DTE Gets Nod to Buy Wind Power

Zacks

DTE Energy Company (DTE) has received approval from The Michigan Public Service Commission to purchase 20 megawatt (MW) of wind power from a subsidiary of Heritage Sustainable Energy, a Michigan wind energy producer.

The 20-year contract between DTE Energy and Heritage Sustainable Energy calls for the purchase of all the power produced from Big Turtle Wind Farm LLC. Located in Rubicon Township in Huron County in Michigan's Thumb area, this wind farm is spread over an area of 2,800 acres and is expected to come online in late 2014. The 20 MW of electricity will be enough to power 9,000 homes.

The Big Turtle Wind Farm will have 10 2-MW turbines. This wind farm is unique in the sense that instead of using turbines of established manufacturers such as General Electric Company (GE), it will employ turbines of a local company, Ventower Industries. In fact, the farm intends to promote new technology advanced by Ventower Industries and other local Michigan suppliers, which would comprise at least 50% of the total content.

By 2015, the company expects to add more than 900 MW, or 10% of its power. This wind power contract comes on the heels of the company’s efforts to meet the state's renewable energy goals. This contract would bring the company’s renewable energy portfolio to 9.8%, thereby implying that the company is just 0.2 percentage points away from its goal of reaching 10.0% by 2015.

In the current climate of promoting green energy, power purchase agreements (PPAs) are an easy way for renewable-energy producers and regulated utilities to fulfill their renewable energy goals. In April this year, San Diego Gas & Electric, a subsidiary of Sempra Energy (SRE), had entered into a PPA to buy 62 MW of capacity from five renewable energy projects in California. These projects comprise three solar and two wind operations.

In August, Duke Energy Corp. (DUK) took over the largest solar generation facility in San Francisco – the Sunset Reservoir Solar Power Project – from Recurrent Energy. With a capacity of 4.5 megawatt alternating current (:MWAC) this solar power system consists of almost 24,000 solar panels mounted on top of the Sunset Reservoir.

DTE Energy is focused on improving its cost structure and directing capital investments toward renewable generation, utility infrastructure and environmental compliance assets. Going forward, the growth momentum will be maintained by beneficial regulatory policies in Michigan, higher authorized rates for its regulated business, the strong balance sheet, growth opportunities in its un-regulated businesses and an industry-high dividend yield.

However, we are concerned about the present unfavorable macro backdrop, lower demand for electricity, the dismal economy in Michigan and pending regulatory cases. The company presently retains a short-term Zacks Rank #3 (Hold).

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