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Next-gen wind farm stalls under PSC terms

A cutting-edge wind farm paired with battery storage cannot advance under what developers are calling unworkable terms set by Montana’s Public Service Commission.

Caithness Beaver Creek is asking the state’s utility regulators to reconsider terms for the $500 million project near Rapelje. Terms by which Caithness was to sell renewable energy to the utility NorthWestern Energy were set by the PSC in early December. The PSC put the overall avoided cost of the energy at $6 a megawatt hour effectively killing the project, according Caithness.

The PSC had expressed excitement about the Beaver Creek project when terms were set in early December. Caithness Beaver Creek is the first Montana renewable energy development with battery storage, making it possible for the wind farm to deliver energy when the wind isn’t blowing, a big step toward making renewable energy more useful and valuable.

When terms for the project were set, Commissioner Roger Koopman, whose district includes the location for Caithness Beaver Creek, called PSC’s work on the project’s terms “the single most important, cutting-edge (renewable energy) decision the commission has yet made.”

However, Caithness said a closer look at the commission’s work revealed seven errors, starting with not taking the project’s battery storage into account. Commissioners also used a new methodology to determine project costs. In filings before Christmas, the developer said the PSC prematurely celebrated the terms for the renewable energy project.

“As a general note, despite the recent publicity that the Commission is excited about the development of the CBC Projects, the effect of the final order is far from encouraging,” wrote Michael Uda, Caithness attorney.

Caithness Beaver Creek plans to build four 80-megawatt wind farms near Rapleje, each with battery storage. The PSC, using its new formula for setting rates, had estimated that Caithness would be receiving a net rate of $38.41 a megawatt hour and a 20-year contract. That rate was 22% less than what Caithness had requested but more than what NorthWestern Energy has asked.

At the rate sought by Caithness, the wind-battery project would have cost NorthWestern’s Montana customers at about half what customers pay for electricity from NorthWestern’s share of Colstrip Power Plant. Montana’s Consumer Counsel puts the customer cost of NorthWestern’s Colstrip power at $78 a megawatt hour.

NorthWestern had argued that Caithness’ development be treated more like a wind farm with energy priced low because of availability issues. NorthWestern argued that it needs “firm power,” that is power available at more consistent levels, from sources like dams and coal-fired power plants.

But NorthWestern did indicate batteries should have been considered by the PSC when establishing avoided cost, which NorthWestern advocated for in its own request that the PSC reconsider the terms set. NorthWestern had its own issues regarding how the PSC expected the utility to true up capacity payments.

Caithness and NorthWestern weren’t on the same page with their concerns about PSC terms. Earlier, the utility had asked the Caithness contract be limited to 15 years. Commissioners set the contract at 20 years.

Once the terms are set by the PSC, barring any reconsiderations granted, NorthWestern has to accept the terms and Caithness power. Those rules are grounded in a 42-year-old federal law guaranteeing contracts for alternative energy projects of a limited size. The federal Public Utility Regulatory Policies Act grants guaranteed contracts for facilities of a particular size. Caithness’ projects, each with 60 megawatts of wind energy and 20 megawatts of battery storage, qualify for the federal terms.

Tuesday’s terms apply to just two of Caithness Beaver Creek’s four phases, each of which generate 60 megawatts of wind energy and battery storage of 20 megawatts. They are qualifying facilities for guaranteed contracts under the federal law known as PURPA.