Does wind power beat natural gas?

Posted by Pete Danko, EarthTechling

Xcel is on a wind roll. Days after announcing a subsidiary’s plans to purchase nearly 700 megawatts of wind power for customers in New Mexico and Texas, the company – thought not long ago to be souring on wind – turned its attention to the Upper Midwest, telling regulators it wanted to add 600 MW of power from three planned wind-farm projects to its portfolio.

Once again, Xcel cited the attractive price of wind energy as a reason for the move.

“Wind prices are extremely competitive right now, offering lower costs than other possible resources, like natural gas plants,” Dave Sparby, president and CEO of Northern States Power Co.-Minnesota, an Xcel Energy company, said in a statement. “These projects offer a great hedge against rising and often volatile fuel prices.”

A Minnesota wind farm (image via Wikimedia Commons)

A Minnesota wind farm (image via Wikimedia Commons)

Here are the three new projects Xcel wants to hook up with, as described by the company:

  • Courtenay Wind Farm, a 200 megawatt project near Jamestown, N.D., under a power purchase agreement with Geronimo Energy;
  • Odell Wind Farm, a 200 megawatt project near Windom, Minn., also under a power purchase agreement with Geronimo Energy; and
  • Pleasant Valley, a 200 megawatt project near Austin, Minn., submitted by RES America Developments Inc. RES would develop the project and then transfer ownership to Xcel Energy. The Pleasant Valley project is adjacent to the Grand Meadow wind project, which Xcel Energy owns.

Wind is increasingly competitive on its own, but the production tax credit helps make it especially attractive, and Xcel said it hoped work would begin on the three projects “immediately in order to qualify for the federal renewable energy tax credits.” Under current law, projects loosely defined as being under construction before the end of this year qualify for the 10-year, 2.3-cents-per-megawatt-hour tax credit.

Xcel cited the PTC as a key driver in its new wind plays, which is pretty interesting given what down earlier this year. Then, there was some question about its affection for the tax break; the company had lobbied for a “consumer renewable credit” while the wider industry was pushing for the PTC extension. Now the company is emphasizing that it appreciates the PTC while also advocating the consumer renewable credit. In a company blog, Xcel explained how that would work:

To help offset renewable energy integration costs and provide additional incentives for clean energy generation the CRC would provide a tax credit for investor-owned utilities (like Xcel Energy) and a payment for non-taxable municipal, cooperative and power marketing administration utilities….The credit increases as more wind and solar energy is added. Starting at 0.1 cent per kilowatt-hour (kWh) and increasing to 0.6 cents per kWh at 24% wind generation.

The question some might begin to ask now is if, given the reported competitive price of wind power, such incentives continue to be necessary.

* Pete Danko, EarthTechling