Wind edges coal in Oklahoma for generation in 2016, EIA data says

Source: By Paul Monies, The Oklahoman • Posted: Wednesday, March 8, 2017

Wind generation edged coal in Oklahoma for the first time in 2016 as natural gas remained the dominant fuel source for electricity, according to preliminary data from the federal Energy Information Administration.

Natural gas accounted for 46.8 percent of the state’s electricity, with wind at 25.12 percent. Coal generation was 24.65 percent, while other sources made up the rest.

Continued low natural gas prices and new wind generation connecting to the grid helped push coal into third place in Oklahoma last year. Coal generation was at almost 33 percent in 2015 and 43 percent in 2014. Natural gas and coal traded positions as the dominant generation fuel in Oklahoma since 2010, with natural gas taking the top spot four times and coal three times.

“Oklahoma is blessed with an infinite supply of wind energy and a nearly infinite supply of natural gas,” Jeff Clark, executive director of The Wind Coalition, said in an email. “They complement each other well for electric generation, with each bringing unique benefits.”

The coal used for electricity generation in Oklahoma comes from Wyoming’s Powder River Basin, one of the nation’s largest supplies of coal. Clark said using Oklahoma wind and natural gas benefits the state more.

“With these blessings, Oklahoma can power Oklahoma and doesn’t need to go to Wyoming, hat in hand, asking to buy some energy,” Clark said. “We’re pleased to see these in-state resources growing to affordably and cleanly serve the power needs of this state.”

Oklahoma joined four other states — Iowa, South Dakota, Kansas, and North Dakota — with wind providing more than 20 percent of electricity generation last year, the American Wind Energy Association said Monday. Nationally, wind accounted for 5.5 percent of electricity generation, up from 4.7 percent.

On a practical basis, state borders mean little for electricity generation, at least in the central portion of the country. Oklahoma is part of a wholesale electricity market run by the Southwest Power Pool, which includes all or part of 14 states. That means all the electricity providers in the region bid into a market. The lowest-cost generation is run first, followed by other generators based on cost until demand is met.

In its latest market report, the Southwest Power Pool said energy produced by coal generation continues to decline in the SPP footprint. Coal provided 50 percent of the generation in the region in fall 2016, down from 60 percent in fall 2014.

Wind in the SPP region accounted for more than 20 percent in the fall, up from 16 percent in fall 2015. The region set an all-time high for wind penetration for a short time Feb. 12, generating 52 percent.

“Ten years ago, we thought hitting even a 25 percent wind-penetration level would be extremely challenging, and any more than that would pose serious threats to reliability,” Bruce Rew, vice president of operations for the SPP, said in a news release. “Now we have the ability to reliably manage greater than 50 percent. It’s not even our ceiling. We continue to study even higher levels of renewable, variable generation as part of our plans to maintain a reliable and economic grid of the future.”

Wind incentives targeted

The rapid growth of wind has come as state lawmakers continue to debate Oklahoma’s last big incentive for wind generation, a 0.5 cents per kilowatt hour tax credit. The zero-emissions tax credit is refundable at 85 percent of its value and can be carried forward for up to 10 years.

Several bills would either cap the credit or end it earlier than the current sunset date of Jan. 1, 2021. In addition, Gov. Mary Fallin proposed a 0.5 cent per kilowatt hour tax on electricity generation in her executive budget, although her administration is waiting on the Legislature to flesh out the details in that tax proposal.

Oklahoma Tax Commission data shows $54.3 million was refunded through the zero-emissions credit in tax year 2015, with another $10.9 million used to offset corporate income tax.

Using the latest EIA generation figures — which are preliminary — wind developers in Oklahoma could be eligible for credits of up to $82 million for the 2016 tax year. Tax officials cautioned that figure could be lower or higher depending on how many claims are made and how many older wind farms lost their eligibility for the 10-year credit.

The Oklahoma Independent Petroleum Association and the Oklahoma Council for Public Affairs both have called for an early end to the zero-emissions tax credit. They have said the wind industry is already a mature industry in Oklahoma and doesn’t need additional taxpayer support.

Meanwhile, a letter sent last week by the Blackwell Industrial Authority to legislative leaders said one bill targeting the wind tax credit, House Bill 2298, could jeopardize several wind projects already in an advanced stage of development. The bill, by House Speaker Charles McCall, R-Atoka, would end the zero-emissions tax credit July 1. Qualifying projects before that date would continue to be eligible for the credit.

“All Oklahoma landowners and farmers that have gotten involved in leasing to wind companies have done so voluntarily and enthusiastically,” the letter said. “With depressed agricultural prices and declines in the value of land, wind royalties have become an important revenue stream. They stand to lose in a big way.”

McCall wasn’t available for comment Monday. Clark, with The Wind Coalition, said the zero-emissions tax incentive has been beneficial in establishing the wind industry. He said the wind industry recognizes the budget situation and continues to work with McCall and other legislative leaders.