Major Wind Project, Hot Air? (ITC, NWE)

Thinking big can be a blessing or a curse. In the case of green power generation, big ideas can be hard to translate into workable plans because we have so little experience with scaled-up projects. Well now, thanks to ITC Holdings Corp. (NYSE:ITC), we’ll get an opportunity to see what happens on a big project.

ITC is proposing adding 3,000 miles of power transmission lines to the mid-western grid that would deliver 12,000 megawatts of electricity to 3.6 million homes. The cost of the grid is estimated to be about $10-$12 billion. That works out to about $3.3 million per mile of 756 kV transmission line. The Green Power Express, as the project is called, could be operational by 2020.

The attraction of such a project is an estimated reduction of 34 million metric tons of carbon emissions, which ITC says is equivalent to 7-9 600 MW coal-fired plants. The company reports interest from NorthWestern Energy Corp. (NYSE:NWE) and a host of smaller wind energy companies.

Like most green energy projects, this one depends heavily on government actions. Will the US institute a carbon tax or a carbon cap-and-trade system that ITC can take advantage of? Will the states adopt renewable portfolio requirements that will enable ITC to supplant some coal-fired generation? Will the US Congress and the Obama administration support this type of project with dollars and not just cheerleading?

The larger question might be, is this really the best way for the US to spend $12 billion? And, where will the money come from to build the wind farms to generate all this electricity? Surely the wind power folks are counting on the government as well.

Trying to replace coal as a fuel for power generation poses some of the same problems as replacing oil as the primary energy source for transportation. Change depends on huge infrastructure investments, dependence on government policies which can change every 4 years, threats to the stability of the established energy source, and ultimately higher costs for consumers.

ITC is making a huge bet, mostly with other peoples’ money. The company’s counting on enthusiasm for green energy projects to help push the political buttons. That’s not to say that the Green Power Express is a lousy idea. But it is at least cynical.

Paul Ausick
February 12, 2009