- American Electric Power expects to hit its target of 5% to 7% earnings growth through 2024, in large part by making capital investments in new renewable projects, CEO and President Nick Akins said in a Feb. 20 earnings call, even with the fate of its 1,485 MW North Central Wind project in Oklahoma still in regulatory limbo.
- The North Central Wind project is another attempt by the company to complete a mega-sized wind farm requiring multi-state approval. Texas regulators rejected AEP’s proposed 2 GW Wind Catcher farm in 2018, causing the company to cancel what would have been the largest wind project in the U.S. at the time.
- While regulatory approval is pending, it is unclear if the full North Central project will be completed or if only a portion of it will. AEP sees many other capital expenditure opportunities to "feed the beast in a way that continues that 5% to 7% growth trajectory," Akins said.
On the same day as AEP's 2019 Q4 earnings call, the Oklahoma Corporation Commission approved a settlement agreement allowing AEP subsidiary Public Service Co. of Oklahoma to recover costs related to 675 MW of North Central. A settlement agreement related to 171 MW of the project has been reached in Arkansas, although regulators there have yet to approve that agreement.
The remaining portion of the project’s capacity is awaiting consideration in Louisiana and Texas, the latter of which killed the Wind Catcher project even after Louisiana and Arkansas regulators approved it. A decision in Oklahoma was pending when Wind Catcher was canceled.
But, Akins argued, North Central will still likely go forward to some degree regardless of the uncertainty. Approvals in both Oklahoma and Arkansas would mean that “we have the critical mass for the project to move forward. The question is at what scale?” he asked. Akins added that Arkansas and Louisiana have the option to “flex up” and take on additional wind power capacity that is not taken on by another jurisdiction, such as Texas.
“So if Arkansas flexes up and then Louisiana approves with a flex up, then you got the 1,485 MW of the whole project,” he said.
AEP’s 5% to 7% earnings growth forecast through 2024 does not assume North Central, but, Akins noted, “the addition of this project is expected to put us solidly in the upper half of” the 5% to 7% range.
AEP has historically been one of the largest operators of coal-fired plants in the U.S., although it has retired many of those plants over the past several years. “By the end of 2020, we will have retired over 10,000 megawatts of generation to make way for the resources of the future,” Akins said during the call. In 2019, across all of AEP’s fleet, including regulated and unregulated businesses, coal-fired capacity made up 45% of the total capacity, down from around 52% in 2015 and over 60% in 2010.
Beyond North Central, AEP is looking at other opportunities to build new renewable power facilities to meet demand for clean energy in several of the states in which the company owns utilities. “I know at [Appalachian Power Co.] there's a solar requirement in Virginia and then there's other opportunities for us to do it on the regulated side, as well as the unregulated,” Akins said.