* Texas sets latest wind record on Christmas Day
* Statewide grid expansion program to be finished on time
* Wind capacity to fall short of 18,500 MW projection
By Eileen O'Grady
HOUSTON, Dec 31 (Reuters) - Texas, which leads the United States in carbon-free electric capacity from wind turbines, will see less wind added than industry leaders had envisioned when construction of $6 billion in power lines is completed next year.
Wind-farm capacity has more than doubled in the state to 11,200 megawatts since early 2008, when the Texas Public Utility Commission began discussing plans to expand the state's high-voltage transmission network to accommodate 18,500 MW of wind generation by the end of 2013.
That plan - to build more 345-kilovolt power lines needed to move electricity from remote areas of west Texas where the wind blows to large cities such as Dallas and San Antonio - was a compromise. Wind advocates had urged a more aggressive network to accommodate 24,000 MW of wind, while others feared too much wind could create more problems and urged the PUC to take a more conservative path to serve just 12,000 MW of wind.
At that time, the Electric Reliability Council of Texas (ERCOT), the state power grid operator, was studying requests from developers that proposed adding a staggering 54,000 MW of wind generation in the coming years.
The amount of proposed wind generation has now dwindled to about 20,000 MW as cheaper natural gas, tight financial markets and uncertainty over a production tax credit (PTC) for wind have led developers to rethink their plans.
The American Wind Energy Association has warned that if the PTC is allowed to expire at the year's end, 37,000 jobs, or half the jobs in the wind industry, will be lost in early 2013 and fewer wind turbines will be installed going forward.
Next year is expected to be difficult for the wind industry worldwide due to struggling economies and cutbacks in subsidies in the United States and Europe.
Even with Texas' grid expansion program, called the Competitive Renewable Energy Zones (CREZ), moving forward, the pace of wind-farm construction has slowed and some in the industry are concerned that the lines won't be fully used without sufficient new wind development.
In 2008, ERCOT projected nearly 9,300 MW of wind capacity by the year end, but just 8,000 MW was completed. Capacity is now expected to grow to 12,100 MW by the end of 2013 as the CREZ lines are put into service, according to ERCOT.
The grid agency projects 13,200 MW of wind online by the end of 2015, still short of the 18,500 MW target.
While keeping the CREZ projects going, Texas regulators have turned their focus to encouraging construction of fossil-fueled plants to meet the state's growing need for electricity.
Meanwhile, existing wind farms in Texas continue to set output records.
On Christmas Day, the amount of electricity produced from wind reached 8,638 MW, up 117 MW from the previous record of 8,521 MW set in November, ERCOT said.
The CREZ program is viewed as a model in the industry to site and pay for transmission needed to facilitate wind-farm development in remote areas.
The CREZ effort has grown in scope and cost since Texas regulators approved it in 2008. Initial plans called for 2,900 miles (4,640 km) of new high-voltage transmission lines at a preliminary cost of $4.93 billion. The program has grown to nearly 3,600 miles of new power lines at a cost of $6.87 billion, according to the latest PUC report.
Sixty-one of the estimated 186 transmission projects totaling 1,400 miles have been completed so far; more than 110 projects are active; 15 were canceled.
The latest progress report says all the CREZ projects, except one, will be completed on schedule by the end of 2013.
Oncor, the largest power-delivery company in the state, told ERCOT last week that a safety issue related to a natural gas pipeline running near one segment of the Brown-Newton-Killeen 345-kv line will force the line to carry less power than its design as it goes into service.
An Oncor spokesman said a long-term mitigation plan is being developed to be in place later in the year.
One megawatt can supply about 200 Texas homes during hot summer days and about 500 homes during more normal weather. Wind power is heavily discounted in the summer when it is less likely to blow.
Dallas-based Oncor, a unit of Energy Future Holdings ; American Electric Power's joint venture Electric Transmission Texas; and privately held Sharyland Utilities are building the CREZ lines, along with affiliates of NextEra Energy, Spanish-based Isolux Corsan and LS Power Group.