Please ensure Javascript is enabled for purposes of website accessibility

Oklahoma To Be Home of World’s Second Largest Wind Farm

By Travis Hoium - Jul 29, 2017 at 9:07AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A massive wind farm is going to make Oklahoma a leader in renewable energy.

Oklahoma is the hub for much of the country's oil and natural gas. But it may soon be home to the country's largest wind farm, and the second largest such farm in the world. 

Invenergy is developing the Wind Catcher 2,000 MW wind farm and an accompanying 350-mile high voltage transmission line. General Electric (GE 1.33%) will supply the 2.5 MW wind turbines; when complete, the $4.5 billion project will be sold to American Electric Power (AEP 1.25%). It's a bold project and could transform energy in Oklahoma.

Wind turbines on a hill with clouds below them in the background.

Image source: Getty Images.

The biggest wind farm in the U.S. 

This 2 GW wind farm is easily going to be the biggest in the U.S. According to Invenergy, it will generate 9 million MW-hrs of electricity annually, about 2 months worth of Oklahoma's electricity consumption. In one plant Oklahoma will solidify its #2 spot in wind in the U.S., behind Texas.

This is also a sizable investment for American Electric Power. The company's market cap is $34 billion, so a $4.5 billion investment in any plant is a big vote of confidence in wind power. And it shows another company making a concerted effort to invest in renewable energy rather than fossil fuels. 

The rush to build wind projects is on

The timing, and scale, of this project is no accident. Projects that began construction in 2016, as the Wind Catcher project did, are eligible for a 2.3 cent per kWh production tax credit. In 2017 the subsidy fell to 1.84 cents per kWh, in 2018 it goes to 1.38 cents per kWh, and in 2019 it falls to 0.92 cents per kWh, after which there is a phaseout.

Building a huge project that will take until mid-2020 to complete ensures the highest possible subsidy and takes advantage of the falling cost of wind turbines. That's why the scale and timing of the project's construction are what they are. 

The wind production tax credit is different than the solar tax credit, which is based on installation costs. The way the production tax credit is structured, you get 2.3 cents per kWh produced and any revenue from the utility on top of that is upside. In other words, at 9 million MW-hrs per year, the subsidy alone is worth $207 million, or 4.6% of the construction cost. 

More renewable energy is coming

Almost every major utility in the U.S. has put renewable energy from wind and solar as a top growth priority. AEP made a big move in that direction by agreeing to buy the Wind Catcher project. And it's making a surprising state, Oklahoma, a renewable energy leader. 

Travis Hoium owns shares of American Electric Power and General Electric. The Motley Fool owns shares of General Electric. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

American Electric Power Company, Inc. Stock Quote
American Electric Power Company, Inc.
AEP
$100.70 (1.25%) $1.24
General Electric Company Stock Quote
General Electric Company
GE
$75.35 (1.33%) $0.99

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.