In Depth | Oklahoma looks to leverage wind into big EV, green H2 and power export plays

A wind energy powerhouse, the solidly Republican US state of Oklahoma has ambitions to become a major player in the fast-evolving US electric vehicle (EV), green hydrogen, and renewable power export markets.

Wind has been a big success story for the Sooner State and given officials there a template for development of other clean energy-related industries with potential to create thousands of jobs and drive economic development for decades to come.

“We don’t want to pick the winners and losers. We want the market to do that. Oklahoma has always done best as a state when we specifically target an industry to bring in,” Brent Kisling, executive director of the Oklahoma Department of Commerce (DoC), said recently, adding “entrepreneurship happens” when that has occurred.

“In 2009-12, we went all-in focused on wind energy. We created some of the best incentives in the states. We don’t have them anymore and haven’t needed them to bring more of that investment here,” he said.

Wind now supplies more than 35% of electricity in Oklahoma, a noteworthy development given its longstanding ties with oil & gas and since the 1970s, low-sulphur coal imported by train in prodigious quantities from Wyoming as fuel for power plants. More recently, some coal units have closed or are converting to burn natural gas.

Another 1GW or so of wind capacity is in development as projects make use of the federal production tax credit (PTC), which expired at the end of last year.

Depending on start of construction date from 2016-21, an onshore project can qualify for 40% to 100% PTC value ($25/MWh) if it meets commercial year-end operation deadlines from 2022 to 2025.

Energy Secretary Jennifer Granholm recently said she is “hopeful and optimistic” that Congress will renew the incentive that expired at the end of last year but gave no timeframe. “I think there is still lots of opportunity for wind energy capacity to be installed within the state,” said Kisling.

Oklahoma governor Kevin Stitt, a successful businessman and entrepreneur prior to taking office in January 2019, is ramping incentives to lure both global and start-up companies in the clean energy sector and others to the state. Having the nation’s second lowest electricity power costs is a big calling card for manufacturers.

“We can customise our incentive programmes to make them work for whatever industry might be coming in for what their need might be,” said Kisling.

For wind, his administration’s focus is on the supply chain where investment has been slower to develop. The nation’s ageing turbine fleet may present a solid opportunity for Oklahoma.

“Re-manufacturing of transmissions is going to be key. The turbines were erected at 1.5MW and are being converted to 3MW to 3.5MW,” he said, noting that the US has only one facility in North Dakota to handle this growing business.

“Taking some of those transmissions, re-manufacturing them to increase the output or longevity, without having to send them overseas. There has been some talk lately of transmission re-manufacturing moving to the state. We think this could be big for us,” he added.

Putting the EV pedal to the metal

Oklahoma has a long history with the US automotive industry. At one time, both Ford and General Motors (GM) had assembly plants in Oklahoma City. The GM facility was the company’s largest until its closure in 2006.

The state is already pursuing investors with President Joe Biden aiming for electrics to comprise half of new vehicle sales by 2030. Stitt believes Oklahoma, located in the crossroads of America, can play a key role in developing a sector with potential to contribute 3% to the country gross domestic product (GDP), now $22trn.

Last month, he signed into law the Large-Scale Economic Activity and Development Act, an almost $700m incentive package, the biggest in state history, aimed at attracting a world-class EV battery manufacturing plant.

His administration is reportedly wooing Panasonic. If it opts to locate in Oklahoma, the company would be required to spend at least $3.6bn and hire up to 4,000 full-time staff within five years operation to be eligible for annual rebates on qualified capital expenditures during that period.

“The Lead Act is probably the best example of his approach to public policy,” said Kisling. “How do we make sure we are as competitive as possible to bring these new industries in and once they’re here, try to eliminate regulations and support on workforce development to help them grow.”

Canoo is eligible to receive $300m in state incentives to open the plant which will assemble family-oriented “lifestyle” vehicles, multi-purpose delivery, and pickup trucks.

Green hydrogen gassing up

Wind energy generation has increased so much that Oklahoma now produces 68% more electricity than it consumes, a situation that presents “great opportunities” for production of green hydrogen and clean power exports to other states, according to Kisling.

In March, Oklahoma formed a partnership with Arkansas and Louisiana to set up a regional hub for development, production, and use of both blue (carbon capture and storage) and green hydrogen as fuel and manufacturing feedstock. Louisiana and Oklahoma are the number three and four natural gas producing states.

They are teaming to compete for $1bn or more federal funding of the $9.5bn available under the Infrastructure Investment and Jobs Act (IIJA) of 2021 for creation of four regional clean hydrogen hubs, and hydrogen-related demonstration and manufacturing activities.

“We fully intend to be one of those four,” he said, noting the application process set by the Department of Energy (DoE) was timely for Oklahoma as the legislature last year formed a hydrogen task force that delivered a strategic plan on 1 December to position the state for clean-hydrogen production.

Officials in the three states view hydrogen as another potentially cleaner, lower-cost alternative that could help create more stability in regional energy markets. At present, the great majority of hydrogen is made in a carbon-intensive manner for use in industrial processes.

They consider the states “perfectly situated” to demonstrate how the entire value chain of hydrogen can tackle hard- to-decarbonise sectors like industry, manufacturing, and transportation.

“The secret sauce on hydrogen is how do you move it? How do you get it from a production facility to an end user? In Europe, they utilise their natural gas pipeline system. We’ve not done that in America yet,” said Kisling, adding that Oklahoma has sent experts there to see to what extent doing this degrades the pipes.

Meanwhile, state officials are keeping a close eye on White House efforts to align federal agencies behind policies that facilitate construction of interstate electric transmission lines, a critical step to achieving Biden’s 2035 carbon free grid goal.

Hundreds of clean gigawatts undeveloped

Hundreds of gigawatts of high quality solar and wind resource are undeveloped nationwide because there is no conduit for delivering the energy that private businesses and states will require to help meet their carbon reduction goals. Oklahoma's share is probably dozens of gigawatts.

“We’re moving to a point where every car is probably going to be electric in some way. We want to make sure we’re electrifying America from Oklahoma,” said Kisling. Getting that power to the big load centres to the east and south is a challenge for several reasons that have little to do with Oklahoma.

First, privately funded high-capacity merchant renewable power lines that bypass congested regional grids have been incredibly costly and difficult to permit given opposition from some fossil fuel interests and landowners, politicians, utilities, and wildlife protection groups.

The ratio of development cost to construction cost is higher for non-utility transmission than for any renewable or fossil fuel technology – 40%, even 50%, versus 4-5% for a typical wind farm.

Federal and some state regulatory entities are often more a hindrance than help with dispute resolutions and authorisations. Kisling acknowledges that several projects involving Oklahoma fell through but believes some in the future will get a green light.

Second, the Southwest Power Pool, which operates a grid serving all or parts of 14 states including Oklahoma, only has two asynchronous DC ties totalling 820MW with ERCOT in neighbouring Texas, the nation’s largest state electricity market. This severely limits two-way power trade.

ERCOT operates as a functionally separate interconnection. It remains largely outside federal oversight because it does not cross state lines. Despite a devastating February 2021 cold weather outage, officials in Texas remain cautious for political reasons about diluting ERCOT’s independence that could occur with more ties to SPP.

Third, SPP and Midcontinent Independent Service Operator (MISO), a 15-state grid to the east, have historically struggled to coordinate joint transmission planning on the seam between their two footprints. This has hurt efforts to address needed transmission development and generation interconnection challenges.

The Federal Energy Regulatory Commission (FERC), whose purview includes regulation of the transmission and wholesale sale of electricity, is redoubling efforts with all the large balancing authorities to accelerate and streamline the planning and approval processes.