The Bonneville Power Administration has proposed to cover half the cost of wind farms’ lost revenue when it shuts off their output because there is too much hydropower already being generated in the region.
Renewables advocates said Tuesday that the approach is unacceptable.
The cost-sharing proposal is the latest bid to end a dispute that began this spring, when the federal power marketing agency accommodated the massive spring runoff and resulting surge in power production by cutting off wind farms transmission and substituting free hydropower to satisfy their scheduled energy deliveries.
BPA controls three-quarters of the region’s electric grid and sells power from 31 hydroelectric dams to utilities around the West. At the time, BPA said it couldn’t dial back its own generation, as sending more water over dam spillways would create turbulence and violate dissolved gas limits established to protect fish.
The agency also refused to compensate wind farm owners for the lost value of renewable energy credits and production tax credits that are generated when wind farms are sending electricity into the grid. It said environmental obligations gave it the right to unilaterally cancel the wind farms’ transmission contracts, and that compensating them for lost credits would unfairly shift costs to BPA’s public utility customers.
Wind farm owners, including both independent developers and investor-owned utilities in the region, cried foul, saying they were being unfairly singled out to solve BPA’s overgeneration problem. Federal energy regulators subsequently ruled that BPA’s curtailments were unfairly discriminatory and ordered the agency to end the policy.
The agency is required to submit its response to regulators by March 6. It has been holding discussion for months to come up with a compromise. It says the proposal to split the costs is based on concepts developed in those discussions, and will be open for public comment for the next two weeks.
“This is an important step toward resolving a Northwest issue in a way that works for the Northwest,” BPA Administrator Steve Wright said in a news release. “We’re focused on seeking solutions based on regional input that maintain reliability, protect fish and support renewable energy while equitably sharing costs.”
Erin Greeson, a spokeswoman for the renewables advocacy group, Renewable Northwest Project, said the proposal was deficient. She said the wind farms owners were willing to consider some form of cost sharing arrangement, but that BPA’s proposal still singles them out to bear an unfair share of the costs for surplus hydropower generation.
“BPA’s proposed approach focuses primarily on wind generators and money,” Greeson said. “It should focus on long-term solutions that will actually solve the over-generation issue, increase flexibility for the system, and ensure that the Northwest remains a good place to do business for renewable energy developers.”
BPA says it expects curtail wind in two out of every three years, depending on runoff conditions. Under the new proposal, it will offer low-cost or free hydropower to replace the output of thermal and other power plants in the region. But if electricity supply still exceeds demand, BPA would then reduce the output of remaining generation within its system, including wind energy. BPA would then compensate the affected generators for lost revenues, including renewable energy and tax credits, subject to audit.
The agency figures it will pay wind producers an average of $12 million per year for lost revenues, though that will vary from nothing to more than $50 million in extreme conditions.
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