US utility group AEP pushing 2.2GW wind procurement by 2021
American Electric Power is aggressively moving ahead with an up to 2.2GW wind power procurement plan in four US states – Arkansas, Louisiana, Oklahoma and Texas -by the end of 2021, on the heels of acquiring Sempra’s wind business this week for $1.05bn.
“We have completed the bid process and received many quality responses. We are in process of negotiating terms with the preferred bidders and plan to file with state commissions in July requesting approvals to proceed,” Brian Tierney, chief financial officer, said Thursday on a conference call.
“That should allow time for approvals in 2020 and commercial operations of projects by the end of 2021,” he added.
Key consideration in the RFP evaluation process include cost, performance and long-term deliverability. The projects must qualify for 80% value of the federal production tax credit (PTC), meaning they would need to be fully online by 2021. In that way, customers would maximise savings from low-cost wind energy, according to AEP.
PSO and SWEPCO anticipate asking regulators in the four states to approve eventual ownership of the future wind farms under a build-own-transfer (BOT) arrangement – as opposed to contracting the energy through power purchase agreements. The utilities want to recover their investment through their customer rate bases.
The proliferation of BOTs combined with increasing utility appetite to own and rate-base wind projects in recent years has resulted in a significant volume of new power capacity being built.
Last year, AEP sought and failed to obtain regulatory approvals in Oklahoma and Texas for the massive 2GW Wind Catcher Energy Connection facility and a related transmission line that would have served both utilities’ customers.
The spectacular collapse of the hemisphere’s largest single-site wind project led Ohio-based AEP, a traditional fossil-fuel and nuclear generator, to adopt a strategy of actively procuring wind capacity through multiple smaller facilities and acquisitions.
AEP not the next NextEra
Tierney told analysts AEP does not aspire to become the next NextEra Energy Resources, the nation’s largest wind power capacity owner with 14.5GW at the start of this year.
Still, AEP does want to grow its renewable energy business within its regulated utilities and on the competitive side – to do this it formed a subsidiary, AEP Clean Energy Resources, which purchased a 724MW operating wind portfolio across seven states from San Diego-based Sempra.
The deal raised Clean Energy Resources’ wind fleet nameplate capacity to 1.16GW, while AEP utilities have 2.75GW of wind on their systems, Tammy Ridout, an AEP spokeswoman, told Recharge.
The 3.91GW plus the planned 2.2GW procurement would vault AEP into the top ranks of US utility holding companies owning wind and having it on their systems.
Clean Energy Resources is also due to acquire 227MW of Invenergy’s 300MW Santa Rita project in Texas when it is completed next month, she said.
Two overlooked aspects of the Sempra transaction were that AEP also obtained a 1GW wind new and repowering project pipeline and a well-regarded development team that it lacked.
“It takes our business to the next level,” said Tierney, adding, “It firms up and de-risks” Clean Energy Resources’ ability to execute against capital investment for renewables through 2023.