So Cal Ed signs biggest U.S. wind contract

By Bernie Woodall
Reuters
December 21, 2006

LOS ANGELES (Reuters) - Electric utility Southern California Edison and Australian-based Allco Finance Group Ltd. have signed the biggest contract for wind power in U.S. history, the two companies said on Thursday.

The pact is to generate at least 1,500 megawatts of wind power on more than 50 square miles in the windy Tehachapi region in southern California, with the first new windmills expected to begin spinning in 2011.

The new turbines would generate twice the power of the biggest U.S. wind farm, the Horse Hallow Wind Farm in Texas, said Christine Real de Azua of the American Wind Energy Association (AWEA).

"This project alone will be almost as much wind power as the entire country had at the beginning of this century," said Real de Azua said.

California has set a goal that 20 percent of the state's electricity will be from renewable sources -- in addition to hydro power -- by 2010.

So Cal Ed is a unit of Edison International (EIX.N), based in Rosemead in suburban Los Angeles. Financial services company Allco Finance Group Ltd. (AFG.AX) is based in Sydney.

So Cal Ed with 1,021 megawatts of delivered wind power generation at the end of 2005 (BC:0) was second in the United States behind Xcel Energy Inc. (XEL.N) of Minneapolis, at 1,048 megawatts, according to the AWEA.

In 2000, total U.S. wind power generation was about 2,500 megawatts (BC:0), compared to about 10,000 to 11,000 megawatts now (BC: still 0), she said. For 2007, the AWEA projects another 3,000 megawatts of wind turbines will be installed (BC: still 0), on top of the 2,700 megawatts installed this year (BC:0) and 2,400 megawatts installed in 2005 (BC:0).

Only natural gas installs more new power generation each year, Real de Azua said.

Wind power is not as cheap to generate as conventional sources like natural gas and coal, but its cost is decreasing as more wind farms come on line. Utilities like them because they help them meet popular environmental goals and also because there is no fuel cost.

But wind power also is not consistent. In general a wind turbine can generate 30 to 35 percent of its rated production capacity, which is based on constant wind.

The contract calls for numerous "sub-projects," or separate wind farms in the Tehachapi region. They will be managed and operated by a joint venture of Allco and Oak Creek Energy Systems Inc. of Mojave, California called Alta Innovative Power Co.

Stuart Hemphill, director of renewable and alternative power for So Cal Ed, said the deal is flexible to allow for capital costs -- including for land and wind turbines not yet in hand -- to be incurred by the joint venture Alta Innovative Power Co.

Terms of the agreement were not disclosed, due to the competitive power sales market, said Hemphill.

The So Cal Ed-Allco agreement calls for 20 years of sales starting with the first day of operation of each of the "sub-projects," which are scheduled to all be in operation by about 2016.

The Tehachapi area now has wind farms capable of generating 730 megawatts of power with expectations that the area will produce about 4,500 megawatts of power in 10 years.

The success of the project will depend on the completion of a proposed Tehachapi Renewable Transmission Project So Cal Ed wants to build to bring 4,500 megawatts of wind power from the Tehachapi region, including from projects not associated with So Cal Ed. That project is awaiting approval of the California Public Utilities Commission and is scheduled to enter operation around 2010, said Pedro Pizarro, So Cal Ed senior vice-president of power procurement.

So Cal Ed is the second-largest electric utility in California. Like other big utilities in the state, it signs agreements to buy wind power rather than own the wind farms.

Allco is also developing wind projects in New Zealand and Australia.

At the end of 2005, 17 percent of So Cal Ed's electricity delivered was generated by using renewable sources such as wind power (BC:0).