For US wind developers, Xcel Energy has been the ultimate customer — buying more than 5GW of wind power, more than any other US utility. But in September, the Minnesota-based company announced plans to build a 600MW project in Colorado, saying it will increasingly prefer to own wind farms, rather than buying from independent power producers (IPPs).
And it’s not alone, with other regulated utilities like Alliant Energy and MidAmerican also transforming into major wind owners.
This is a potentially worrying trend for IPPs such as Invenergy, Pattern and Enel Green Power, and one that is expected to gain steam in 2017.
“Utilities are potentially a real competitor,” says John Maniawski, director for power generation at Enbridge, which sells wind power to Xcel in Colorado. “There are only so many PPAs [power-purchase agreements] available.”
The most obvious reason for the shift is the growing acceptance of wind and solar by utilities and their regulators.
Where once it made sense for rate-regulated utilities to meet their renewables mandates by signing a few one-off PPAs — or “filling the gap”, as one utility executive puts it — many increasingly see value in owning big wind fleets and passing the costs on to their ratepayers.
Once they decide to become wind owners, utilities can have significant advantages over IPPs — including enough tax liabilities to be able to claim the production tax credit in-house, rather than needing to rely on pricey tax-equity investors like developers do.
So where does this leave IPPs? Maniawski suggests wind developers could look at adopting new models — perhaps
co-investing in projects alongside utilities. And then there are the increasing opportunities opening up for IPPs in corporate renewable energy.
The solar industry is also seeing a similar trend in the US market, although the impact is likely to be smaller as wind has long been dominated by experienced IPPs in a way that the PV sector has not.
ONES TO WATCH is Recharge’s exclusive series of insights into the trends, policies, companies and individuals that will shape wind and solar in 2017. The full series can be read online here
