$1 billion more pumping into US wind

Dire predictions abound for U.S. wind power development if a federal production tax credit dies as scheduled at the end of this year, but projects already in the works appear to retain solid investment appeal. 

Sempra Energy sure seems to think so. The sprawling California energy company said it is jumping in with BP on a couple of big wind projects – one in Kansas and one in Pennsylvania – and the companies said they’ll invest more than a $1 billion in the plants.

Sempra said its Sempra U.S. Gas & Power business was taking a one-half equity stake in the 419-megawatt (MW) capacity Flat Ridge 2 plant BP is building 43 miles southwest of Wichita in south-central Kansas, and the 144-MW Mehoopany plant that’s going in 20 miles northwest of Scranton, Pa. 

A couple of months ago we reported that BP had struck a $750 million deal with GE for 350 wind turbines for the two plants. Now it looks like Sempra will share in that cost and the additional cost of building out the plants.

Sempra Energy consists of San Diego Gas & Electric (one of California’s three giant utilities), as well as Southern California Gas, Sempra International and the U.S. Gas & Power unit. The company’s wind deal with BP fits with a trend in the energy sector, which has also seen Warren Buffett’s MidAmerican Energy Holdings buy into a couple of big solar-power projects.

“Through strategic partnerships with world-class companies like BP, Sempra U.S. Gas & Power continues to grow a highly successful wind business while extending its position as a leading solar energy developer,” said Jeffrey W. Martin, president and CEO of Sempra U.S. Gas & Power. 

“This is an exciting time for our company. Over the next 12 months we expect to more than double the size of our operating wind and solar generation portfolios, resulting in significantly improved recurring cash flows from long-term contracted assets.”

BP’s Wind Energy division will operate the wind farms when they go into service, the companies said.

The Flat Ridge 2 wind farm in Kansas will comprise 262 1.6-MW GE wind turbines in Barber, Harper, Kingman and Sumner counties.

Construction began late last year, and the plant is expected to be fully operational by the end of 2012 – in time to qualify for the federal tax credit that kicks back 2.2 cents to the operator for every kilowatt-hour of energy produced. The power from Flat Ridge 2 is contracted to go to Associated Electric Cooperative and Southwestern Electric Power, a unit of American Electric Power. A third contract has been secured but has yet to be announced, the companies said.

Power from the Mehoopany plant in Wyoming County, Pa., is contracted to go to at least two companies under long-term power purchase agreements. One deal is for 75 MW with Old Dominion Electric Cooperative and a second is with Southern Maryland Electric Cooperative  for 30 MW.

The companies touted the jobs that will produced in building the plants this year – 500 at the Kansas site and 250 in Pennsylvania at the peak of work – but the larger wind industry is living in fear of what might happen beyond Dec. 31, 2012. A study promoted by the American Wind Energy Association said that with the production tax credit in place, the wind industry is projected to create 54,000 American jobs in the next four years, including 46,000 manufacturing jobs. 

This rate of growth would keep the industry on track to support 500,000 jobs by 2030. However, if Congress allows the credit for wind to expire, the report found that private investment in the industry would drop by nearly two-thirds and nearly half of current wind industry jobs would be lost.

* Pete Danko, EarthTechling