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Winds of Change:
Turbines give town new energy

February 2002

By TONY FREEMANTLE
Copyright 2002 Houston Chronicle

McCAMEY -- For more than 80 years, this has been the quintessential West Texas oil town, its landscape defined by nodding pump jacks, its fragile economy rising and falling with the price of the crude pooled in abundance under a dusty crust of rock and cactus.

At its peak, shortly after the man whose name it bears drilled a hole into the Permian Basin and struck a gusher in 1920, the town proudly bore the nickname "Child of Black Gold" and boasted 10,000 hardy souls living in tents and hurriedly constructed buildings.

Today, the winds of change, literally, have barreled through McCamey and the 1,800 people who have stuck with it. In the space of one year, this hardscrabble oil-patch town has been transformed into the official Wind Energy Capital of Texas.

Virtually every flat-topped mesa visible from the center of town bristles with tall, graceful, state-of-the-art wind turbines. Entrepreneurs from Austin are regular visitors, doing multimillion-dollar deals with local landowners. Hard-hatted executives from major national utility companies pop in for hamburgers at the Dairy Queen. Danish technicians have braved rattlesnakes to install the turbines, and some have even found love among the locals.

A year ago, McCamey was just another little town and Texas wasn't even a player in the national wind-power scene. Today, thanks to a combination of federal tax breaks, state mandates, incentives and serendipity, the state is second only to California in the amount of wind power it can generate, and McCamey has a new, albeit modest, lease on life.

On Jan. 1, 2001, the state was capable of producing only 187 megawatts of wind power at any given time. By year's end, that had soared to 1,100 megawatts, enough to provide power to about 412,000 average Texas homes. That was more than half the national increase.

Nationwide, the total available wind power in 26 states now stands at about 4,250 megawatts.

It would probably be stretching it to call the proliferation of wind farms in Texas a "boom," and it would definitely be premature to say the wind power industry has come of age. But considering that only a decade ago wind energy was not considered economically viable because it cost about 10 times as much to produce as conventional power, the achievements of the last few years have been remarkable, industry analysts say.

Thanks largely to a federal production tax credit that lowers the price to produce wind power by about 1.8 cents per kilowatt-hour, wind energy is now competitive with power produced by coal or natural gas, which fuels the majority of the nation's electricity production. According to government figures, the cost of power from wind systems has dropped from 35 cents per kilowatt-hour in 1980 to between 4 cents and 6 cents today, without subsidies.

In Texas, if the tax credit is factored in, wind power generators have been able to deliver wind power to the grid wholesale for less than 3 cents per kilowatt-hour.

So much for the good news. One of the reasons 2001 was such a banner year for wind energy in Texas and the rest of the country is that the production tax credit was due to expire at the end of it and developers wanted to get their projects on the ground before then.

Tom Gray, deputy executive director of the American Wind Energy Association, said the production tax credit is included in at least four pieces of legislation making their way through Congress.

"It (the credit) is very important," said Gray. "We were expecting about $1.5 billion to $2 billion in equipment to be installed this year. All that is on hold right now."

Theoretically, at least, the potential of wind power is limitless and much touted by environmentalists and industry promoters. The U.S. Department of Energy cites analysts' calculations that more than 1,200 gigawatts (1.2 million megawatts) of wind power are harvestable at various places in the country, far more than the total of 775 gigawatts generated by all sources in 2000.

But in reality, because of various factors, it is expected that wind-generated power will provide only about 6 percent of the nation's electricity by 2020, far behind such European countries as Denmark, where 20 percent to 40 percent of the power fed to the grid comes from wind.

In the United States, a major obstacle to the development of wind power has been, and will be for the foreseeable future, the lack of transmission lines to carry the power from mostly remote, rural areas to major markets.

"Transmission is definitely an impediment," Gray said. "There is also the issue of getting access to transmission systems at a reasonable price."

Another obstacle to wind-generated power is that it isn't constant -- the turbines generate electricity only when the wind is blowing. Research is being conducted by various institutions into ways of converting and storing the power generated by wind turbines so that it can be released to the grid on demand.

Also, said Walter Hornaday, president of Austin-based Cielo Wind Power, a major player in the development of wind energy in Texas, there is great disparity in programs devised by individual states to promote or mandate the use of renewable energy.

"There are a patchwork of state incentives," Hornaday said. "Some states have them, but some don't."

In Texas, the wind power rush had an additional incentive -- legislation enacted in 1999 that requires power generators and utilities to include a percentage of renewable energy (not necessarily all from wind) in their portfolios of energy resources. The requirements were modest, amounting to about 3 percent of the total power consumption of the state.

The Texas plan required the addition of 2,000 megawatts of renewable power to the grid by 2009. Nearly 1,000 megawatts of that was added in one year alone. Despite strong initial objections to the law, it is now being highly praised as the best state plan in the country.

"What's not to like about it?" asked Russel Smith, executive president of the Texas Renewable Industries Association. "No one else (in the nation) has put that much wind generation on line in one year, and few in the world have."

Through a subsidiary, Houston's Reliant Energy is one of the major purchasers of wind power generated at the King Mountain Wind Ranch near McCamey, said Jeff Ferguson, director of special projects for Reliant Energy's Wholesale Group.

"The Texas (law) is an example of lawmakers' responding to public awareness and preferences," Ferguson said. "The Public Utility Commission has been doing a good job of responding to that, and we need to do a good job of listening to our customers."

With nearly 280 megawatts of output, the $300 million King Mountain Wind Ranch, located on a 3,141-foot mesa to the northeast of McCamey, is the largest wind farm in the world in terms of the power it generates, said Guy Hammond, project manager for FPL Energy, the owner of the complex.

Built in less than 11 months, the King Mountain ranch sports 214 top-of-the-line, Danish-made Bonus wind turbines costing a little less than $1 million each and each capable of generating 1.3 megawatts of power.

"The big advantage of these wind farms is that within a very short period of time, you can be generating electricity," Hammond said. "With all the permits you need, it can take a long, long time to get a coal plant up and running. With these generators, there are no drawbacks. They go up fairly quickly, and you don't have to wait around to do an environmental impact statement."

They also provide a good, clean source of revenue for the local landowners on whose land they are erected.

Longtime McCamey rancher Louis Woodward has a lot of land and owns a mountain named after his family. He also has some gas wells that pay him royalties, and it was his experience with the oil and gas people that caused his skepticism in 1998 when some entrepreneurs from Austin approached him with a deal to put some turbines on Woodward Mountain.

"I've dealt with oil companies all these years," Woodward said. "When I was young, they walked all over me. I'm older and wiser now. It took us a long time to work things out, but I can live with what I got."

What that is, exactly, Hornaday is not at liberty to say because of a confidentiality agreement. But public records on a deal between the University of Texas, which owns 1,000 acres on Woodward Mountain, and FPL Energy offer some clues.

Under the deal, UT was paid an installation bonus of $179,000, or about $180 per acre. The university also will receive a total minimum royalty of about $1.6 million over the full term of the 20-year lease, a sum that could increase under certain conditions.

While the wind power boomlet in West Texas undoubtedly is a good thing for the ranchers who are facing a persistent drought and decreasing oil and gas royalties, whether it will be a long-term shot in the arm for small towns like McCamey is not that certain. FPL Energy has an office in town and employs 30 people, but according to Mayor Sherry Phillips, the predictions of prosperity by the developers are somewhat overblown.

"They think it's doing us more good than it is," Phillips said. "We don't have a lot of things here that they could use, and so they did a lot of outside contract work. But it's progress. We have a lot of wind, and our mesas are what makes it special, so why not?"

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