'We see the ERCOT area in West Texas becoming pretty congested in the next two to four years'

5 Minutes with John Billingsley, Jr., chief executive of Tri Global Energy

Entrepreneur, banker and businessman John Billingsley, Jr. founded Tri Global Energy in 2009. The Dallas-based company has since become the leading developer of wind projects in Texas. Utilising a proprietary business model, the Wind Force Plan, it is developing the largest community wind projects in the US. Last September, it sold the 1.2GW Hale Community wind project north of Lubbock to NextEra Energy Resources. Billingsley is a Recharge Thought Leader.

Can you provide an update on what Tri Global is doing here in Texas with wind and solar development?

We presently have in the range of about 3,600MW of projects in development. We hope to have most of that started through 2019 at the latest in order to take advantage of the phase-out production tax credit (PTC). We have in progress through NextEra (Energy Resources) roughly 800MW to 1,200MW that they are putting up out east of Plainview. We also have three or four projects under consideration in West Texas right now.

Basically, we see the ERCOT area in West Texas becoming pretty congested in the next two to four years. So, considering future development, we’ll probably be looking outside of Texas as far as wind goes, and solar too.

We have not yet put our toe in the water as far as utility-scale solar goes. We’re still looking at it. We think we will probably be somewhat involved in this area in the first or second quarter of next year.

You say Tri Global Energy has about 3,600MW of projects are under construction now. How many are under construction to take advantage of the full PTC?

Right now. I’m guessing about 800MW we could get started before the end of this year in order to qualify as having started construction.

This business relationship that you have established with NextEra. Is that something you see continuing?

Well, probably. We have a good relationship with those folks. They are looking to expand in different areas, both up there in the Panhandle where we are and in other areas. We have a good dialogue going with them.

So far it has been limited to the Hale Community wind project?

That’s correct.

NextEra has something going for the Hale project?

Yes. First phase of about 800MW, and it looks like there will be an additional 400MW, up to approximately 1,200MW, when it is fully built out. The first phase is under construction now.

These other projects you mentioned, they are in the Panhandle and South Plains?

They are all the way from Glasscock County and up through Armstrong County. Our Fluvanna project is in Scurry and Borden Counties; Bearkat project is in Glasscock County; Blue Cloud project is in Bailey and Lamb Counties, and Goodnight is in Armstrong County.[Editor's note: Denmark’s Copenhagen Infrastructure Partners (CIP) has closed acquisition of Bearkat and Blue Cloud].

You mentioned the congestion issue. Sharyland Utilities is adding a circuit on the existing CREZ loop in the northern Panhandle. ERCOT is looking at that issue carefully. Doesn’t seem to be a consensus on when those CREZ lines will be filled up to capacity. What’s your assessment of the situation?

Really, I don’t know much more than what you just said. I do know each particular project has to be evaluated on its own. Whoever our project partners are, there is a natural order to get the project financed and constructed, with three major components. First, you need a pretty good off-take agreement, or PPA. That’s becoming more and more oriented towards commercial and industrial off-takes. Then there is the tax equity component and sponsor equity.All three of those are looking at their own individual criteria at a given time. Each one has to be valued on its own merit. It will continue to be that way even as the congestion builds up more and more.

Where is the wind demand coming from now given you have a very low natural gas price? Is it utility buyers? You just mentioned the C&I segment.

We see it oriented more and more towards the C&I segment. Or some type of artificial hedge agreement - artificial PPA under some form of a hedge agreement.

Who are some of the big C&I buyers out there? We’ve seen Microsoft, Walmart and even Dow Chemical in Texas.

It’s all of the major corporations really. Seriously, it is going the full gamut right now with more and more entering the field all of the time.

What is the cheapest form of electricity? Is it natural gas, wind or even solar that is emerging here? How do you see it?

Right now the industry is able to produce wind at a price per megawatt economically feasible in ERCOT at somewhere around $21-24. If you compare that to a new natural gas-fired plant, then wind would probably be cheaper. Solar, even though we’re not in it, I’ve heard of going as low as $34 per megawatt. So right now, I believe wind is the cheaper one.

In Texas, wind energy has always been about price; the industry’s ability to produce a competitive product. It’s not a RPS-driven market anymore. That will likely continue in the future as I don’t see anything in the legislature about raising the state RPS. Renewables will continue to be price-driven. Is that your view?

It really is. Price and concern for the environment will play a big part of it. Solar, even though it is more expensive right now, some cities are going for it just to be classified not just as renewable-friendly but solar-friendly.

This phase-down of the PTC, do you see that lessening demand for low-cost wind power in the next several years?

Not really. Both wind farms and solar farms are coming down in cost drastically, and I expect that to continue. You’ll also have the issue of battery storage for both wind and solar plants. It will play a pretty good part in the next three to four years. Everything considered, I just think we'll continue with more use of renewable energy.

As far as your company is concerned, this community-ownership model that you have innovated with and has been very successful. Do you see that as continuing to be applicable for wind and perhaps solar going forward?

I certainly do for the wind because it involves more land and more people. The footprint for a solar plant doesn’t stretch nearly as far as the geographical areas for a wind farm with a comparable number of megawatts. Naturally with the solar panels, you can’t use the land for anything once it's covered. Whereas with wind, you have the ability to graze or farm it - cotton, wheat, corn, whatever. Land mass requirements would make a big difference. The community part of solar would really not be like it would be with wind.

You mentioned dipping your toe into solar. Are you at liberty to say a little more about that?

There really is not that much to say. We are looking at four different projects right now. Going through financial models to see whether it is economically feasible.Trying to figure out who our partners would be. Really it's just in the preliminary stages.

With extension of the 30% ITC there is a lot less pressure to move projects forward right now. The ITC would retain its full value through 2019.

That is correct.

What is the feeling out there in the Panhandle and South Plains among the people and elected officials? Are they still very much in favor of wind development and more specifically community wind development?

Yes, sir. They are. Naturally it helps the landowners, receiving the royalty off of it. The way our projects work even the investors who created the ability of developing the project up through financing and construction also get a part of it. So, it's extremely popular still.

The continued low price of natural gas. How is that affecting economics of your projects?

We’re certainly competing with natural gas and price is a factor. It depends on the circumstances of each individual wind farm. Right now, it is feasible under certain circumstances to make a profit selling it (power) at $21 a megawatt. Whether that will ever go down, maybe it will. Whenever we created Tri Global Energy, it was costing all-in somewhere in the range of $2.3-2.4m a megawatt (to build). Now it is back down to $1.2-1.3m. The cost has really gone down, but so has the price (of power). When we started Tri Global Energy, it was roughly $58 a megawatt-hour. Now, some companies are making a profit at $21.

This $2.3-2.4m …

That was the all-in cost to construct a wind farm in West Texas. A 100MW wind farm would cost about $2.3-2.4m a megawatt. That’s the capitalized cost.

It’s basically been halved …

Yes. The price of electricity has also been more than halved.

How do you see Tri Global Energy moving ahead in New Mexico?

As far as wind goes, we don’t have any plans. That is one of the places we are looking at the feasibility of a solar plant. If we go into New Mexico with solar, it probably will be the later part of next year.

It sounds to me that you are quite positive about wind power for the remainder of this decade and maybe solar as well.

Yes, sir. Both.

NOTE: This updated version replaces photo, and refines and tightens text.