SunZia wind farm raises the high bar for green energy

Hey everybody, Peter Zeihan here coming to you from Colorado. Now I get a lot of flack for never having good news. So I figured you know, here here’s something fantastic that’s happened over the holidays. There’s an organization called SunZia, which is a company that produces and transmits electricity, that has close funding and started construction and what will be the largest green-tech power generation system in the hemisphere, 3.5 gigawatts, which in electrical terms is huge. Why does this matter? Bunch of reasons. Number one, $11 billion is how much money they had to raise. Raising money these days is difficult. Because the baby boomers are majority-retired, all of their capital, all their savings, has been put into relatively static things like cash and T bills. And so if you’re trying to raise funding for anything, it’s gotten a lot more expensive. In addition, unlike if you were to build say, a natural gas power plant, or anything as fossil fuels-based with those systems, fossil fuels, only about 1/5 of the cost of your of your full lifecycle cost for your facility has to be raised at the front end to pay for construction. But most of it is instead raised from fees when you’re generating the power as you go.

Instead, with green tech, two thirds of the cost is upfront, because there’s no fuel costs, but the upfront cost is much higher. So you’re talking about two thirds of the total value of the entire lifecycle of the project has to be raised before day one. And so doing that at all is difficult now that capital costs have roughly tripled, but SunZia was able to pull it off. So number one, big achievement for the capital cycle.

Number two, the size, 3.5 gigawatts, biggest in the hemisphere, if we are going to do the green transition, we need to increase the amount of power generated in the country by at least 50%. This is a nice little bite taken out of that. But from my point of view, if we’re going to deal with the post-China world, and expand the industrial plant [sic] manufacturing we need, we need to expand it by another 50%. So regardless if you’re green, if you’re pro-development, or both, this takes us a significant step forward. We still need like 100-500 of these steps, but you know, we’re going in the right direction.

Okay, number three, what it is, it’s wind, and it’s in New Mexico. So wind, as a rule, is much more cost-effective than solar, in large part because every time the sun goes down, all the solar panels just become paperweights, whereas the wind blows at night. In addition, while we have had incremental improvements in the capacity of photovoltaic cells over the last 15 years, it’s nothing compared to what has gone on with wind. It used to be that wind turbines were 100 feet tall. Well, this year, we’re gonna have prototypes are ones that are 1,000 feet tall, they are just massive, massive structures. And they generate more than an order of magnitude more power than the old ones do. And more importantly, in their sizes, their height, because they’re reaching wind currents that are far more stable and far stronger. And so we’re seeing places in Texas, in Iowa, and now in New Mexico, that are using some of these taller turbines to not just generate integrated power, but baseload power. And that’s one of the big problems with green tech. If the wind stops or the sun goes down, you’re kind of out of luck. And you have to switch to a more conventional system or battery system, which is much more expensive. But if you are tapping a wind current that never stops, you can use it for baseload and avoid both of those problems. And that’s part of the goal here for the SunZia project.

But fourth, and I think most importantly, is that unlike almost every green tech project that we have done in the United States to this point, a huge portion of this project is transmission. They realize that there aren’t a lot of people in New Mexico and Albuquerque, can only suck up so much power. And so this project includes massive transmission lines that go into Arizona, and link into the network that goes into Los Angeles. And of the three and a half gigawatts of power generation that they’re anticipating, all but a half a gigawatt of it is for export to the Arizona and California markets. And the fact that this taps into the LA market is beyond awesome. I don’t know how many of you have heard of California, but doing business there is almost impossible. Electricity demand is hardly encouraged. But in many ways, electricity generation is flat out illegal. A very heavy regulatory environment. The state is also very power hungry, and they import about a third of their electricity because they made it very difficult for producers to operate in their home state. Arizona is by far the single largest supplier they have. And every night when the sun goes down and all those panels that California built stopped working, 10 gigawatts of fossil fuel power comes from Arizona across the border flooding into the LA zone. The SunZia project will now be able to put roughly three gigawatts of power into that network. It doesn’t solve it at a stroke, but it’s a much more sustainable program from an environmental point of view than anything that we have right now, so you know, great step forward.

One of the big things that we forget about in the wind and solar is not just the intermittency. It’s just that not everybody has places sunny and not every place stays windy, and most people don’t live in those locations. So our best wind locations are the Great Plains from eastern Montana, North Dakota, going down to the panhandle of Texas and West Texas. Our best solar zone is from Southern California going into West Texas as well. New Mexico is on the edge of that Great Plains region, great wind potential, great solar potential. But there aren’t a lot of people in that entire area. You got to wire it somewhere. And this is one of those projects that has managed to work out the details of crossing state boundaries to have them getting power to where people actually live, in Phoenix and Los Angeles. So we need many, many, many, many, many, many, many, many, many more of these for this to go. But the fact that we have our first really big one that’s already started construction, first power is expected in 2026, it’s a great start.