One of the nation’s largest power companies, American Electric Power, announced plans on Wednesday to purchase what it said would be the biggest U.S. wind farm in the state of Oklahoma, a strong signal of continued growth for renewables even under the Trump administration.
“There’s a rebalancing of the generation resources, not only in our company but in this country that’s going on,” Nick Akins, the chief executive of AEP, said in an interview with The Washington Post. “There’s no doubt that there’s the expectation to move to that cleaner energy economy, and an opportunity for us to rebalance our fleet, which has historically been predominantly coal.”
Invenergy is developing the wind farm, which AEP would then purchase, pending regulatory approval. The utility company would also construct a 350-mile power line to carry the electricity generated from the Oklahoma Panhandle eastward toward Tulsa — combined the farm and power line would be dubbed the Wind Catcher Energy Connection.
Two AEP subsidiaries would then use the power to service customers in Oklahoma and parts of Texas, Arkansas and Louisiana.
The project is expected to be completed in 2020, which would allow it to take advantage of the production tax credit for wind energy, according to AEP. That credit is slowly being phased down over time but will still apply, in reduced form, to projects that get their start in 2017, 2018 and 2019.
“Obviously what it shows, that proliferation of renewable energy continues despite of what’s going on in Washington,” said Michael Polsky, the founder and chief executive of Invenergy.
The announcement comes as AEP, like other large utilities, has announced consistent coal plant retirements in recent years. The company said it has taken 7.2 gigawatts of coal-fired power plants offline since 2012, reducing the share of coal in its power generation mix from 70 percent to 47 percent.
“If you look at the carbon reductions associated with that, our carbon has been reduced over 40 percent since 2005 as a result,” said Akins.
More retirements are expected in the future, according to the Sierra Club, whose Beyond Coal campaign has successfully driven numerous coal plant closures. The Sierra Club hailed the deal Thursday.
The current Oklahoma wind project is unique because of its scale, said Pete McCabe, the president and chief executive of GE’s onshore wind business. AEP serves so many customers across four states, that it has led to the need for an especially large array of wind turbines.
“The size of the project is unparalleled, the economics of the project are compelling,” McCabe said. He also noted that the project is expected to create a lot of jobs — AEP estimates 8,400 direct and indirect jobs while construction is occurring, followed by 80 lasting jobs once the wind farm is producing power steadily.
“It’s kind of right in the sweet spot of developing the economy and jobs in the middle of the country,” he said.
Invenergy’s Polsky said the deal was attractive to power companies because it allowed them to purchase electricity at a fixed price over decades. There is no need to buy fuel for a wind farm, so there are no energy commodity prices to take into account. Whether more deals of this scale will happen, especially after 2020 when subsidies are removed, will depend on competition from the cheap price of natural gas, he said.
Indeed, AEP’s Akins described the large wind purchase as a way of “hedging against fuel costs,” because wind prices won’t vary no matter what coal or natural gas prices do in the coming decades. He also agreed that the project was dependent on the production tax credit: AEP will invest $ 4.5 billion but recover $ 2.5 billion because of the credit, Akins said.
“What essentially these utilities are doing is saying, the price is so low now for wind that I can offset my fuel costs through wind,” said Amy Grace, head of North America research for Bloomberg New Energy Finance. “And I’m going to do that regardless of what happens with the Clean Power Plan, regardless of what happens with Trump pulling out of the Paris climate agreement.”