymakers here would rather provide incentives and goals than mandates."

Instead, Kansas Governor Kathleen Sebelius has called for voluntary goals of 10% renewables by 2010 and 20% by 2020. Those goals, according to Ploger, pencil out to 1050 MW by 2010 and 2100 MW by 2020. "I have some confidence that we'll be pushing that 1000 MW mark between now and the end of next year," Ploger says. "So I think we're on target to beat that well before 2010. We're kind of getting in gear and trying to catch some of our neighbours."