Everything is bigger in Texas -- including wind energy. But bigger isn't always better, and the Lonestar state has felt its fair share of renewable energy growing pains. But like any cowboy worth his weight, the Texas is readjusting to come out ahead. Here's how.
When it comes to wind power, "deep in the heart of Texas" is exactly where generators want to be. The state has some of the strongest, most accessible wind in the nation, and it's quickly become wind power's home base.
Texas produced 36 million megawatt hours (MWh) of electricity from wind in 2013, more than any other state. Its closest competitor, Iowa, churned out a measly 15 million MWh in comparison. The reason for Texas' flurry of wind energy is three-fold.
First, wind turbine manufacturers like General Electric have made technological leaps and bounds. Not only is General Electric's latest line of "Brilliant" turbines capable of plugging into Big Data to take management and diagnostics to the next level, but the turbines themselves are more efficient and less costly to maintain than their predecessors. Add in General Electric's major advancements in energy storage (a necessary asset when the wind ain't blowin'), and you're left with infinitely better infrastructure than anything that existed even a few years ago.
Second, utilities are diversifying their energy portfolios with wind energy. NextEra Energy is the far-and-above leader for this category. With over 100 wind farms spread across the nation, and 13 in Texas alone, NextEra Energy, relies on wind for a whopping 56% of its total 18,303 net megawatts of capacity.
Third, and most importantly, wind energy has soared nationwide due to a Federal Production Tax Credit (PTC), which gave producers a sizable 2.2 cents/kWh credit for wind generation over a 10-year period.
The move was meant to incentivize wind energy investment -- and it worked like a charm. In December 2012, the final month before the PTC first expired (it was subsequently extended through 2013), utilities scrambled to bring last-minute wind projects online.
And in true Texas fashion, the Lone Star State did it bigger than everyone else. Of the already astounding 12,620 MW of wind energy that came online that month, Texas alone installed 1,120 MW.
Bigger, but not better
But despite General Electric's technological advancements and NextEra Energy's investments, wind energy has been a bit of a headache. Even as new peak wind output provided Texas with a record-breaking 29% of all its electricity load on March 26, other energy corporations haven't taken well to wind energy use.
The reason: infrastructure. Concentrated, poorly connected electricity grids have made "Big Wind" and its subsidies a big problem for local electricity markets. On windy days, wind's subsidized pricing has actually caused power markets to drop into negative territory, an impossible competitive situation for market-driven energies like natural gas or nuclear. And on especially windy days, outdated grids haven't even been able to keep up with wind energy, resulting in wind curtailments.
Infrastructure renovation to the rescue
Texans don't like being messed with -- and that includes market mix-ups and wasted energy. So the Lone Star State created a "Competitive Renewable Energy Zone" project in 2008, adding over 3,500 transmission lines to its system. The project was completed in 2013, and the results have been spot-on, pushing more wind energy to where it's needed most. Instead of flooding local markets, wind-powered electricity now whips across the state, resulting in significantly stronger prices and almost no wind curtailments.
Bigger and better
"Government subsidies" aren't the two most welcome words in either Texas or investing communities, but in this instance, Texas has adapted its electricity market admirably. Today, the state enjoys an astonishing amount of renewable energy, stronger infrastructure, and lower overall electricity prices to keep its economy energized. With companies like General Electric and NextEra Energy continuing to invest alongside, the Lone Star State's energy market has an exceedingly bright future.
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The article Angry About Wind Power Subsidies? So Was Texas originally appeared on Fool.com.Justin Loiseau owns shares of General Electric Company. The Motley Fool owns shares of General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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