Fateful winds blow for Wyo power
By Mark Wilcox
February 6, 2013 --
Even with the nation's largest wind project and plenty others planned in the Cowboy State, one wind lobbyist is saying the industry faces stiff headwinds.
"Wind in Wyoming is essentially dead," said Dave Picard, a lobbyist for the Wyoming Power Producers Coalition. "We don't have any customers. We don't have any transmission. We have a tax regime in Wyoming that is much more expensive than our competing states and we're competing for investment dollars."
Picard said the blame is partly because of legislative handling of wind generation, citing things like the $1 per megawatt-hour, first-in-the-nation generation tax on wind that went into effect at the start of 2012. He also mentioned Wyoming's property tax structure is onerous to wind developers, who have to pay on tangible personal property like multi-million-dollar windmills.
"On average, the last analysis we did at current prices showed it costs $5.50 more to generate a megawatt of power in Wyoming before transmission costs than in New Mexico," Picard said. "That's why nobody is looking at Wyoming wind."
People looking at Wyoming wind
Despite Picard's belief that "nobody's really clamoring for Wyoming wind," many developers are exploring the option anyway. The Bureau of Land Management has seven major wind projects on its "hot sheet," representing up to about 4,300 megawatts of potential wind energy in the state.
While Picard said his last look at the hot sheet revealed defunct companies or dead-end, lease-holding projects, he admits that the 2,500 megawatts at the Chokecherry/Sierra Madre wind farm look to be solid.
And the Power Company of Wyoming LLC, (PCW) an offshoot of the Anschutz Corp. in Denver, remains vocal about their ability to get North America's largest wind farm in the ground. The $4 to $6 billion project could power about a million households with a 40 percent load factor, an achievable feat in windy Wyoming. The company sees it as a benefit to the area as well as the company.
Kara Choquette, director of communications for the Power Company of Wyoming, said she thought she was seeing too many zeroes when she saw the kind of padding the farm would offer in tax revenue to Carbon County and the state. The massive project will pay property tax, sales and use tax and wind generation taxes. Two of those three taxes are relatively new.
Picard said he saw it as ironic that in two rooms twenty yards apart at legislature at the time, the sales and use tax was being taken away from electricity producers — wind — while being given to data centers, large users of electricity. The result is that it will take an additional $232 million in sales/use taxes to make Chokecherry/Sierra a reality. All told, the project could generate about $800 million in different taxes over 20 years.
PCW touts these taxes as an economic benefit to the community, while at the same time telling legislators current tax code would deter the arrival of the wind farm, according to Picard.
But the Power Company of Wyoming got its record of decision from the Department of the Interior last October, something the administration used to pat itself on the back for: achieving the goal of approving 10,000 megawatts of new renewable power on public lands. Obtaining approval doesn't mean it will be built, however. Many other factors play into it. The wind-production tax credit just received a one-year renewal, meaning any wind project "under construction" by the end of 2013 will receive the 2.2-cent per kilowatt-hour credit. This does little to buffer projects in early stages, according to some, since permitting can't be shortcutted and the definition of "under construction" is so far open to debate. But that may not keep people from trying.
"Rest assured there'll be a lot of folks scrambling (to meet the deadline)," said Loyd Drain, executive director of the Wyoming Infrastructure Authority.
Additionally, many wind farm makers wait until they have a proven customer for their power. PCW does not yet have one.
"We don't have a signed power purchase agreement but we're confident that will happen," Choquette said. "There is a lot of interest in cost savings from Wyoming Wind."
Another wind developer out of Jackson told the Business Report market conditions aren't a deterrent for his 300-megawatt, $750 million farm at Belvoir Ranch near Cheyenne.
"We will meet the 2016 online date," said Bruce Morley, CEO of Morley Companies that is developing the ranch.
He went on to state why.
"Big international developers can quickly switch their efforts to projects in another state or another country with the political winds," he said. "Wyoming is home and where we are determined to concentrate our efforts."
For him, the tax credit extension didn't do much.
"As a practical matter, the one year renewal isn't very helpful since it takes at least three years to develop a project, if everything goes smoothly," Morley said. "However, it does change the whole psychology toward the future of renewables. Like many people in Wyoming, government manipulation of business via the tax code is distasteful to me."
Eminent domain and California's portfolio
Two more issues have come to the forefront in Wyoming wind energy of late. One is the state of eminent domain. While utilities have the right to seize private lands if necessary to provide for the greater public good, the right looks like it will be denied to wind-power producers for another two years.
"Our projects can be held hostage by one person that does not want to negotiate in good faith," Picard said. Even so, Picard freely admits eminent domain is rarely needed. Producers agree on that.
"In our past projects this has been a non-issue," Morley said. "Ranchers are generally very willing to receive fair market royalties for transmission lines, which don't hinder agricultural operations but do provide another source of steady income for a volatile business."
Yet another problem is getting new electricity into a crammed national grid that hasn't been significantly built out for 25 years, according to a Rocky Mountain Power spokesperson.
"None of those new wind projects will come online without new transmission," Drain said. And many are banking on major projects from Rocky Mountain Power and Anschutz Corp. to fill the void. Anschutz's TransWest Express Transmission Project would specifically try to capitalize on renewable energy portfolios by transmitting Wyoming wind power to Las Vegas, where it can be relayed into California. The $3 billion project is a gamble that California will indeed bite on the proposed $600 million in rate savings the Wyoming Infrastructure Authority anticipates will be passed on to California electricity consumers if the state buys into Wyoming wind. California Gov. Jerry Brown has expressed a desire to build out renewables within the state, however.
"You can't blame any state for wanting to develop its own resource and that's just human nature," Drain said. "California is famous for a lot of things, but wind's not one of them."
Wyoming Business Report Staff Writer Mark Wilcox relies on electricity — wind powered or not — to write and edit.