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Avista shifts, mulls own wind power; Utility abandons effort to buy renewable energy through RFP process  

Dissatisfied with proposals it received from prospective vendors interested in providing it with long-term renewable energy, Avista Corp. says it now is looking at building its own wind-power plant to meet some of those future electrical-generation needs.

“Our new strategy is to develop something ourselves,” says Steve Silkworth, wholesale power manager for the Spokane-based utility. He says the company is evaluating potential wind-farm development sites “in or near our service area.”

Development of such a plant would help Avista comply with an initiative passed by Washington voters last year that requires larger utilities in the state to obtain at least 15 percent of their power from certain renewable resources by 2020. The affected utilities must reach intermediate thresholds of 3 percent in 2012 and 9 percent in 2016.

Avista already serves more than half of its energy load with renewable resources, primarily hydropower, but hydropower won’t count toward the state-mandated percentages except through efficiency improvements to current facilities, since the initiative’s focus was on new capacity.

Silkworth says Avista has nearly enough other renewable-energy resources planned or in place to comply with the state mandate through about 2015, but will need to develop or acquire additional resources, or buy renewable-energy credits, to stay in compliance after that as the state threshold rises.

Of the company’s plans for developing its own wind farm, he says, “We have the time to do it. We just don’t have the need (for that power) right now.”

Silkworth and Hugh Imhof, an Avista spokesman, say the company also remains open to partnerships or acquisitions that would help it meet its renewable-energy needs, although it doesn’t plan to issue another request for proposals like the one that generated the initial proposals the company found unpalatable.

Avista’s energy-source mix currently is about 54 percent hydroelectric, 30 percent natural gas, 13 percent coal, 3 percent biomass (coming from a Kettle Falls wood-burning plant that’s too old to qualify as renewable under the initiative), and 1 percent wind power.

The company buys all of its wind power from the Stateline Wind Energy Center, near Touchet, Wash., under a 10-year agreement it reached several years ago with the plant’s owner.

About two years ago, it had sought proposals from vendors interested in providing it about 35 average megawatts of long-term renewable energy that it hoped to begin integrating into its energy-resource mix by the end of this year.

Average megawatt means one megawatt of power supplied over a specified period of time, rather than referring to generating capacity. One megawatt is enough to supply the electrical needs of roughly 650 Inland Northwest homes, so the amount that Avista was seeking would be enough to meet the needs of nearly 23,000 homes.

The company received a total of 24 proposals, 14 of which involved wind power, but was surprised at their high cost. It culled the overall group to a short list of four, later reduced to one. That one, Silkworth says, involved Avista’s potential purchase of an operating 100-megawatt wind-power plant, which he declines to identify. The company was “very close” to signing a purchase agreement when the plant’s owner bumped up the price to a level Avista wasn’t willing to pay, he says.

Even to develop its own wind-power plant, Avista appears to face sizable challenges. A long-term electric power plan that the company released three months ago says, “Most of the economically viable and readily developable wind power sites in the region have already been or are in the process of being acquired.”

The power plan also notes that wind-power generation costs have risen more than 50 percent since 2005, and Silkworth says those costs now are about double what they were a couple of years ago. Renewable-energy legislation in Washington and Oregon “has artificially increased and accelerated the demand for these resources and therefore increased their costs,” the power plan asserts.

Other types of renewable energy, such as biomass and solar power, though being pursued, still are seen as less viable for large-scale generation in the near future. Avista also says in the plan that it currently doesn’t consider nuclear power a viable option.

The lack of cost-effective options has caused Avista to lay out a strategy for the next 10 years that reduces the amount of additional generating capacity it expects to derive from renewable resources.

Its latest long-range plan calls for generating an additional 350 megawatts from natural-gas-fired plants, 300 megawatts from wind turbines, 87 megawatts from conservation, 38 megawatts from hydro plant upgrades, and 34 megawatts from other renewable sources.

The plan estimates the investment cost of adding that power at $1 billion to $1.5 billion.

That projected wind generation, though, is 100 megawatts less than what Avista forecast in its previous long-term plan, released in 2005, and the anticipated generation from other non-hydro renewal sources is 56 megawatts less. Those reductions are partially offset by a 17-megawatt increase in power savings that the company expects to capture through a major conservation initiative it currently is implementing.

On the nonrenewable side, the company has added 100 megawatts of expected generation that it expects to gain by replacing 250 megawatts of coal-fired generation with the previously mentioned 350 megawatts of natural gas-fired power. Coal power was dropped from the plan due to changing economics and recent legislation that effectively bar its use. Avista plans to use the 275-megawatt Lancaster natural gas-fired plant in Rathdrum, Idaho, and which Avista expects to be able to incorporate into its resource mix in 2010, to provide much of that power.

Avista currently serves about 346,000 electric customers and 306,000 natural gas customers across the Inland Northwest.

Like other Washington utilities, it must submit 20-year resource plans to state regulators every other year. The plans describe the utilities’ strategies for meeting customers’ projected future requirements while balancing associated costs and risks.

Avista’s latest plan anticipates 2.3 percent annual growth in demand for electricity over the next 10 years. The company says it faces a likelihood of not having enough power to meet demand beginning in about 2014 unless it develops additional resources.

By Kim Crompton

Spokane Journal of Business

6 December 2007

This article is the work of the source indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

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