AEP Sustainability - Renewables

Renewables

In 2019, according to the U.S. Energy Information Administration (EIA), renewables accounted for 19% of the nation’s electricity generating mix and are projected to grow to 38% by 2050. The EIA forecasts that 76% of new capacity additions in 2020 will be from solar and wind. The EIA also projects that by 2021, electricity generation from renewables will exceed that of coal and nuclear and will overtake natural gas by 2045.

As renewable resources become more affordable due to advances in technology and support from federal tax credits, we see these clean options capturing larger and larger shares of our integrated resource plans (IRPs). In addition, AEP’s transition to a clean energy future is tied to our grid modernization investments.

Our goal, as outlined in our IRPs, is to increase regulated renewable energy on our system by approximately 8,000 MW by 2030. At the same time, we are expanding our renewable footprint beyond our traditional service territory. We plan to invest $2.1 billion in contracted renewables from 2020 through 2024. Through our competitive operations, we offer low cost of capital and energy project expertise to potential partners, creating attractive energy solutions for customers. This is especially appealing to companies, universities and municipalities that often have their own renewable energy goals.

The North Central Wind Energy Facilities project and AEP Renewables, a subsidiary of AEP Energy Supply, are leading the charge for our renewable energy strategy.

North Central Wind Energy Facilities Project

In 2019, Southwestern Electric Power Company (SWEPCO) and Public Service Company of Oklahoma (PSO) filed proposals to acquire and jointly own three wind generation facilities in north central Oklahoma. The North Central Wind Energy Facilities (NCWEF) will provide 1,485 MW of new wind capacity, with 810 MW allocated to SWEPCO customers across Arkansas, Louisiana and Texas and 675 MW to PSO customers in Oklahoma. The facilities are strategically located to tap into the region’s wind resources and AEP’s existing transmission systems, which allows for easy interconnection to the regional power grid.

In February 2020, the Oklahoma Corporation Commission unanimously approved a settlement agreement allowing PSO to move forward with the project. Once the facilities are in operation, PSO’s use of wind energy will increase from 22% to 34%. In May 2020, SWEPCO received final approval in Arkansas by the Arkansas Public Service Commission. SWEPCO continues to work through the regulatory process to gain approval in Louisiana and Texas.

The plan includes provisions for states to increase their portion of the project in the event another state decides not to move forward with its share of the project.

If approved by the state regulatory commissions, the project would provide more than $3 billion in energy savings to our customers in Oklahoma, Arkansas, Louisiana and Texas over the 30-year life of the facilities. In addition to lowering bills, NCWEF will help insulate customers from energy price volatility over the life of the project. The project, which is eligible for the federal Production Tax Credit once approved, is scheduled to come online in 2020 and 2021.

Competitive Renewables

In July 2019, we completed the purchase of 75% stake of the Santa Rita East Wind Project near San Angelo, Texas.

AEP Renewables, a subsidiary of AEP Energy, develops, owns and operates utility-scale wind and solar energy generation projects throughout the United States. These renewable energy facilities sell the energy they produce to utilities, electric cooperatives, municipalities or corporate customers.

2019 was a transformational year for AEP Renewables, as we invested $1.4 billion in contracted renewables, bringing to 13 the number of projects we now have in 11 states. In April 2019, we acquired Sempra Renewables, LLC and its 724 MW of operating wind generation, including a battery storage asset. The deal included seven operating wind farms in Colorado, Hawaii, Indiana, Kansas, Michigan, Minnesota and Pennsylvania, all with long-term power purchase agreements in place for 100% of the energy produced.

In July 2019, we completed the purchase of 75% stake (227 MW) of the Santa Rita East Wind Project near San Angelo, Texas. With the addition of these new projects, the AEP Renewables portfolio now includes 1,302 MW of renewable generation.

Through these acquisitions, we now have a greater ability to expand our development of contracted renewable projects. For example, AEP Renewables signed a long-term purchase agreement with Evergy to buy the energy from Flat Ridge 3, a 128 MW wind farm that is currently under construction and expected to be operational by the end of 2020.

AEP’s Investments in Renewables

  • In early 2020, I&M received approval from the Indiana Utility Regulatory Commission to build and operate its largest solar generation facility in St. Joseph County, Indiana. I&M will collaborate on this 20 MW project with the University of Notre Dame. This project also provides educational and research opportunities and supports I&M’s and Notre Dame’s sustainability goals.
  • In early 2019, Appalachian Power’s proposal to provide its customers with the opportunity to purchase 100% renewable energy was approved by the Virginia State Corporation Commission. The renewable energy will come from APCo’s existing or planned renewable resources. Participants who use 1,000 kWh of energy per month will pay an additional $4.25 per month.
  • In early 2020, APCo issued a Request for Proposals for up to 200 MW of solar energy resources located in Virginia that will reduce customer costs and further diversify its electric generation mix. The RFP also gives developers the option of including battery storage system with their proposals.
  • Public Service Company of Oklahoma (PSO) is requesting proposals for PV Solar and Reciprocating Internal Combustion Engine (RICE) resources for commercial operation. Both projects will be located at the Fort Sill Military Base in Lawton, Oklahoma. The net minimum output of the PV Solar will be 10 MW to 14 MW. The net minimum output of the RICE will be approximately 36 MW. The project, owned and operated by PSO, will provide power to PSO’s system during normal operations. In the event of an outage or validated threat to the electric supply to Fort Sill, these assets will first be used to restore power to Fort Sill. This project is mutually beneficial as it simultaneously supports PSO’s system and the Army’s goal of enhancing its energy resilience for its military installations.
  • OnSite Partners, an AEP competitive business, has a portfolio of distributed energy solutions that includes 59 projects across 18 states, with a total investment of $322 million. Another four projects that are currently in various stages of construction represent an additional investment of $41 million. The projects use a variety of technologies, such as behind-the-meter solar, community solar, substations, batteries and a fuel cell.
  • AEP Energy was instrumental in powering the John Glenn International Airport in Columbus, Ohio, with 100% clean energy. The Columbus Regional Airport Authority estimates the new deal will save nearly $13 million in energy costs.
  • Google broke ground on a $600 million data center in New Albany, Ohio, powered by 100% renewable energy supplied by AEP Energy.
  • Today, approximately 11,900 MW of renewable generation is interconnected across the U.S. via AEP’s transmission system.

Meeting Customer Demands

Our customers’ demand for clean energy is a key driver in the growth of our renewable energy portfolio. We listen to our customers’ needs and develop solutions for them. We do this through surveys, one-on-one meetings and other channels of engagement and we will continue to see further expansion of renewables and other technologies to address customer preferences. What we have learned is that a strong majority of customers, especially large commercial and industrial customers, want clean energy.

In our regulated jurisdictions, we need the support of our regulatory entities to be able to invest in clean energy resources. Renewable resources are becoming more cost-competitive compared to other forms of generation and this has led to increasing penetration of renewables within the Regional Transmission Organizations (RTOs). As a result, RTOs have been required to both clarify and reconsider some of their rules to take into consideration these increasing volumes of intermittent generation. In some cases, this has led to market changes that reduce the value of renewable resources in the market. Although these changes are intended to provide renewable resources the proper credit for the value they bring to the market, the reductions work against our efforts to provide the low-cost renewable options that our customers expect.

In November 2019, the Public Utilities Commission of Ohio (PUCO) found that there was no generation supply need for AEP Ohio’s plan to develop 400 MW of solar power from two projects in the state’s Highland County. Through the plan, AEP Ohio would have entered into long-term contracts with the project developers for the power. This proposal was part of a 2016 commitment we made to pursue development of 900 MW of renewable resources in the state. If developed, this project would have been the single largest clean energy commitment in Ohio history and would have doubled the state’s renewable generation capacity. In addition, it would have created 4,000 construction jobs and 150 permanent jobs.

Despite this setback, we remain committed to supporting renewable energy projects that will improve our future generation mix while adding tax revenue and reducing long-term electricity costs for our customers.