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 (NYSE:GE) will supply the 2.5 MW wind turbines; when complete, the $4.5 billion project will be sold to American Electric Power (NASDAQ:AEP). 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. 

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