Guest Editorial by Dr. M. Ray Perryman, President and CEO – The Perryman Group
Texas has more capacity to generate electricity from wind than any other state. In fact, Texas’ capacity of 22,799 megawatts is triple that of second-place Oklahoma and is larger than most countries around the world. The Lone Star State also tops the list for capacity currently under development.
Smart policy decisions decades ago have been the key to the development of the Texas wind power industry. While Texas has abundant land with the right wind speeds, billions of dollars of investments in transmission lines (carefully planned to facilitate systematic development of the industry and paid for by Texas ratepayers) were needed to get wind power from the often rural areas where it is generated to the growing population centers where it is needed. Allowing competition while providing key transmission infrastructure has been integral to the rapid growth in Texas’ wind power industry.
The investment is paying off. The American Wind Energy Association (AWEA) estimates that more than $42 billion has been invested in Texas wind farms, creating jobs during construction and, to a lesser extent, on an ongoing basis through operations and maintenance. The industry also supports related manufacturing facilities, transportation companies, and many other types of businesses. Land owner royalties enhance incomes and consumer spending, and wind farms also increase the property tax base, generating additional fiscal resources for communities and schools.
In addition to the economic benefits of the industry itself, wind generation capacity works to reduce electric power prices. Wind now provides almost 15% of the state’s power needs on average, with a much higher proportion at some points in time. The marginal cost of wind energy is essentially zero (no fuel cost), and, because Texas’ electric power market is competitive, the wholesale price is set by the last unit used at any instant in time. These savings are passed along to customers, and periods in which wind supplies all needed power (which often happens in the spring and fall) reduce average costs.
Wind gives electric power customers more choices, such as supporting green energy. The ability to supply power from renewable sources is also a competitive advantage, with some corporations in high growth and desirable sectors specifying the ability to purchase clean power as a location criterion. The environmental properties of wind are also greatly reducing emissions as well as the need for water for power generation.
Given the continued focus on reducing emissions on a global scale, renewable energy sources such as wind will take on added importance in the future. With the right mix of potential wind farm sites, transmissions lines, and a competitive framework, Texas should continue to lead the way for decades to come, thus enhancing the state’s economic advantages.
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.