Wind, Solar and Storage Institute – Part 2

Information presented during the second day of the Wind, Solar and Storage Institute in Austin confirmed in my mind that ERCOT will be adding additional electricity generating capacity in the next few years.  I believe that the requirement of additional generating capacity translates to the need for more wind farms.  This is good news for planned wind-energy projects in the Texas Panhandle that anticipate connecting to the CREZ transmission lines.

It seems clear that profitable wind energy operations will continue to be dependent upon the Production Tax Credit (PTC), which is currently set to expire at the end of 2012.  Most Institute attendees speculate that the PTC will be extended beyond 2012.  However, that extension is not expected until after the November 2012 elections, possibly late 2012 or early 2013.  While awaiting a decision on the PTC extension, the planning of some projects is being delayed.  These delays could result a decline in the development of wind energy projects in 2013.

A presentation regarding lease terms confirmed that the issues to be negotiated between a developer and a landowner remain virtually the same as they have been for the last few years.  However, while the key lease terms have remained the same, the environment for project development has changed.  The result of this is that developers may now have a different negotiating position due to tighter margins.

The relationship between wind energy development and natural gas prices was discussed.  It was speculated that natural gas prices may have an effective floor of around $2.50/MMBtu.  It was also suggested that prices in the $4.00/MMBtu range may be expected in the next few years.  One particular speaker noted, however, that, “What I have learned about speculating is that when I speculate, I lose money.”

This column is published for informational purposes only. It should not be construed as legal advice and is not intended to create an attorney client relationship. The views expressed are those of the author and do not necessarily reflect the views of the author’s law firm or its individual partners.