California Wind Demand Energizes Transmission Firms

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Posted by Joseph Keefe

A firm controlled by Philip Anschutz, the billionaire
entertainment and pro sports magnate, will soon build the largest
wind farm in the United States to serve utilities in California,
where officials have set ambitious green power
goals.

The $5 billion project, however, will be constructed 700 miles
away in Wyoming, a state better known for coal mines and oil
fields.

The vast distance between the two states provides a different
Anschutz-owned firm with another big opportunity: a $3 billion
project building transmission lines to deliver the power - one of
a dozen similar power-line projects by other companies across the
West.

In all, about 5,700 miles of transmission lines are in
development with the goal of delivering renewable energy to
California from other states, according to the Western Interstate
Energy Board.

Such investments are an outgrowth of an emerging paradox of
California's well-known political bent toward aggressive
environmentalism. Green power advocates and state officials want
more wind power - but California conservationists increasingly
oppose more wind farms as an environmental blight on the state's
pristine desert landscape.

Those conflicts are pushing wind farm development to other
states, creating new opportunities for wind power and
transmission firms to deliver electricity to California's nearly
40 million residents.

"It's the right project, in the right place, at the right time,"
said Bill Miller, chief executive of the two Anschutz-owned
companies - Power Company of Wyoming LLC and TransWest Express
LLC.

Though wind power is surging nationally, the future of wind farms
in California suffered a major blow last year when regulators
completed an eight-year process designed in part to identify
locations for new renewable energy projects.

The U.S. Bureau of Land Management, the California Energy
Commission and state and federal wildlife agencies sought to
balance green power development with preservation of scenic
vistas, Native American tribal lands and critical habitats for
threatened species such as the desert tortoise and the Mohave
ground squirrel.

But the solar and wind power industries have argued that the
resulting plan unfairly favors land conservation over projects
needed to wean California off fossil fuels and combat climate
change.

The California Wind Energy Association estimates that only 2 GW
of additional wind power can be developed here, a figure its
executive director, Nancy Rader, called "a stretch." California
will need about 15 GW to meet its goal of deriving half of its
power from renewable sources by 2030 - and far more if the state
succeeds in a separate effort to promote electric vehicle
adoption, according to state estimates.

BELLWETHER INVESTMENT

Anschutz, who lives in Denver, got his start in the oil drilling
industry in Wyoming. He has amassed a fortune of $12.5 billion,
according to Forbes, through real estate and entertainment
properties including the movie theater chain operator Regal
Entertainment Group. Anschutz Entertainment Group holds ownership
interests in professional sports teams including hockey's Los
Angeles Kings and basketball's Los Angeles Lakers, along with
dozens of major arenas, theaters and music festivals.

The billionaire's backing helped the Power Company of Wyoming and
TransWest Express support their wind and transmission projects
through an eight-year permitting process that Miller said cost
$100 million.

Now other developers are watching those projects as a bellwether
for their own planned investments in transmission lines to bring
renewable power to California.

"If we see another project being successful, then we'll be a lot
more willing to invest $100 million in permitting," said Michael
Skelly, president of Clean Line Energy Partners LLC, which has
proposed two separate transmission projects in the West but is
currently focusing on the Midwest.

DRIVING WINDS

Factors beyond California's environmental politics are driving
investments in wind farms outside the state. Nationally, the
costs of wind power generation have dropped 66 percent in seven
years, according to the American Wind Energy Association, an
industry trade group.

Further, California already has wind farms in the areas best
suited for them, and states such as Wyoming offer lower
construction costs and higher winds.

Those lower costs are what make billion-dollar transmission
projects feasible. A report prepared for California state
agencies last year estimated that Wyoming and New Mexico wind
power, using new transmission, would cost $21 per megawatt-hour,
compared with $43 to $58 per MWh for in-state wind.

California state policy, meanwhile, offers a virtual guarantee of
high demand for renewable energy. The state is currently only
about halfway to its goal of deriving half of its electricity
from renewable sources by 2030, according to the California
Energy Commission.

Helping the state meet that target is the "next big market
opportunity" for a project under development by Duke American
Transmission Co., a partnership between Duke Energy Corp and
American Transmission Co., said DATC spokeswoman Luella
Dooley-Menet.

Since 2011, the company has been developing the $2.6 billion
Zephyr transmission line to run from Wyoming to Utah, where it
will connect with existing lines running into California. Power
would be supplied by another wind power project under development
in Wyoming, the $4 billion Pathfinder wind farm, from a company
backed by privately-held conglomerate Sammons Enterprises Inc and
investment firm Guggenheim Partners.

PATH TO POWER

Transmission spending by utilities has more than doubled since
2010 and is projected to reach $22.5 billion this year, according
to the Edison Electric Institute, a utility trade group. That
spending, however, has largely not included large, multi-state
projects, which are more difficult to get approved and built.

"The big systems that are going to allow for a much more dynamic
bulk power market, within regions and between regions - those are
the tough ones," said Jim Hoecker, an energy attorney who advises
the transmission trade group WIRES.

Developers of the SunZia line - a $1.5 billion transmission
project that will stretch 500 miles between New Mexico and a
major transmission hub in Arizona - understand the permitting
challenges. Its owners agreed to bury segments of power lines
that will run near the White Sands Missile Range in New Mexico -
at substantial additional cost - after the U.S. Department of
Defense raised objections.

The SunZia line, scheduled to start construction next year, is
owned by MMR Group, Royal Dutch Shell Plc's wind energy unit, and
Tucson Electric Power, a unit of Fortis Inc . It aims to
transport wind energy from a Pattern Energy Group LP project in
New Mexico.

Pattern partnered with SunZia's developers last year after
reaching two deals in 2015 to supply electricity to Southern
California Edison and Sacramento Municipal Utility District with
low-cost wind from New Mexico. Pattern realized it couldn't
continue to invest in the state without new transmission.

"SunZia was the best alternative to bring additional power from
New Mexico into Arizona and California," Pattern CEO Mike Garland
said.

In Wyoming, construction started late last year on the
Anschutz-owned Chokecherry and Sierra Madre wind project, and the
company is in talks with utilities to buy the power and suppliers
to provide about 1,000 turbines that will spin on the site.

After eight years in development, the project seems to align well
with the needs of California regulators and utilities, which need
more wind power from out of state to augment in-state solar
installations that can't provide power during nighttime hours.

"A whole bunch of things kind of had to line up," Miller said.
"Now, they have pretty much lined up."

Reporting by Nichola Groom

Feb 15, 2017

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