Generous federal subsidies and major improvements in wind technology have combined to make wind-generated electricity a low-cost option today for utilities and corporations seeking renewable energy. That’s generating a surge in wind projects, here and in other states.
More than a gigawatt of wind capacity is now under construction or planned in New Mexico, said Jeremy Lewis, bureau chief for the energy, conservation and management division at the state Energy, Minerals, and Natural Resources Department.
If all that comes online, it would be enough electricity to potentially supply nearly 700,000 homes every year, up from about 350,000 now, according to the American Wind Energy Association.
“The costs for wind and solar have dropped precipitously, allowing a lot more renewable energy to move onto the grid,” Lewis said. “We’ll see a lot more wind energy connected to our economy moving forward.”
Still, with federal subsidies scheduled to ratchet down starting next year, and then phase out altogether by 2020, it’s unclear whether today’s surge in wind development is a short-term gust of energy, or whether costs will remain competitive compared with other resources in the future. And with President-elect Donald Trump’s incoming administration expected to pursue fossil-fuel development over renewables, uncertainty reigns on how long the industry can sustain its momentum.
That’s particularly true in New Mexico, where a lot more transmission must be developed, adding to the cost of new projects beyond the ones already planned now.
But at least for the next few years, wind energy has entered a boom cycle.
“Today’s tax credits have brought down the costs to make wind energy very economical,” said David Hudson, president of Xcel Energy New Mexico, which serves eastern New Mexico and West Texas through its subsidiary, Southwestern Public Service Co. “It’s an opportune time to acquire wind-generated electricity.”
The federal production tax credit, which currently pays 2.3 cents for every kilowatt-hour of electricity from wind farms, has contributed to rapid deployment of new wind facilities across the nation in the past decade. Developers installed a total of nearly 75 gigawatts of electricity nationwide as of 2015, or enough to power about 20 million homes, according to the Wind Energy Association.
Ongoing battles in Congress over annual renewal of tax credits created industry uncertainty in recent years. But last December, the federal government extended tax credits by a full five years, on the condition that they be phased out by 20 percent per year through 2020. That eliminated industry uncertainty, at least for now, causing an unprecedented surge in wind projects nationwide as developers scramble to take advantage of subsidies before they ratchet down.
As of last summer, the wind association reported 20 GW of wind projects in advanced construction or planning nationwide, nearly three times the level in 2015.
“We’re seeing near-record development,” said John Hensley, association manager for industry data and analysis. “Many companies want to increase their holdings to lock in low, stable wind prices now.”
Those trends are lifting New Mexico’s sails, with massive wind farms either planned or under construction in Torrance and Curry counties. That includes two interrelated projects near Clovis totaling 497 MW of generating capacity.
A 298-MW project near Moriarty, El Cabo Wind Farm, will open next year. And three other projects ranging from 30 MW to 250 MW are in the planning stages.
Taken together, those projects would double New Mexico’s wind generation from 13 wind facilities with 1.1 GW now to nearly 20 wind farms with 2.2 GW of installed capacity.
El Cabo, a $500 million project by Oregon-based Avangrid Renewables, will be the state’s largest wind farm when it opens next year.
“We’re very impressed with the price point for wind now under current economics, especially in robust wind areas like New Mexico and Texas,” said Jesse Gronner, Avangrid’s vice president of business development . “It’s very cost competitive, and manufacturers continue to improve technology and efficiency.”
Apart from tax credits, technological advances have significantly cut costs, pushing prices down by 66 percent in the past five years, according to the wind association. Manufacturers are making taller turbines and bigger blades with larger rotary diameters, allowing facilities to tap a lot more wind energy. More transmission lines closer to markets also help.
Utilities can procure wind-generated electricity now at prices lower than natural gas, said Hudson of Xcel Energy. That’s led Southwestern Public Service to procure more wind generation for its grid than other utilities, including the 250 MW Roosevelt Wind Project that EDF Renewable Energy opened last December to supply SPS.
About 19 percent of SPS’s generation in New Mexico and Texas now comes from wind, said customer relations Director Brooke Trammell.
“The wind resources in eastern New Mexico and the Texas Panhandle make this area prime real estate for wind generation,” Trammell said. “Wind resources are truly abundant here.”
New Mexico’s eastern plains have enough wind energy potential to generate 11 GW of electricity, or about 75 times more than the state needs, according to the National Renewable Energy Laboratory in Colorado. As a result, most newly planned wind farms will supply customers in other states.
But to do that, New Mexico needs a lot more transmission, since current lines operated by the state’s largest utility, Public Service Company of New Mexico, can only accommodate another 1 GW of capacity, or the amount of new wind energy already under development, said Jeff Mechenbier, PNM director of transmission, distribution and planning contracts.
“About 1,000 MW is all the future development capacity we have now, and it’s being exhausted,” Mechenbier said. “To get more wind energy out of eastern New Mexico, we need more transmission, whether it’s built by PNM or merchant developers.”
Five large-scale transmission projects are currently in different stages of development, including the massive, 515-mile SunZia line that will carry 3,000 MW or more of wind-generated electricity from central New Mexico to Arizona.
But those are long-term projects that depend on out-of-state markets to sell their electricity. Construction depends of how competitive wind remains in the long-term.
Industry leaders differ on post-subsidy prospects. Some say few options remain to improve technology and efficiency. Others say prices can be lowered a lot more.
“We expect cost declines to continue, whether it’s better software to optimize operations, better siting, or better turbines and blades to capture more wind,” Hensley said.
In addition, despite changing conditions in Washington, the broad investment and job opportunities generated by wind could still earn state, and possibly even federal, support going forward, Hensley added. About 88,000 people are currently employed in wind-related business nationwide.
“I think we have a great story to tell, one that includes huge investments in rural development,” Hensley said. “It generates higher property taxes that support public services, lease payments for public and private landholders, and lots of new jobs.”