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American Electric Seeks Approval to Buy 1,485 MW Wind Projects

Zacks Equity Research

American Electric Power Company, Inc. AEP recently announced that two of its subsidiaries — Public Service Co. of Oklahoma (PSO) and Southwestern Electric Power Co. (SWEPCO) — have sought approvals from regulatory authorities to buy three under construction wind projects of Oklahoma. With a total capacity of 1,485 megawatts (MW), these wind facilities are likely to supply more than 5.7 million megawatt-hours (MWh) of electricity annually to customers in Arkansas, Louisiana, Oklahoma and Texas.

After receiving the regulatory approvals, American Electric will make an investment worth $2 billion in wind projects, inclusive of all costs. These projects are expected to save approximately $3 billion, net of cost, over 30 years, for SWEPCO and PSO customers.

Wind Energy Prospects in the United States

Among alternative energy sources, wind energy has made commendable progress in the United States lately. Per American Wind Energy Association’s latest report, the U.S. wind industry added 7,588 megawatts (MW) in 2018 and another 841 MW in the first quarter of 2019. U.S. wind power has more than tripled over the past decade and is currently the largest source of renewable generating capacity in the nation.

Rapidly declining prices of wind turbines have been a major catalyst behind growth of the U.S. wind energy industry. Per a report from the Department of Energy’s Office of Energy Efficiency and Renewable Energy, the average installed cost of wind projects in 2017 was $1,610 per kilowatt, down $795 per kilowatt from the peak in 2009.

With technological advancements such as taller wind turbine towers and larger rotors that are currently under development by the Energy Department and its private sector partners, costs of wind projects are expected to decline even more.

American Electric’s Wind Initiatives

The United States is home to one of the largest and fastest-growing wind markets in the world. Therefore, American Electric has been consistently investing in this space. In April 2019, the company acquired 724 MW of wind and battery generation assets from Sempra Renewables and has proposed adding more than 9,100 MW of new wind and solar generation to its regulated power plant fleet by 2030 to diversify its power production portfolio.

As the entire utility industry is undergoing a historic transformation toward a clean energy environment, American Electric has successfully reduced its carbon emissions by 57% to 2017 from 2000’s level. Backed by the latest investments, we may expect this Zacks Rank #3 (Hold) company to further reduce its exposure to carbon dioxide in the coming days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Utilities Following Suit

As the U.S. grid’s largest source of renewable electricity in 2019, wind power is expected to surpass hydropower energy. This prompted other utility providers to make notable investments in wind energy for strengthening clean energy portfolio. For instance, this April, Duke Energy DUK announced its plan to build a 200 MW wind project in Mesteño, Starr County, TX. Post completion, expected by the end of 2019, the wind project will boost Duke Energy's nationwide wind capacity to more than 2,500 MW.

In the same month, Xcel Energy XEL submitted a request to undertake the construction of Cheyenne Ridge Wind Project to the Colorado Public Utilities Commission of Colorado. Valued at $743 million, the project has a capacity of 500 MW.

Additionally, in January, WEC Energy Group WEC announced that it has acquired 80% ownership of Coyote Ridge Wind Farm for $145 million. The wind facility boasts a generation capacity of 97 MW.

Price Movement

In a year’s time, shares of American Electric have gained 28.9% compared with its industry’s  12.1% growth


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