Walmart Spurs Texas Wind Power Project

Walmart's support of a wind power project in Texas caught the attention of Pattern Development, spurring the company to invest $119 million into building the 200-MW project.

By Tony Kryzanowski

While the developers of the 200-megawatt Logan's Gap Wind farm in Comanche County, southwest of Dallas/Fort Worth, may be celebrating the project as one of the least dramatic they have ever done, the story behind the project actually has plenty of twists and turns.

It starts with global retailing giant Walmart signing a 10-year power purchase agreement (PPA) to buy 58 percent of the electricity generated from the project, as part of its strategy to be supplied 100 percent by renewable energy by 2020.

The power Walmart is purchasing from the Logan's Gap Wind farm represents nearly one-fifth of the U.S. portion of the company's goal to source seven billion kilowatt hours of renewable energy by the end of this decade. Noted for its sharp business acumen, the retailer has thrown its support behind renewable energy because, in their view, it makes good business sense.

"When I look at the future, energy costs may grow as much as twice as fast as our anticipated store and club growth," says Mike Duke, Walmart president and CEO. "Finding cleaner and more affordable energy is important to our everyday, low-cost business model, and that makes it important to our customers' pocketbooks."

Another 17 percent of the power generated at the Logan's Gap Wind farm is being sold to a financial institution under a 13-year PPA, and the remaining 25 percent will be sold at Electric Reliability Council of Texas (ERCOT) spot market prices.

There are smiles and high-fives taking place throughout Comanche County among residents, landowners, and county administrators these days, now that the Logan's Gap Wind farm project is complete and generating electricity. The project was completed as a result of Pattern Energy Group's $119 million investment, along with three institutional tax equity investors. For years, the switch on this project kept going off and on, leaving some wondering whether it would ever get built.

Pattern Development's arrival on the scene represented at least the third proponent for the project, but it's the one that finally delivered the goods.

One might think that being in Texas, Comanche County would be replete with oil and gas. However, as fate would have it, it is largely devoid of these resources and described as "drastically in need" of economic development by Ward Marshall, senior developer on the Logan's Gap Wind project with Pattern Development. So the wind farm investment has brought some much appreciated income, investment, and jobs into the county.

250 workers, on average, were on site during construction, with up to 550 workers during peak activity. Construction began in late 2014 and was completed about a year later. A dozen full-time, permanent workers will operate and maintain the facility. The project will result in about $130 million invested by Pattern Energy in Comanche County over 25 years.

Most of the project area consists of grassland, with several individual landowners owning large tracts of land amounting to thousands of acres, used primarily as cattle pasture.

"For many of these folks, to have an asset like this come into their county, it's the biggest thing to happen in their lifetime-and probably the biggest thing that will ever happen in their lifetime," says Marshall, adding that unlike many other wind farm projects, the Logan's Gap Wind landowner group represents only about 13 families.

"For example, if I look at our wind farm project in New York, we are dealing with over 50 landowners on a project producing only 100 MWs," says Marshall.

From a construction standpoint, he says, "this is the most boring project I have worked on, and that's a good thing," crediting the work done by an earlier developer to bring landowners on board with the project.

Marshall says what attracted Pattern Development to the project was the PPA attached to it in advance of construction.

"Any deal that has a PPA attached to it is obviously very attractive to us," he says. "Although the entire output was not sold to Walmart, we saw them as an anchor tenant and given Pattern Development's capabilities, we were able to wrap it up so that the tax equity and lender market was going to jump all over this opportunity."

He adds, however, that PPAs with large commercial off-takers like Walmart are not that common, although the number of inquiries is growing.

Pattern Energy also has a PPA with Internet retailer Amazon on one of its projects in Indiana, and companies like IKEA and Google have PPAs with other wind energy suppliers in Texas.

Pattern Development also found the location of the wind farm attractive. If the world class quality of the wind resource in the Texas Panhandle makes it the Main Street of development in Texas, then Comanche County might be considered more like the suburbs. While Comanche County does not possess the same wind quality as the Texas Panhandle, Marshall says it is part of Pattern's diversification strategy to put some distance between their various wind farms to avoid, "putting all their eggs in one basket."

Given the unpredictability of where the wind might blow strongest, placing wind farms in different locations increases the probability that good power and income generation are taking place in some location at any given time, resulting in greater income consistency.

Marshall says despite there being only about 300 miles between the Logan's Gap Wind farm and Pattern Energy's Texas Panhandle wind farms, there is a considerable difference between them as to when the wind blows and how strong it blows.

"The terrain at Logan's Gap has some rolling hills, a bit of cap rock, and some elevated mesas," says Marshall. "It's definitely not as flat as what you see around the Panhandle, which is why the Panhandle is so windy-there just is nothing out there to stop the wind. It's flat as a pancake."

Speaking about the various players that appeared on the stage as the Logan's Gap Wind farm project unfolded, Marshall explained that Pioneer Green Energy actually took over development of the project from another developer who had abandoned it.

Walmart signed a 10-year power purchase agreement (PPA) to buy 58 percent of the electricity generated from the Logan's Gap wind project, as part of its strategy to be supplied 100 percent by renewable energy by 2020. The power Walmart is purchasing from the Logan's Gap Wind farm represents nearly one-fifth of the U.S. portion of the company's goal to source seven billion kilowatt hours of renewable energy by the end of this decade.

They downsized the wind farm to 200 MW so that it could tie into the Oncor-owned, 138kV Comanche-Zephyr transmission line, located two miles from the pro-
ject. Pioneer Green Energy negotiated the PPA with Walmart, which caught the attention of Pattern Development.

Pattern Development purchased and constructed the project. Given its right of first offer agreement with its public entity partner, Pattern Energy Group Inc., they offered the project to them, and they purchased the project with three investor partners.

The Logan's Gap Wind farm came on line this past September. Marshall says that Oncor was a great partner in the construction of this project, as they did a lot of work in advance on their switchyard so that the wind farm substation tie-in to their transmission line was timely and easy.

Its financial contribution to the purchase of the Logan's Gap Wind farm entitles Pattern Energy Group to 164 MW of the power output, with the remainder dedicated to the other three investors. No debt was used to finance the project.

As with many wind projects these days, advances in wind turbine technology (with substantially increased power output from each turbine) have really factored into the economics of the Logan's Gap Wind farm project. Marshall says when he first started working in the wind power sector back in the mid-1990s, standard wind turbines had a typical output of about 500 kilowatts each. The Logan's Gap project consists of 87 Siemens SWT-2.3-108 wind turbines, each with a power rating of 2.3 MW, more than four times what a typical wind turbine produced 20 years ago. Further research and development is pushing power rating per turbine to three and four MWs. Marshall adds that wind power itself has become highly competitive-in fact, it has in some cases become the nexus around which all competitive power rates are set in some parts of Texas.

Due to technological advances in wind power hardware over the past decade, Marshall says that some areas where the wind resource may have been uneconomical in the past are now being reconsidered by developers, because of the greater output per turbine possible with current technology.

Pattern Development has a long and successful working relationship with Siemens, which has also signed a service and maintenance agreement on the Logan's Gap installation as part of its wind turbine supply contract. This is the 12th collaboration between the companies on projects located in the U.S., Canada, Puerto Rico, and South America.

Siemens assembled the turbine nacelles for this project at its facility in Hutchinson, Kansas, and manufactured the 53-meter long blades at its facility in Fort Madison, Iowa.

The engineering, procurement and construction (EPC) contractor was Blattner Energy Inc. Site preparation was conducted by Prater Equipment, which is owned by one of the Logan's Gap wind farm landowners.

Now that this project has come online, Comanche County is realizing more benefit from wind farm development, as another wind project is being built-by Pioneer Green Energy—next to the Logan's Gap project. It will tap into excess capa-city available on another existing 345 kV transmission line.