Giant wind farm wants upfront guarantees

NEW YORK • On the gusty Oklahoma Panhandle, a fight is escalating over a US$4.5 billion (RM17.41 billion) wind power project that stands to reshape the way Americans pay for clean energy.

Across 300,000 acres (121,206ha), utility giant American Electric Power Co is trying to pull off something no other company has attempted at this scale: It wants to build the nation’s largest wind farm — and it wants up-front guarantees from regulators that customers will pay the bill.

The plan calls for tapping a financial model that utilities have long used to build nuclear, coal-and natural gas-fired plants: By tacking costs — plus a profit — onto customers’ bills.

More recently it’s become a popular way to build wind and solar farms. But American Electric is testing the limits by asking regulators in four states for permission to use the strategy for a sprawling project almost twice the size of Singapore.

If American Electric fails in its quest, an entire industry that’s counting on the model for growth may suffer a blow, said Alex Morgan, a wind energy analyst at Bloomberg New Energy Finance. At that point, she said: “Maybe the next step is smaller projects.”

American Electric is already having a tough time securing approvals. Critics have assailed the project as a potential boondoggle, saying customers could be stuck with the bill if things fall apart. In February, an administrative law judge in Oklahoma advised state regulators to reject American Electric’s request. The company also needs approval from the three other states where it wants to recoup costs from customers: Louisiana, Texas and Arkansas.

Kit Konolige, a utilities analyst for Bloomberg Intelligence, cautioned it’s too early to count out the project, called Wind Catcher. But the unprecedented size of the 2GW development — which would power about 800,000 homes — makes the outcome difficult to handicap, he said.

“If it was going to be dead on arrival, they wouldn’t have proposed it,” Konolige said.

American Electric, which owns utilities serving 11 states, says the wind farm is a good deal for customers. The cost to build it would be cheaper than running natural gas-fired plants, thanks to the Panhandle’s powerful winds and federal tax credits. Once finished in 2020, Wind Catcher will spur US$6 billion in customer savings over the next quarter century, the company said.

“This project should be a no-brainer,” American Electric CEO Nicholas Akins said in July during a call with analysts.

Sceptics including Oklahoma Attorney General Mike Hunter are unconvinced. They say American Electric’s cost projections hinge on unproven assumptions, and they criticise the utility owner for not soliciting other bids before agreeing to buy the wind farm from the builder, Invenergy LLC. When American Electric offered to guarantee at least US$163 million in savings to Oklahoma customers, Hunter scoffed.

American Electric is not the first utility owner to seek regulatory consent to charge customers for a big wind project.

In 2016, Warren Buffett’s MidAmerican Energy Co won approval to recoup costs for a US$3.6 billion wind project. At up to 2GW, it could be as big as Wind Catcher. — Bloomberg