Despite the potential of wind as an alternate energy source for Idaho, a recent proposal by Idaho Power Company makes some wind developer plans seem quixotic at best. The state’s largest utility wants some of the windmill wild-catters to pay for power grid upgrades to transmission lines and then some.
At issue is just who should pay for the upgrade of a power transmission line in the Twin Falls area, which would be used by two wind farms near Hagerman. The Idaho Public Utilities Commission is now reviewing a complaint filed by Cassia Gulch Wind Park and Cassia Wind Farm. The wind farmers say that an Idaho Power plan to require small-power producers to pay for nearly $60 million in transmission upgrades threatens the economic viability of a number of wind projects.
Energy developers have big plans for wind power in Idaho, which ranks as the 13th windiest state in the nation. According to the Idaho Energy Commission, 42 wind farm projects around the state are in various stages of development, with a combined potential output of 1,500-2,000 megawatts of electricity. Since 1 megawatt is enough juice to power 650 homes, current plans would be enough to power 1.3 million homes.
Of course, this is only if the wind blows steadily, which it never does.
Intermittency is the bugaboo with this clean energy source.
“Wind power generation does tend to drive utilities companies a little crazy,” says Frank Halverson of Power Engineers in Hailey. “If the wind is blowing 30 mph and then suddenly drops off to zero, Idaho Power will have to ramp up a gas turbine or some other source in order to meet the demand.”
Jared Grover was a farmer on 320 acres in Hagerman before irrigation rate hikes caused him to seek other work in 2004. After selling his water rights he joined with a neighboring farmer to bring nine wind turbines, totaling 30 megawatts of electrical output, onto the power grid. The utility company agreed to buy the electricity from Grover under the provisions of the Public Utilities Regulatory Practices Act of 1978.
PURPA passed Congress during the energy crisis of the 1970s, requiring electric utilities to purchase energy from small, non-fossil fuel generators who obtain qualification from the Federal Energy Regulatory Commission.
Grover signed a purchase agreement with Idaho Power before the utility instituted what he calls a “virtual moratorium” on wind farms last June. At that time the company discontinued power purchase agreements for any generators over 100 kilowatts.
“Wind generators 20 years ago had that kind of output,” Grover says. “One of our new generators will put out 20 times that amount. Idaho is going to miss out on a lot of federal tax incentives in the form of production tax credits for wind power if this continues. Those incentives will go other states.”
But Idaho Power argues that requiring its customers to pay for transmission line upgrades would amount to a ratepayer subsidy, violating the basic regulatory principle of “ratepayer neutrality,” which states that the cost to ratepayers should be no greater for PURPA projects than if the power was generated by the utility itself or purchased from another source. The company claims that a decision favorable to the wind developers would result in more favorable treatment than that given Idaho Power’s own generating units as well as independent, merchant generation sources. Such a decision, the company argues, could adversely affect the utility’s ability to require other developers to fund system improvements. The utility claims a decision in favor of the wind developers could result in economically inefficient siting decisions made by other new generators, because transmission costs are ignored.
Idaho Power spokesman Dennis Lopez said his company made a generous offer to repay Grover and others for the system upgrade.
“If they will pay up front for the impact on our system, Idaho Power has agreed to repay the cost over a 20-year period,” Lopez says.
Grover is not disputing his responsibility to pay for new feeder lines and substations to interconnect with Idaho Power’s grid, but says the developers should not have to finance upgrades to the “backbone” of Idaho Power’s transmission system. “Whether we pay for the upgrade now, or Idaho Power pays it over time, it is still going to be paid by the ratepayers in any case,” says Grover. “The issue is over who should be the banker for this.”
Grover hopes the commission will hurry its decision because turbine costs are increasing rapidly, and further delay could impact anticipated delivery of the turbines.
“Right now our construction has come to a halt and we are paying people to store equipment,” Grover says. “The tax revenues which Twin Falls County will miss out on are about $400,000. Forty percent of that would be going to the school district. So this is not only costing us.”
Idaho Power maintains the $60 million upgrade to a transmission line from Twin Falls to Boise is necessary to insure the system’s reliability against a loss of transmission parts of the grid during high-use periods. But Grover argues that there are less costly means of preventing overloads than these sorts of major transmission upgrades, such as curtailing predetermined amounts of generation during an outage.
Whether one sees this as an engineering issue or a financial one, or both, the two parties will likely come to an agreement soon.
Gene Fadness, spokesman for the Idaho Public Utilities Commission, (the agency charged by the feds with settling such disputes) expects a resolution in the near future. After oral arguments, the PUC’s staff recommended that some compromise be found in order for the project to move forward.
“If they don’t work it out between themselves,” says Fadness, “the PUC will have to advocate some kind of cost-sharing agreement.”
The PUC staff established a four-week period for negotiations, which would just meet the December 31 financing deadline faced by Grover and his investors.
By Tony Evans