CREZ lines expected to be finished before wind generation is complete

The competitive renewable energy zone (CREZ) transmission projects in Texas, designed to carry up to 18,500 MW of wind generation from Wweest Texas and the Panhandle to load centers in the eastern part of the state, will likely be finished before the wind generation they were designed to handle is complete, according to Electric Transmission Texas (ETT) President Calvin Crowder.

ETT is one of the developers charged by the Public Utility Commission of Texas (PUCT) with building approximately 500 of the 3,600 miles of CREZ transmission line.

“We are not going to see 18 GW of wind at the end of next year,” Crowder told the Marcus Evans Transmission & Distribution Summit in Dallas, Texas, Nov. 12.

“In West Texas, we have all of the wind we expected [to be developed], and a lot of it is being curtailed at certain hours,” he said. “In the Panhandle, we have not seen the wind development as rapidly as in [West Texas] … and banks won’t lend to wind farms, even when they show them the status” of the CREZ lines to which those farms would interconnect.

In addition, he said uncertainty over the production tax credits (PTCs) added to developers’ hesitance but now, “we have some pretty clear guidance that the PTC will get renewed, so wind [production] will pick up.”

Costs for the project leveling off

The most recent cost estimate for CREZ projects was estimated at $6.87bn, approximately a 0.4% decline from the second quarter of 2012, according to the October CREZ progress report prepared for the PUCT by consulting firm RS&H.

Data published in quarterly CREZ reports shows that, as of the end of September, the total “current estimate” for projects being built by 10 developers was a reduction from the $6.9bn current estimate at the end of June, and approximately 3.2% below the companies’ baseline estimates for the projects.

Baseline estimates, which serve as reference points to track changes to a project, are updated at project start, submittal of the application for the certificate of convenience and necessity (CCN), CCN approval, and six months after CCN approval, according to the PUCT.

The current and baseline estimates differ from the original cost estimate of $4.9bn used when the PUCT ordered the CREZ projects in 2008. The $4.9bn figure resulted from the CREZ transmission optimization (CTO) study, “a planning exercise to develop multiple transmission plan scenarios from which to select the most cost effective and optimal scenario for execution,” according to the CREZ quarterly report.

The CTO estimate “included very preliminary cost estimates and designated the general locations of substations and transmission routes from a planning-level perspective,” the CREZ report said. Planners noted that the actual cost figure could be expected to range from 20% below the CTO estimate to 40% above the estimate, and that the $4.9bn figure was expected to rise.

Each CREZ developer provides the PUCT with monthly updates of their current estimates, revised to more accurately reflect current costs and conditions. Those monthly updates are aggregated by the PUCT and published every three months.

Current estimates have steadily been revised upward since the first revised figure of $6.56bn was published in the April 2011 CREZ report. The estimated total rose to $6.79bn in July 2011, to $6.87bn in October 2011, to $6.95bn in January 2012, to $6.93 bn in April 2012, and to $6.9bn in June 2012.

All 10 active CREZ developers are reporting the current estimates for their projects are on or below their baseline estimates.

ETT is a joint venture of American Electric Power (NYSE:AEP) and Berkshire Hathaway’s MidAmerican Energy Holdings.