UPDATE 2-Pickens delays wind farm on finance, grid issues

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By Ayesha Rascoe and Eileen O'Grady

WASHINGTON/HOUSTON, July 8 (Reuters) - Texas oil billionaire T. Boone Pickens said on Wednesday he has delayed his plan to build the world's largest wind farm in the Texas Panhandle, blaming financing problems and transmission limitations.

"I didn't cancel it," Pickens said after a press conference on Capitol Hill. "Financing is tough right now and so it's going to be delayed a year or two."

Over time, Pickens had planned to install 4,000 megawatts of wind turbines, which could power about 1.2 million average homes, at a site near Pampa, Texas, by 2014 at a cost of $8 billion.

Instead of putting more than 600 wind turbines ordered by his Mesa Power LLP last year for the first $2 billion phase of the project, Pickens said he will likely develop a number of more modest wind farms across the nation's mid-section where wind resources are strongest.

"I had hoped that Pampa would be the starting point, but transmission issues and the problem with the capital markets make that unfeasible at this point," Pickens said in a statement. "I expect to continue development of the Pampa project, but not at the pace that I originally expected."

Pickens said he did not think the postponed project is a setback for the wind industry because all sectors are having trouble finding financial backers in this economic climate. [ID:nN08392723]

"I am fully committed to wind energy and to developing wind projects in the U.S. and perhaps Canada," he said.

CHALLENGES IN TEXAS

In Texas, Pickens arrival to the wind game was ill-timed.

Mesa Power's huge order of wind turbines in May 2008 came after other developers, such as FPL Group (FPL.N), German-based E.ON AG (EONGn.DE) and AES Corp (AES.N), were already operating more than 5,500 MW of emission-free wind power.

Installation was underway on another 3,000 MW of wind, an amount that strained the existing transmission network's ability to transfer power from windy west Texas to power-hungry cities like Dallas, San Antonio and Houston.

The original plan to move electricity from the Texas Panhandle -- an area not connected to the state's primary grid serving major cities -- called for Pickens to build his own transmission line, a costly idea he soon dropped.

Late last year, Texas regulators finalized a $4.9 billion plan to construct new power lines to accommodate more than 18,000 MW of wind generation in the next few years, including nearly 2,400 MW of wind in the Panhandle zone that includes Pampa.

But Pickens' 667 General Electric turbines, capable of producing 1,000 MW of electricity, are set to begin arriving in 2011 -- at least two years before new power lines can be permitted and built.

Mesa Power was also looking at an option of shipping power from the Pampa wind farm through Oklahoma and Kansas to northern and eastern markets through the grid overseen by the Southwest Power Pool.

SPP, which currently has about 3,000 MW of installed wind capacity, also has significant transmission bottlenecks, and is working to create a "superhighway" to take advantage of the huge amount of wind resource in the nation's midsection.

Les Dillahunty, SPP's senior vice president of engineering and regulatory policy, said the agency recently completed the initial study of Mesa Power's 4,000-MW interconnection request.

Mesa Power has not withdrawn that request, SPP said. (Reporting by Eileen O'Grady and Ayesha Rascoe; Editing by Marguerita Choy)