There will be a legal bill. That much is clear.
But little else is easily explained in a bizarre situation in the Pacific Northwest that’s pit wind energy against hydropower, and caused the shutdown of thousands of wind turbines during a prime season of hard-blowing gusts.
Spring runoff has caused rushing waters in the Federal Columbia River Power System, making massive amounts of water power possible. In fact, there is too much power available to the northwest’s power grid, threatening service and rate stability. Some generation has to be slowed or shutdown, or buyers outside the region found for the electricity.
The Bonneville Power Administration, which manages power transmission in parts of eight Western states and sells hydropower from federal dams, has decided to curtail windpower to solve its overgeneration problem.
Since May 18, the decision has disrupted operations at 35 wind farms with more than 2,000 turbines stalled almost daily in the Columbia Gorge along the border of Oregon and Washington. Those generators have contracts with BPA to transmit wind power. Now, they are tallying ongoing losses already in the millions.
“It looks like in the typical week they are curtailing in the mid-20,000 megawatt hours. And to put that in perspective, that’s enough power to power about half of the houses in Portland,” a city with a population of roughly 584,000, said Michael Goggin, manager of transmission for the American Wind Energy Association.
BPA’s hasn’t only shut down wind farms. It’s also stored some power, curtailed other sources, and exported surplus electricity at very low cost. But the administration has stopped short of paying to get rid of surplus hydropower to make way for wind generation, with damages absorbed by the wind industry.
Critics of the curtailment dispute its necessity, instead charging BPA has used high water conditions – and the potential to harm to salmon by spilling it over dams – to craft policies that benefit its bottom line. “It will certainly harm our future in the Northwest for renewable energy development, but it could even have broader implications. If a monopoly utility can break utility contracts, it would be very hard to finance projects in a lot of places,” Goggin said.
Officials at multinational energy company Iberdrola and six-state utility Pacific Power are planning lawsuits. Iberdrola and Pacific Power’s parent company PacifiCorp were among five companies that filed a challenge at the Federal Energy Regulatory Commission June 13 charging BPA violated the Federal Power Act. Meanwhile, the situation has riled salmon advocates and upset rural communities dependent on tax revenues from wind farms. In Washington, D.C., Congressional leaders have dispatched letters to the Obama Administration, noting the disconnect between its call to promote renewable energy and decisions on the ground at BPA, which is part of the United States Department of Energy.
BPA operates and maintains a transmission system that encompasses all of Idaho, Oregon, Washington, Western Montana, and small parts of Eastern Montana, California, Nevada, Utah and Wyoming. It is somewhat unique as a federal agency in that it generates revenue from power sales, even while offering low-priced power to ratepayers. BPA supplies about a third of the power used in the Northwest.
Since 2005, BPA has contracted to deliver wind power for an expanding number of wind farms, most keen to the advantages of its established transmission routes along the Columbia Gorge, where the wind currents are so strong that trees lean to the east. BPA has added 3,400 megawatts of new wind capacity since 2005 in this region and is projected to reach 6,000 megawatts by 2013. Agency officials note that the pace of integration is years ahead of original estimates, and that BPA has worked hard to integrate what are now among the highest levels of wind power compared to load of any grid-balancing authority in the country.
The agency has grappled mightily with the demands of managing that power, however, particularly as development centers around the Columbia Gorge. With turbines located mostly in one place, the wind either blows there or doesn’t, and wind power’s effect on the grid fluctuates widely. Tasked with balancing the power supply to meet demand, an exercise that keeps power delivery and prices stable, BPA has had the most difficulty in spring, when wind power and hydropower peak simultaneously. Though BPA can spill water over dams to release oversupply in some cases, fast-falling water makes for bubbles in rivers, which dissolve as gas and can threaten endangered salmon.
This year, with weather warm and rivers raging, thermal producers – coal, nuclear and natural gas producers – have already powered down, and BPA said it has had no choice but to cut wind power off the grid next. But unlike thermal power generators, wind farms lose money in the exchange. When hydropower is so abundant there is little financial gain to producing more, thermal producers save money by conserving fuel. Wind companies, however, have no fuel savings, lose money from power sales, and also lose lucrative federal and state incentives tied to production. As of June 13, wind companies had curtailed 74,114 megawatt hours of power during select overnight hours, worth $1.6 million in production tax credits alone.
Michael Milstein, spokesman for the BPA, said the policy was a last resort. “It was something that nobody here wanted. There wasn’t really a good option. Ultimately the administrator felt that this was the safest and the best balance between bad choices, the best for protecting fish, for protecting the stability of the grid, and for trying to keep power rates reasonable,” he said.
The policy, however, has left wind operators fuming, including private companies and utilities, and stoked real fear throughout the industry that BPA’s move could disrupt future wind development.
Patrick Reiten is president of Pacific Power, one of three platforms under PacifiCorp, a six-state utility that both owns wind farms and purchases wind power within BPA’s service territory. He believes BPA is simply pushing wind power offline because it’s the cheapest solution to its balancing problem.
Reiten points to open capacity on transmission lines connecting southern California to Canada, and says, “What that tells you is this is an economic event, not a matter of physics or fish.”
Power transmission organizations from the Midwest ISO (MISO) and PJM Interconnection, to New York (NYISO), New England (ISO-NE) and Texas (ERCOT), which together manage about 40 percent of the power consumed nationally, regularly pay customers to consume surplus power, according to Andy Ott, senior vice president of markets at PJM, which coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia. Wind operators in the Northwest have loudly argued for BPA to adopt a similar strategy. Ott said PJM has found that paying customers to shift power to overnight use, when balancing low demand with abundant supply is most difficult helped maintain consistent rates, even as factories cleverly shifted production hours and earned cash.
“If you had enough people respond to the incentive, it may actually cost them less, which is what we saw here,” he said.
BPA has said paying to offload surplus hydropower would raise their costs, a sticky problem for an agency that operates as a nonprofit. Spokesman Mike Hansen said that while negative pricing is utilized in other parts of the country, “In many cases it is the wind projects that are paying the negative prices in order to have their power delivered to load. In the BPA situation, since the vast majority of the wind on our system is exported to other utilities, you have a cost shift from the users of the wind power to other Northwest customers (BPA ratepayers) who are not purchasing the power.” He said the agency was actively discussing alternatives.
But after weeks of shutdowns, including hot-headed public meetings involving wind operators and BPA officials, the dispute has reached a stalemate, prompting Pacific Power’s parent PacifiCorp to join Iberdrola Renewables, Horizon Wind Energy, NextEra Energy Resources and Invenergy Wind North America in parts of a three-pronged strategy to lob legal grenades at the BPA. All five companies joined the June 13 FERC filing, which claimed BPA abused its authority to benefit its own power generation business and broke contracts with wind power companies for financial gain. The American Wind Energy Association immediately filed comments in support. Lawsuits are also expected in the Ninth District Circuit Court of Appeals and the U.S. Court of Federal Claims. They will attempt to roll back BPA’s policy, charging it violates the Northwest Power Act. Companies will also seek to recoup losses.
Don Furman, senior vice president of external affairs at Iberdrola Renewables, the U.S. subsidiary of Spain-based Iberdrola Renovables that operates about a dozen wind farms in the Pacific Northwest, says there is an important legal precedent at stake: whether BPA upholds the contracts it signed with wind operators and abides by federal energy policies.
“This is not about fish and wildlife. It’s not about renewable energy as much…. It’s really about whether the federal government is going to follow the rules that have been set down by other parts of the federal government. Bonneville is the dominant player in the power market in the Northwest. They own 80 percent of the transmission system. And they are using their control of the transmission system to gain an advantage for their power generation. That’s what we’re saying is not okay,” he said.
BPA officials maintain that its contracts with wind operators provide the latitude to curtail power when there’s too much and that they have the authority to limit power generation in general. Officials continue to note the strategy was in part an effort to minimize dangers to fish posed by rising gas levels, even while taking fire from salmon advocates. Pat Ford, executive director of Save Our Wild Salmon, said what’s best for fish is increased development of renewable power so more dams can be removed.
“We don’t want to see that industry harmed or derailed by threats to its business model,” said Ford. He said BPA could have done more to avoid the crisis by spilling water over dams earlier in the season, but now BPA’s fish defense is giving renewable power and salmon recovery a bad name. “What that’s leading to is people thinking or saying, ‘Wind energy kills salmon.’ ‘Wind energy and salmon are not compatible.’ ‘We are going to have to choose between wind energy and salmon.’ None of those things are true,'” said Ford.
With the spring operating season in shambles, wind operators have set their sights on either reversing or resolving the BPA policy by 2012, and members of the Congress have joined the chorus, pressing the issue in Washington.
Sen. Jeff Merkley (D-Ore.) joined Rep. Earl Blumenaur (D-Ore.) in lobbying BPA to reverse the decision before BPA made it official in May. A week after wind curtailment was authorized, Blumenauer appeared at Windpower 2011 in Anaheim, Calif., a conference hosted by the American Wind Energy Association, to criticize the disconnect between BPA’s short term maneuvers and the Obama Administration’s long-term energy policy goals. He has since pressed the Administration for support, joined by Rep. Edward Markey (D-Mass.) and others.
They have asked U.S. Energy Secretary Steven Chu to urge BPA toward long-term solutions, including developing new energy storage tools, more transmission capacity and bettering management and forecasting techniques. They also want to see BPA displace more thermal power and modify its pricing to export surplus energy to other regions during high runoff and high wind scenarios.
In a letter to Chu, Blumenauer wrote, “BPA’s decision, which in effect will curtail wind turbines during high water events in the Columbia River system, will undercut one of the most promising new energy industries in the United States. It also sends a mixed message from the Department of Energy that contradicts the Administration’s clean energy agenda to advance renewables development, create jobs, and rebuild the economy…”
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