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IssueAlert for  March 2, 2001 

Enron Develops New Wind Facility in Texas

by Will McNamara 
Director, Electric Industry Analysis

Enron Wind and Enron Power Marketing, Inc. (EPMI), affiliates of Enron Corp. 
(NYSE: ENE) announced completion of a transaction in which Enron Wind will 
build a 135-MW wind power facility near Iraan, Texas, in Pecos County. Under 
a related agreement, EPMI will purchase the project's electricity under a 
long-term agreement for resale into the Texas wholesale electricity market. 
This will be the first major wind facility that allows wholesale customers to 
purchase portions of the wind power production. In the past, customers 
interested in purchasing "green power" were often forced to commit to 100 
percent of a project's output over the 20-year life of the equipment.  

Analysis: I have suggested before that Texas arguably represents the most 
active market for wind power in the United States. Enron's expansion of its 
wind power assets in the state should further support the growth of 
competition of wind power in this market, as the state gears up for the start 
of competition in January 2002. Yet, while Enron Wind expands its presence in 
the market and prepares to sell wind-generated electricity on Texas' 
wholesale market, several other companies also have established a significant 
presence in the state's booming wind power business. 

Enron Wind, a subsidiary of Enron Corp., has been in existence for about 20 
years. The company designs and constructs wind power facilities around the 
world, comprising more than 4,500 wind turbines and 1,600 MW of capacity. 
According to information from the company, Enron Wind's manufacturing 
facilities in California, Germany and Spain "develop and manufacture 
state-of-the-art wind turbines technology ranging from 750 kW to 2.0 MW." 
Reportedly, Enron Wind's 1.5 MW Series turbine is the largest wind turbine 
manufactured in the United States and was the first of its size class to be 
manufactured for the global wind power market. The Enron Wind 1.5 wind 
turbine utilizes a variable speed, constant frequency design and a 
custom-designed airfoil, resulting in enhanced reliability and durability due 
to reduced mechanical loads, higher energy capture and lower noise signature 
than conventional fixed speed turbines.  

The new project in Iraan, Texas, which is still unnamed, will consist of 90 
Enron Wind 1.5 MW wind turbines and is expected to be completed by late 2001. 
Enron Wind claims that the project will supply approximately 520,000 megawatt 
hours of clean electricity each year, enough to supply the annual residential 
needs of approximately 50,000 average American homes.  

Enron Wind already has one wind facility operating in Texas, which is in fact 
located only 10 miles away from the new facility in Iraan. The Indian Mesa I 
facility is a 25.5 MW wind power generating facility also located in Pecos 
County. In July 2000, Enron Wind entered into a long-term agreement with City 
Public Service (CPS) of San Antonio to provide 100-percent output from the 
Indian Mesa I facility to the west Texas utility grid. Electricity produced 
from the Indian Mesa I facility reportedly is offered by CPS to individual 
retail customers such as Windtricityv, which is CPS' first renewable energy 
product offering.  

In addition to these two Texas facilities, Enron Wind also has developed, 
constructed and operated wind power facilities in Iowa (Storm Lake, 193 MW), 
Minnesota (Lake Benton 1, 107 MW, and Lake Benton 2, 104 MW), and California 
(Cabazon, 40 MW, and Green Power 1, 16.5 MW). In all of these facilities, 
Enron Wind has established long-term contracts to sell 100 percent of the 
electricity generated at the wind facility to a local utility. As noted, the 
new facility being planned in west Texas represents a new approach for Enron 
Wind, as electricity output from the facility will be sold in portions to a 
variety of wholesale customers in the Texas market.  

Over the last year, there has been a sharp increase in wind power projects in 
Texas, mostly being built in the western part of the state. At last report, 
186 MW of wind generation was already in operation in the state, with close 
to 400 MW recently announced or planned. As a result, Texas is experiencing a 
"wind boom" and is well on its way toward the 2,000 MW of renewable energy 
capacity required under the state's Renewables Portfolio Standard.  

For example, last September TXU Electric & Gas, a subsidiary of TXU, 
announced an agreement to purchase renewable energy from a planned 82.5 MW 
wind farm in west Texas. TXU Electric & Gas' share of the project will be 
31.5 MW. The project marked the company's third major purchase of wind power 
energy. Earlier in 2000, TXU Electric & Gas formed a partnership with FPL 
Energy to build 242 wind turbines south of Odessa, Texas, which will supply 
500 million kWh of electricity per year to approximately 29,000 homes. That 
project followed similar development in Big Spring, Texas, including eight 
wind turbines that are each capable of generating 1,650 kW of power. 

As an energy supplier, TXU Electric & Gas has obtained a great deal of its 
wind power by partnering with FPL Energy*the largest generator of wind power 
in the United States*which serves on many of the new projects in west Texas. 
FPL Energy is a fast-growing, unregulated power producer that is a 
wholly-owned subsidiary of FPL Group. Among the more than 3,000 MW net 
generating capacity that FPL Energy now has, the company focuses on "clean" 
technologies. Wind power now accounts for about 15 percent of FPL Energy's 
generation portfolio. 

The projects by TXU Electric & Gas represented the largest wind power 
projects in the world until late August, when Reliant Energy announced what 
it claimed to be the world's largest single wind power installation. 
Reliant's wind power project, slated to become operational in the fourth 
quarter of 2001, will be located on King Mountain, near McCamey in far west 
Texas. Reliant says that the project will be able to produce 250 MW of 
electricity that will be sold into Texas' power grid. (Note: The Reliant wind 
project has now been eclipsed by a joint, 300-MW wind project between 
PacifiCorp and FPL Energy in Walla Walla, Wash. However, I am focused only on 
the Texas market in this column). 

Thus, Enron faces stiff competition when selling its wind power into the 
Texas wholesale market. Enron joins TXU Electric & Gas, FPL Energy and 
Reliant as the four companies that are vying to gain a leadership role over 
the limited areas of the state where the wind blows at speeds of 14.5 miles 
per hour or higher (the minimum to make a wind project cost effective).  

Why is there so much development related to wind power taking place in Texas? 
A number of factors are making the state a strong market for wind. The first 
factor is nature itself: Texas is one of the handful of states along the Sun 
Belt and Southwest regions that offer an abundance of wind. Some reports 
indicate that average annual wind speeds in west Texas are 18 miles per hour. 
Second, deregulation legislation in the state resulted in the Texas 
Renewables Portfolio Standard, which until the end of 2001 is providing a 
federal tax credit for companies that produce electricity from wind. The 
deregulation law in Texas is considered the most supportive of renewable 
forms of energy when compared to the 24 states that have enacted legislation 
for electric competition. The pro-renewables stance is perhaps attributed to 
the fact that a variety of environmental lobbying groups*including the 
Environmental Defense group and the Texas Renewable Energy Industries 
Association*were included in the dialogue when Texas was forming its law. In 
addition, more efficient technology has lowered prices for wind-generated 
electricity, while costs associated with natural gas have remained high. Add 
all that to the fact that customers in the Lone Star State have a 
comparatively high desire for wind power*along with other strong markets such 
as California, Iowa and Minnesota. Consequently, Texas has proven to be an 
enticing region for companies like Enron Wind and its competitors in the 
state's wind power market.  

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