The Wind Market in Texas, Pt. I
By Joshua Ebersole, Staff Contributor
Texas, the largest producer of wind energy in the United States, has over 12,750 megawatts of total wind power capacity installed. An additional 7,000 megawatts of capacity is expected to come online by the end of 2015, and approximately 26,000 megawatts of potential wind power capacity are under study. In this two-part installment piece, GIELR Online explores the recent success and future viability of the Texas wind market. Part I describes seven factors that have enabled Texas to become the largest producer of wind energy in the United States. Part II discusses long-term considerations for further expansion of Texas’ wind industry.
Wind power currently provides an approximate average of 9.9 percent of Texas’ energy mix. During times of low demand, wind has provided up to 38 percent of the load on Texas’ largest power grid, ERCOT, which services 85 percent of the state’s electric customers. In addition to increasing energy demand, the following seven factors have contributed to the growth and success of Texas’ wind industry.
1. Renewable Portfolio Standards
The Public Utility Commission of Texas adopted a Renewable Portfolio Standard (RPS) in 1999. The RPS mandated 5,880 megawatts of renewable energy capacity or 5.4 percent of the states summer capacity by 2012 and set a goal of 10,000 megawatts of renewable capacity by 2025. The state surpassed the 2025 goal in 2009, having installed 13,359 megawatts of renewable capacity, of which 12,824 megawatts were wind.
“The city of Austin has . . . one of the most ambitious standards in the nation.”
In addition to the state RPS, two Texas cities have in place their own RPS’s. The city of Austin has an RPS applying to its municipal utility that calls for 50 percent renewables by 2020, and 65 percent by 2025; this is one of the most ambitious standards in the nation. San Antonio city has in place for its municipal utility a RPS of 20 percent by 2020.
2. Renewable Energy Credits
Because Texas’ renewable energy credits program was set up to meet the state’s RPS which has been greatly surpassed, the Texas REC market is rendered irrelevant. The REC’s for projects being completed are sourced from out of state. In the case of this project, the REC’s are from the Northern Carolina market.
3. Federal Taxes
The twenty-year-old federal tax credit for wind power has been important in driving the wind market. For each megawatt hour of wind power that is produced, the producer receives a $23 tax credit. At present, the average cost to produce one MWh of wind power is $86. Therefore, the tax credit permits wind to be sold for an average price of around $63 per MWh. This is lower than the current average price of traditional energy alternatives; with nuclear costing about $108 per MWh, coal around $100 a MWh, and natural gas at $67 a MWh. Once a project comes online, the tax credit is locked in for ten years.
4. State Taxes
Texas has in place two significant tax incentives to promote the commercial development of wind. The first is the Solar and Wind Energy Device Franchise Tax Deduction; it is equivalent to a corporate tax. The tax deduction permits a corporation to either (1) deduct the total cost of the system from the company’s capital, or (2) deduct 10 percent of the system’s cost from the company’s income.
“Texas has in place two significant tax incentives to promote the commercial development of wind.”
The second incentive is the Solar and Wind Energy Business Franchise Tax Exemption. This incentive exempts all franchise (corporate) taxes of a business solely engaged in the business of manufacturing, selling, or installing solar or wind energy devices.
A significant factor leading to the success of wind power in Texas is the existence of renewable energy transmission lines stretching over 3,600 miles, connecting the wind power produced in western Texas to the cities in central and eastern Texas. The approximate 18,000-megawatt renewable energy transmission capacity is a result of the Competitive Renewable Energy Zones created by the Texas Legislature in 2005. This public policy provides $7 billion worth of free transmission and is important to the success of wind in Texas. The great wind potential in western Texas highlights the crucial need to be able to transport the energy to market in the central and eastern part of the state for the industry to be viable.
6. State Lands
Texas is also promoting wind on its more than 20 million acres of state lands by collecting data and opening the lands for leasing by wind developers. The General Land Office, the agency that manages state lands, has been analyzing the potential for wind on lands under its control since 2001, by installing wind monitoring towers. The data collected by the GLO has provided an important information source for the wind industry to identify locations to install wind projects on and off of state lands.
7. Local Government
Several Texas cities have in place green power purchasing goals. The city of Austin has achieved its GPP goal of 100 percent renewable for the local government by 2012. The city of Houston, as of 2012, has in place a wind-exclusive GPP agreement for 35 percent of the city’s municipal electricity or about 50 megawatts. Lastly, the city of Dallas has in place a GPP agreement to procure 40 percent of the city’s municipal electricity exclusively from wind.
Part II will discuss long-term considerations for further expansion of the Texas wind industry.
 American Wind Energy Association, U.S. Wind Industry Second Quarter 2014 Market Report, at 5, Jul. 31, 2014, available at http://awea.files.cms-plus.com/FileDownloads/pdfs/2Q2014%20AWEA%20Market%20Report%20Public%20Version%20.pdf.
 Bobby Magill, Wind Power Production Record Broken in Texas, Scientific American, Jul. 26, 2014, http://www.scientificamerican.com/article/wind-power-production-record-broken-in-texas/.
 Peter Kelly-Detwiler, Texas Sets New Wind Power Record, Forbes, Mar., 30, 2014, http://www.forbes.com/sites/peterdetwiler/2014/03/30/texas-sets-new-wind-power-record/.
 Renewable Generation Requirement, Texas Inventive/Policies for Renewables & Efficiency, DSIRE, http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=TX03R&re=0&ee=0.
 City of Austin – Renewables Portfolio Standard, Texas Incentives/Policies for Renewables & Efficiency, DSIRE, http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=TX11R&re=0&ee=0.
 San Antonio City Public Service (CPS Energy) – Renewable Portfolio Goal, Texas, Incentives/Policies for Renewables & Efficiency, DSIRE, http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=TX15R&re=0&ee=0.
 Matthew Phillips, Wind Energy Companies Prepare for Tax Credit’s End, Business Week, Jan. 9, 2014, http://www.businessweek.com/articles/2014-01-09/wind-energy-companies-prepare-for-tax-credits-end.
 Solar and Wind Energy Device Franchise Tax Deduction, Texas Incentives/Policies for Renewables & Efficiency, DSIRE, http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=TX04F&re=0&ee=0
 Solar and Wind Energy Business Franchise Tax Exemption, Texas Incentives/Policies for Renewables & Efficiency, DSIRE, http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=TX02F&re=1&ee=1.
 Bobby Magill, Wind Power Production Record Broken in Texas, Scientific American, Jul. 26, 2014, http://www.scientificamerican.com/article/wind-power-production-record-broken-in-texas/; see also Matthew L. Wald, Texas Is Wired for Wind Power, and More Farms Plug In, NYT, Jul. 23, 2014, http://www.nytimes.com/2014/07/24/business/energy-environment/texas-is-wired-for-wind-power-and-more-farms-plug-in.html?_r=0.
 Id; see also Peter Kelly-Detwiler, Texas Sets New Wind Power Record, Forbes, Mar., 30, 2014, http://www.forbes.com/sites/peterdetwiler/2014/03/30/texas-sets-new-wind-power-record/.
 Public Utility Commission of Texas, CREQ Transmission Program Information Center, Program Overview, http://www.texascrezprojects.com/overview.aspx.
 Ryan Holeywell, Study Will Assess Shifting Transmission Costs to Wind Generators, Houston Chronicle, Jul. 8, 2014, http://www.houstonchronicle.com/business/energy/article/Study-will-assess-shifting-transmission-costs-to-5607745.php?cmpid=email-premium&t=0906f5d2df81750c0d.
 Texas State Energy Conservation Office, Texas Wind Energy, http://seco.cpa.state.tx.us/re/wind/. Id.
 City of Austin – Green Power Purchasing, Texas Incentives/Policies for Renewables & Efficiency, DSIRE, http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=TX20R&re=0&ee=0.
 City of Houston – Green Power Purchasing, Texas Incentives/Policies for Renewables & Efficiency, DSIRE, http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=TX22R&re=0&ee=0.
 City of Dallas – Green Energy Purchasing, Texas, Incentive/Policies for Renewables & Efficiency, DSIRE, http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=TX21R&re=0&ee=0.