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Analysis: Utilities buy into wind

As more states pass renewable or clean energy portfolio standards, utilities are forced to supply their customers with green power while keeping it affordable and reliable.

“Ten years ago, utilities had an adversarial relationship with the wind industry. Now they have a business relationship,” said Pat Wood, chairman of Airtricity Inc. “Utilities are embracing wind.”

But there’s still a laundry list of issues that need to be dealt with before utilities, on which responsibility will ultimately fall, can meet the goals for renewables.

It is easier to impose regulation that can be enforced through utilities because compared with other emissions-producing sectors there are fewer companies, said Yakout Mansour, president and chief executive officer of California Independent System Operator.

Utilities are not eligible for the federal production tax credit, and though they are making power purchase agreements with wind developers and owners, it is not a long-term solution. A more permanent solution would be for utilities to own their own wind projects.

Xcel Energy is the largest purchaser of wind power in the United States with 1,300 megawatts in its portfolio in 2006, 2,800 expected by the end of 2007 and 6,000 megawatts projected by 2020.

Most of Xcel’s wind is obtained through power-purchase agreements, but the company “would like to own some wind; ownership brings down cost,” said Paul Bonavia, president of Xcel.

Sacramento Municipal Utility District is also developing its own wind projects. At Rio Vista, 39 megawatts are being produced; when the second phase is brought online at the end of the year there will be about 400 megawatts. A third phase is also under consideration, said Jan Schori, general manager of SMUD. If that is added, the project will generate nearly 870 megawatts in 2011.

Interconnection and transmission is another problem; no one has yet connected the large amount of wind, around 6,000 megawatts, that will need to be connected on the Pacific Coast.

Bonneville Power Administration recently finished a report studying the feasibility of integrating 6,000 megawatts of wind into the Northwest transmission grid. The findings suggest the cost of interconnection is relatively low but is increasing due to constraints, said Stephen Wright, administrator of Bonneville.

One way to keep the cost down, Wright said, is to work with hydro owners and to develop markets for integration services. In addition to upgrades, new transmission is needed, especially where the wind is, which is oftentimes away from the central grid system. New transmission could also be designed to incorporate the cost of interconnection.

Bonneville expects to have 1,400 megawatts of its own wind power online by the end of the year.

“Wind has moved from a marginal resource to a mainstream resource,” Wright said. “But by itself, it can’t meet load.”

SMUD is researching another way to improve interconnection with hydro by using wind, which blows the hardest at night, to power a pump storage hydro system.

Expansion of regional markets and control areas would make a national market and national grid more feasible.

Utilities also have other ways to mitigate problems such as demand-side management methods of reducing demand. Efficiency is something that can be practiced 365 days a year, not just during time of peak load. Demand-side management is a nice complement to renewables such as wind, Mansour said.

Encouraging customers to use more energy during times of low demand is another way to help enable the wind industry.

Schori and the other utility officials at the American Wind Energy Association Windpower 2007 conference offered their wish list to the wind industry: better siting approval, transmission, more and better wind data, integrated wind and utility operating data, better day-ahead forecasting, packaging wind projects and extension of the production tax credit.

“We will not get the transmission built unless the wind industry stands hand in hand with the utilities to get the policy that’s needed in place,” Schori said.

“We think it’s good business, the technology is real and the problems are manageable,” Bonavia said. “Our investors are looking for us to do it,” he said about investing in wind.

By Kristyn Ecochard
UPI Energy Correspondent

United Press International

6 June 2007