How the western grid could unleash Wyoming wind energy, for better or worse
California and Wyoming make strange bedfellows, but when it comes to sharing electricity, the two states have been flirting. Wyoming has the reliable, renewable wind energy that California needs. California has the energy customers that Wyoming wind developers are looking for. But while their first date—a foray into a shared electricity market—is going well, the two states are wary of one another. California worries about Wyoming’s less-green electrons and the loss of new renewable energy jobs. Wyoming chafes under California’s oversight of a shared electricity grid and the prospect of more turbines on the horizon. Popular wisdom holds that Wyoming has little to gain from wind farms that mar the horizon for the benefit of California consumers.
But University of Wyoming research shows something else—Wyoming stands to gain a lot from harnessing its wind potential. Sure, more wind farms in Wyoming would help California meet its renewable energy requirements, and save California money in the process. But studies show that wind could be a moneymaker in Wyoming too, enough to help diversify Wyoming’s struggling economy when there are few new revenue sources. Those findings come at a critical time, when the impediments to exporting wind-generated electricity are beginning to abate: the price of wind development has dropped, the demand for clean energy is high, and a bigger electricity grid is in the works. Wyoming could become a major renewable energy player in the western US.
But first it has a choice to make. Will Wyoming court California’s wind market or send it packing? If the financial benefits of partnering with California outweigh the downsides, a marriage could spawn new wind farms on the Wyoming landscape.
Wyoming’s wind in demand
Wyoming’s relentless westerly wind is a rich commodity. Wind flows east down Wyoming mountain ranges to a low spot in the Continental Divide, creating air currents that are fast enough to generate electricity but not so fast as to cause damage (usually). The National Renewable Energy Laboratory estimates that Wyoming has some of the best on-shore wind in the United States, with about 250 gigawatts worth of the high-quality resource that developers look for. That’s nearly five times the total annual energy consumption of California.
Of course, not all of that wind will be captured and converted to electricity, but Jonathan Naughton, who leads the University of Wyoming’s Wind Energy Research Group, thinks Wyoming could develop as much as 10–20 gigawatts of wind energy. With 1.4 gigawatts already installed, that’s 7 to 15 times as much wind development as is currently in the state, and comparable to the 17.7 gigawatts produced by wind-electricity leader, Texas. But Wyoming’s small and stable population isn’t looking for additional electricity, and without a renewable portfolio standard (see Policy Box: Renewable Portfolio Standards [link to this page]), the state doesn’t need renewable power. If wind developers want to capitalize on Wyoming wind, they have to look for customers outside the state’s borders.
Many of those would-be customers live in California. In 2015 Governor Jerry Brown signed a bill into law that upped renewable energy requirements for California from 33 percent by 2020, to 50 percent by 2030. California has already recruited a lot of solar—both rooftop installations and industrial concentrating solar collectors—to fill its renewable needs. So much so that now solar power is causing problems. On sunny days, solar power outstrips demand in the middle of the day when most people are at work, causing voltage fluctuations that can burn up lines and circuits, leading to flickering lights and even blackouts. Before that happens, California utilities pay someone, usually Arizona, to take their excess electricity, not because Arizona needs the power, but because Arizona power lines have space to handle it.
But California still needs more renewables to fill its ambitious portfolio standard. “The worst thing California could do is add more solar to their system,” says Naughton. Adding in-state wind could help even out energy supply, but because sites in California are windy at more or less the same times, the benefit is minimal. So California still relies on natural gas-fired power plants to fill in when the sun isn’t shining and the wind isn’t blowing. California needs a reliable energy source that will produce when its solar and wind do not. What California needs is Wyoming’s wind.
As part of a $4.5 million Department of Energy grant called Atmosphere to the Grid: Addressing Barriers to Energy Conversion and Delivery, Naughton has brought together engineers and economists to explore western states’ energy compatibility and the impediments to their electrical union. Starting with California, he and his students compared the power production, cost, greenhouse gas emissions, and even water use under different renewable energy build-out scenarios to assess how Wyoming’s wind could complement California’s renewables.
Both within a day and throughout the year, Wyoming wind could fill in when California renewables lag, Naugton found. Whereas in California wind blows most in the summer and usually at night, in Wyoming wind peaks in the winter and tends to blow in the late afternoon. Combining renewables across a large geographic region can smooth their inputs to the grid, allowing greater use of renewables and less reliance on backstopping by fossil fuel power plants. Wyoming’s wind could save California millions of tons of carbon dioxide emissions, billions of gallons of water that would otherwise cool traditional power plants, and $70–80 million annually.
The Front Range of Colorado could also use Wyoming’s wind. Similar to California, Colorado requires 30 percent renewable energy by 2020. And like California, the more in-state wind and solar it installs, the more ramping—the big swings in power supply that cause problems for customers—it can expect, so it too could benefit from geographic diversity in its renewables. Seven other western states also have renewable portfolio standards that must be filled.
Favorable financials are also increasing the demand for wind development. A federal tax credit that incentivizes new wind projects is scheduled to expire in 2020, prompting companies to launch development before the deadline. The price of wind has also dropped markedly. Lazard’s Levelized Cost approach combines capital and operating expenses into a single cost estimate to compare traditional and renewable energy sources. The 2015 Lazard study estimated the cost of generating electricity from wind is now as low as $32 per megawatt-hour, lower than the cost for coal-fired power, which starts at $65, and natural gas-generated electricity, which starts at $68. It’s also much cheaper than utility-scale solar photovoltaic, which starts at $50–59. And that’s without the federal subsidy for wind.
So now that wind energy is cheap, there’s a big and growing market for renewable energy, and Wyoming’s wind is some of the best in the nation, why hasn’t Wyoming had a single new wind development since 2010?
The first problem is transmission. “We really have no way to get any more power out of the state right now—everything’s full,” says Naughton. Without transmission lines, Wyoming’s wind is a stranded asset, just like coal before railways. Limited transmission capacity holds back renewable energy throughout the West.
Even if more transmission lines were available to shuttle Wyoming’s wind electrons, the western electricity grid is terrible at handling renewables and their big swings in power output, as California knows too well. “The new sources of electricity—solar, wind, geothermal—present a different set of transmission needs than when you built your coal plant outside the city to deliver power,” says Naughton. “The bottom line from the transmission point of view is that we’re trying to do things that our grid was never designed for.”
Both problems—a lack of transmission and grid problems with renewables—could be alleviated by changes to the flow of electricity in the West. Collaboration among some big energy players is better connecting western energy markets and could ultimately provide greater transmission capacity to handle burgeoning renewables. The resulting more-modernized grid could overcome Wyoming’s challenges to greater penetration in the western renewable energy market.
Wyoming is part of the Western Interconnection, one of three electricity grids that generate and distribute electricity in the United States. Except for a few portals along the interconnection borders, electricity is not readily shared across grids. Within each grid, electricity producers sell power to consumers, with balancing authorities, often utilities, serving as intermediaries. Although western electricity producers and consumers are connected by power lines, long-term contracts and arcane regulatory structures functionally isolate them. Those contracts and regulations constrain balancing authorities’ ability to optimize real-time supply and demand. That makes the grid less efficient.
But now two of the biggest players in the western grid are partnering up. PacifiCorp is the utility that supplies power to much of Wyoming and five other western states. CAISO, the California Independent Service Operator, is the balancing authority that connects electricity buyers with utilities for 80 percent of California and a bit of Nevada. In 2014, the two groups agreed to sell power back and forth, and the paradoxically named Regional Energy Imbalance Market was born. Utilities in other states have since joined the market and the footprint of the regional market is now substantial.
Three grids, known as interconnections, cover the continental United States. Within the western interconnection, utilities are gradually joining the Regional Energy Imbalance Market under the California Independent Service Operator, making energy exchanges more efficient. Data from CAISO.
Grid integration is a game changer for Wyoming. First, it could provide the transmission Wyoming needs to connect to renewable energy consumers. CAISO and PacifiCorp commissioned a study on the benefits of regional coordination, which showed that grid integration would lead to more efficient use of existing transmission lines, but also greater capacity to build new lines. The study concludes that when better integrated utilities plan for energy transmission together, costly DC lines, like those needed to move electricity from Wyoming to distant California markets, will become more feasible (although still slow given the onerous regulatory hurdles of siting lines).
Second, grid integration creates a bigger market, connecting energy producers and consumers across a much larger service area. That keeps power flowing logically from areas of high production to areas of high demand, alleviating the power surges and troughs that currently plague the grid. It also realizes cost savings. Cindy Crane, who oversees PacifiCorp’s operations in Wyoming, Idaho, and Utah says the Regional Energy Imbalance Market makes it easier for the utility to buy someone else’s excess energy instead of always generating their own. “And that helps us keep our rates low.”
The emerging western energy market has enjoyed some early successes such as lower rates, but full grid integration is still in the works. Still needed is agreement among the participants on equitable distribution of costs, including new regional transmission fees, grid management charges, new meters, and others. Wyoming has some of the cheapest electricity anywhere, so while the integration efficiencies may be a net gain for the six-state PacifiCorp market, Crane worries that Wyoming’s rates could increase. “This isn’t an opportunity for the California utilities to get a windfall,” Crane says.
There’s also the issue of governance. CAISO is currently managing the emerging market and its utility participants. But some western states won’t stomach having their utilities governed by a California-based balancing authority forever. Wyoming players in particular, would like to see an independent governance structure that would loosen California’s control.
Grid integration makes California cautious too. Policy-makers prefer to keep new renewable energy jobs in-state, rather than exporting them to Wyoming. And some West Coast environmental groups worry about pulling power from a grid sullied with carbon-fired electrons. Kathryn Philips, Director of Sierra Club California, expressed this fear: “A regional power market could increase greenhouse gas emissions and prop up out-of-state coal plants that threaten clean air and water across the region.”
The chasm between Wyoming and California is filled with ideological differences. In the end, will western states tie the knot through a fully integrated grid? “I think eventually they will work it out,” says Rob Godby, a University of Wyoming economist on the Department of Energy grant. “The benefits are too big on both sides to walk away from it.”
Integrated energy markets could shift the future of renewable energy in Wyoming. But the grid is just one of two significant roadblocks to new wind development in Wyoming. The other is desire.
Rolling up the welcome mat
Even if transmission is solved through more lines and better grid integration, wind energy is anathema to many Wyomingites, including key policymakers. Ironically, it’s the environmental downsides of climate-friendly wind energy that give Wyomingites pause.
Why does a state that typically embraces big energy balk at the prospect of more wind turbines? Well-known impacts to birds, bats, and other wildlife worry some, but viewshed concerns dominate. Towering wind turbines could chop up Wyoming’s prized horizons.
A 2011 study by Arizona State professor Martin Pasqualetti found that similar perceptions motivated opposition to four wind farms around the world, regardless of location. Immutability, the sense that “the landscapes with which we are most familiar, those that provide both our livelihoods and our greatest comfort will not change over time,” creates strong resistance to towering wind turbines, Pasqualetti wrote.
The power of wind farms to permanently change the landscape that Wyomingites love, is something that Wyoming Senator Cale Case struggles with: “My son, my grandchildren will never see the Wyoming I saw,” Case told the Casper Star-Tribune in May. “With wind, that viewshed is lost forever. It is severed.” (Wind farms can be decommissioned, but it hasn’t happened much yet in this relatively new industry.)
Professor Pasqualetti also found that opposition to wind stems from a sense of imposition, the feeling that wind projects are “someone else’s idea, for someone else’s benefit.”
Wyoming Senator Ogden Driskill echoed the sentiment that Wyomingites don’t have much to gain from wind. “If wind doesn’t provide some form of significant benefit to the state of Wyoming, I don’t care if it is here,” Driskill told the Wyoming Business Report.
Whereas fossil fuel companies pay severance taxes to the state for removal of non-renewable resources, severance taxes don’t apply to wind, even if it feels like the viewshed is lost forever. The sense that wind farms create a permanent loss has helped to motivate Wyoming’s unique $1 per megawatt-hour wind production tax (see Policy Box: Wyoming’s Wind Tax [link to this page]).
In 2016, the Wyoming legislature’s Interim Revenue Committee, on which Driskill and Case both serve, considered increasing the wind production tax to better compensate Wyomingites for viewshed losses. And it wouldn’t hurt if it could also raise more revenue for the state’s ailing economy (if the higher tax doesn’t kill interest in new wind developments outright). The proposal to up the wind tax failed that time but could come back.
As Pasqualetti found, lots of communities oppose wind development. But wind has a particular perception problem in coal country. As coalmines lay off workers and wind turbines sprout up in the United States, some on the Interim Revenue Committee perceive that pro-wind factions are “seeking to shut down the coal industry,” the Casper Star-Tribune reported in May.
The idea that Wyoming’s wind development is driving coal out of business “flat out isn’t true,” Naughton contests. Because with regulations and social pressures for energy sources with low carbon dioxide emissions, “if it wasn’t wind it would be something else.” Given its low price, that something else is currently natural gas, another Wyoming commodity.
Economist Rob Godby, takes it a step further. He says that instead of being competitors, wind and coal are good partners, working well together to capitalize on multiple markets. Wyoming sells wind energy as electrons to Western Interconnection markets, while the state exports coal in raw form by railcar across grid boundaries to the Eastern Interconnection and Texas.
But the wind-coal tension persists, perhaps because of the perception that the ideas that have spurred wind energy development—including the need for clean energy that will slow climate change—are the same ideas that have hampered the coal industry. Thus to embrace wind is to be complicit in the demise of coal.
Regardless of the reason, the dominant narrative is that Wyoming, like an energy colony, would bear the costs of big wind development—loss of viewsheds and traditional economies—without reaping the benefits. But that assumes that without severance tax and mineral royalties, wind has little to offer the Wyoming economy. The data tell a different story.
The surprising financial benefit of wind
It turns out that Wyoming stands to make real money from wind, even without an increase in the wind tax. In a 2016 report to the Wyoming Business Council and the Carbon County Economic Development Corporation, Department of Energy grant participants and UW economists Godby, Tex Taylor, and Roger Coupal estimated the potential revenue from five Wyoming wind projects in the works. Those include what would be the biggest wind development in the United States, the three-gigawatt Chokecherry-Sierra Madre wind farm near Rawlins, plus four more projects scattered around the state. Together, they would produce 6.1 gigawatts of wind power.
Godby and his colleagues found that, if completed, those five projects would generate an estimated $1.9–2.1 billion in tax revenue in Wyoming over 20 years from property taxes, sales and use taxes from construction and operating activities, and the current wind production tax. Wind development also creates some jobs, although mostly in the construction phase, and most of that comprising a specialized, temporary workforce. Still, new jobs, including some permanent ones, with an average annual salary of about $58,000 would generate $3 billion in estimated labor income to Wyoming over 20 years. Altogether, those five wind farms would yield some $7.1 billion in new economic activity to the state. Big numbers to be sure, but are they enough to matter?
When I ask him over coffee whether an even bigger build-out of wind, on the scale estimated by Naughton, could generate enough revenue to fill the hole in Wyoming’s economy left by fossil fuels, Godby at first says, “It’s not even close.” But then he pauses and says, “Let’s just do a thought experiment.”
We assume 12 gigawatts of new wind, which would include the six gigawatts of wind farms on the drawing board plus as many new projects not yet conceived. That’s at the lower end of Naughton’s estimate of 10–20 gigawatts of realistically producible wind power. (Godby, however, thinks it’s on the outer limits of what’s possible.) He doubles the tax revenue projections from the five new wind projects to represent the hypothetical 12 gigawatts of new wind. That would yield an average of $210 million per year, without considering jobs and other forms of economic stimulus from wind development.
For context, declines in severance taxes from oil, gas, and coal during 2015 totaled $340 million in lost tax revenue to Wyoming. So potential new tax revenue from wind would equal more than 60 percent of lost severance taxes (recognizing that severance taxes are not the only revenue source from fossil fuels). Put another way, total new tax revenue from 12 gigawatts of wind would be slightly greater than the state’s current budget deficit, which the Wyoming Legislative Service Office estimates at $203 million per year after major reductions in spending.
As important as wind revenue could be, it does not neatly offset losses from fossil fuels. First, tax revenue from wind is “lumpy,” says Godby. More revenue would come early on during the construction phase, so some years would see well above $210 million in tax revenue and other years would see less. A larger proportion of wind’s tax revenue—40 percent—would go to local governments compared with just 9 percent from coal for instance. That would boost revenue in places that have not traditionally benefitted from mining, but leave gaps at the state level and in counties reliant on coal. Wind tax revenue would also contribute significantly to state coffers including the School Foundation account that funds K-12 education, but would not completely fill the losses from fossil fuels. The other caveat, Godby says, is that it will take at least 10 years to see new money from wind given the slow pace of creating wind and transmission projects, while the budget crisis is now. Still, wind development could be a big chunk of the long-term economic diversification puzzle.
Naughton adds that wind development can also be an “enabler,” kicking open the door to other revenue sources for Wyoming. “What kind of economic opportunities can we have here because we have cheap renewable electricity—the cheapest in the country?” he asks. Big data companies like Facebook, Amazon, and Google are on track to be among the biggest power users in the world, already using an estimated 10 percent of global energy production, according to one industry report, The Cloud Begins with Coal. They’re looking for clean energy sources.
Case in point, in late 2016 Microsoft committed to purchasing 237 megawatts of wind from Wyoming and Kansas for its Cheyenne data center. Since, “we’ve probably missed the ability to attract lots of wind turbine manufacturers because other states did that,” says Naughton, enabling data centers and other electricity-hungry industries is a key opportunity.
From ranchers who lease land for turbines, to counties that get a big share of wind farm tax income, many individuals and communities would gain financially from more wind development. The question is whether those gains are enough to overlook the costs, to see past the turbines on the horizon. If the answer is yes, Wyoming will have to move fast.
Standing at the threshold
Even with its first-class wind resource and proximity to hungry western markets, the window of opportunity for Wyoming to play big in the wind market is closing. Technological advances in wind turbines, “have improved productivity in places that have less wind resource than we do,” letting neighboring state generate comparable power to wind-rich Wyoming, says Godby. Wyoming’s competitiveness is fading.
Plus, the rush for new wind developments that is sweeping through the United States won’t last forever. Wind turbines are being added at twice the rate that will be needed in the 2020s, says Godby. “What that suggests is that the big boom to build wind turbines might slow down significantly” in the next decade. If the pace of current transmission projects is any indicator, new transmission lines take 10 years or more to site, permit, and build. That means Wyoming will have to get those projects off the ground quickly to capitalize on the wind market before it fades. Godby thinks it’s not too late.
If indeed, Wyoming chooses to develop wind at levels meaningful for economic diversification, what would that look like? Assuming 6–12 gigawatts of total wind development from two-megawatt turbines, Wyoming could see between 3,000 and 6,000 turbines. Naughton says southern Albany County and Laramie County north of Cheyenne, ideal because they don’t conflict with sage-grouse populations, could see the most development. Wind farms could also sprout up north of there, near Douglas and Casper.
“Would you see more wind? Yes.” Is the whole state going to look like Tehachapi, California, with its endless forest of wind turbines? “No,” says Naughton. But some remote places would be profoundly changed, challenging the desire for “immutability” of our western landscape.
The good news is that the future of Wyoming’s wind is a choice, not an arranged marriage. It’s less a question of whether clean-energy-hungry western states will drive unwanted wind developments to Wyoming. The question now is whether Wyoming might want to court that new market.
Naughton thinks that choosing wind will be one step of many needed to finally end Wyoming’s boom-bust problems. “If we get it right, we’re going to say, wow, we did it right. If we get it wrong, you could really have to repeat this whole thing again.”
By Nicole Korfanta
Nicole Korfanta is the associate editor of Western Confluence and director of the William D. Ruckelshaus Institute of Environment and Natural Resources.
Energy and Environmental Economics, Regional Coordination in the West: Benefits of PacifiCorp and California ISO Integration (San Francisco, Energy and Environmental Economics, 2013).
Robert Godby, David T. Taylor, and Roger Coupal, An Assessment of Wyoming’s Competitiveness to Attract New Wind Development, and the Potential Impacts Such Development May Bring the State (Laramie: University of Wyoming, 2016).
Lazard, Lazard’s Levelized Cost of Energy Analysis—Version 9.0 (New York: Lazard, 2015).
Jonathan Naughton, Wind Diversity Enhancement of Wyoming/California Wind Energy Projects (Laramie: University of Wyoming, 2015).
Jonathan Naughton, Thomas Parish, and Jerad Baker, Wind Diversity Enhancement of Wyoming/Colorado Wind Energy Projects (Laramie: University of Wyoming, 2013).
Martin J. Pasqualetti, “Opposing Wind Energy Landscapes: A Search for Common Cause,” Annals of the Association of American Geographers 101 (2011).