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AEP to spend $4.5 billion on biggest single wind farm in U.S.

AEP to spend $4.5 billion on biggest single wind farm in U.S.

AEP plans to spend $4.5 billion on new power – and in a sign of recent times, it’s in renewable energy, not coal.

The electric utility plans to spend the money on what will be the biggest single wind farm in the United States, as the Columbus company continues its fast churn away from coal toward a more diverse mix of power generation.

“This project is consistent with our strategy of investing in the energy resources of the future, and it will save our customers money while providing economic benefits to communities,” AEP CEO Nick Akins said in a statement.

The 2,000-megawatt project, called Wind Catcher Energy Connection, will go toward the utility’s customers in Texas, Oklahoma, Louisiana and Arkansas.

The sprawling Meadow Lake wind farm in northwestern Indiana, one of the few things to look at during the drive from Columbus to Chicago, is 500 megawatts.

State and federal regulators still need to approve the planned purchase of the wind farm being developed in the western panhandle of Oklahoma by Chicago-based Invenergy, for which customers there will foot the bill. AEP says it will save its customers in those state $7 billion, “net of cost,” over a 25-year period.

Renewable energy developer Invenergy is making a huge push into renewables: It plans to build two of Ohio’s biggest-ever solar farms, as reported by Columbus Business First, one of which is next to a large wind farm it’s selling to another AEP (NYSE:AEP) subsidiary.

AEP, long one of the largest coal-burning power providers in the country, has made a swift pivot away from its favored fuel source in a bid to diversify its holdings.

Coal made up 70 percent of its power portfolio in 2005; that’s cratered to 47 percent this year, and the utility projects it making up just one-third of its resources in the future. Renewable energy, which includes wind, solar and hydropower, will pick up much of the slack, increasing from 4 percent in 2005 to 13 percent today, with a projected 30 percent share in the future.

Source: Columbus – Business First |

 BY: Tom Knox
From Bloomberg:

In $4.5 Billion Wind-Farm Deal, AEP Joins Trend Taking Hold Across U.S. Utility Sector



There’s a new model emerging for growth-starved utilities looking to profit from America’s solar and wind power boom.

American Electric Power Co. is using it for a $4.5 billion deal that’ll land the U.S. utility owner a massive wind farm in Oklahoma and a high-voltage transmission line to deliver the power. NextEra Energy Inc.’s Florida unit is using it to build solar farms. And in April, the chief executive officer of Xcel Energy Inc. said he’d use it to help add 3.4 gigawatts of new wind energy over the next five years.

Here’s how it works: Some utilities that for years contracted to buy electricity from wind and solar farm owners are now shifting away from these so-called power purchase agreements, or PPAs. They’re instead seeking approval from state regulators to buy the assets outright and recover the costs from customers through rates. While the takeovers are being branded as a cheaper way of securing power, saving ratepayers millions in the end, they also guarantee profits for utilities.

With the cost of building solar and wind farms sliding and electricity demand weakening, owning renewables is a more attractive proposition than ever for utilities.

“The price of wind has come down enough that it’s going to be competitive with anything else you’re probably going to propose to build out there,” Kit Konolige, a New York-based utility analyst for Bloomberg Intelligence, said by phone Wednesday.

The catch, of course, is regulatory buy-in. AEP will need approval from Arkansas, Louisiana, Oklahoma, Texas and federal regulators to purchase the 2,000-megawatt Wind Catcher farm from developer Invenergy LLC, build a 350-mile (563-kilometer) transmission line and bake the costs into customer rates. The company expects to file these plans with regulators on July 31.

American Electric wants regulatory approvals by April, Chief Executive Officer Nicholas Akins said on the company’s second-quarter earnings call Thursday. Central to the project are $2.7 billion of U.S. tax credits for wind production. No rate increase will be needed, he said.

Benjamin Fowke, chief executive officer of Minneapolis-based Xcel Energy, said in April that the company would seek approval to add 3.4 gigawatts of new wind energy and bill customers for as much as 80 percent of that investment through rates. He said at the time that wind energy is now the cheapest new form of generation.

NextEra has already gotten Florida’s go-ahead to recover the costs of the solar farms its Florida utility is building through customer rates.

Should AEP gain similar approvals, the utility will be embarking on its most expensive renewable energy project yet, underscoring a dramatic shift in America’s power mix. Once the largest consumer of coal in the U.S., AEP is now shuttering money-losing plants burning the fuel and diversifying its resources along with the rest of the utility sector.

The Wind Catcher farm in Oklahoma is set to become the largest wind farm in the nation and the second-biggest in the world.

AEP estimated that the low cost of wind power will save customers $7 billion over 25 years. Construction on the farm began in 2016, and the plant is scheduled to go into service in mid-2020

More: Growth-Starved Utilities Have Found a New Way to Make Money



Why AEP’s $4.5B wind farm is less risky than coal

Tom Knox

The Blue Creek Wind Farm in Van Wert and Paulding counties in Ohio.

American Electric Power Company Inc. is spending big on the largest single-site wind farm in America.

The project holds risk, which the Columbus electric utility spent a year analyzing. But the risks associated with spending $4.5 billion on the 800-turbine Oklahoma project are still less than those associated with building traditional power plants, said AEP CEO Nick Akins.

“While it appears $4.5 billion is a big number, if you built a central-station generation facility like a coal unit or something like that, it would be as big or bigger, but much more risky,” Akins said.

It’s quite a change of direction for AEP, the one-time king of coal that still derives 47 percent of its power from the fossil fuel. But building new power plants isn’t its forte – putting up small generators on poles is.

“We build transmission all the time,” Akins told Columbus Business First.

The project includes a 350-mile transmission line to move the power, generated in the Oklahoma panhandle, to Tulsa, where it then will be distributed throughout Texas, Oklahoma, Louisiana and Arkansas.

Financing – the other major risk factor – won’t come until the project is approved by state regulators, which AEP (NYSE:AEP) hopes comes by early 2018. But that shouldn’t be too much of an issue, Akins said.

“Typically in this market, if you’re investing in renewables and you’re investing in infrastructure like that, getting financing for these types of projects is not a big issue,” he said.

Development and construction of wind projects rose 40 percent in second-quarter 2017 compared to a year ago, according to a new American Wind Energy Association report.

Tom Knox covers Ohio State University, energy, state policy and the business of marijuana for Columbus Business First.

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