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Wind gatecrashes power conference -- Impact of RPS examined

Wind was the surprise package of the West Coast Power Conference in San Francisco, California, last month. As delegates tackled the myriad problems present in the region, including a congested grid, lack of investment in the energy sector, transmission problems, conflicting jurisdictions and flawed attempts to deregulate, wind power emerged as a beacon of light in a somewhat pessimistic overview.

Renewable energy merited one small conference slot during the second day, yet the subject ended up dominating every single session. The first session began in front of a standing room only audience of mainstream power sector delegates. They arrived to hear views on developing new generation, expecting news of gas plants and funding issues. Instead, the focus strayed to wind as the best means of portfolio expansion.

PacifiCorp's Peter van Alderwerelt laid out the barriers to wind, such as energy price volatility, high initial costs, transmission access and public policy issues. Nevertheless, he was more than optimistic. "We see tremendous potential in large scale wind farms in the West and Midwest," he said. His company contracts the power from the 300 MW Stateline wind farm, which straddles the Oregon-Washington border, and plans to develop more than 2000 MW of wind in the next five to seven years.

Government programs such as the new California renewables portfolio standard (RPS), which requires the state's investor-owned utilities to provide 20% of their power from renewables by 2017, and the federal production tax credit (PTC), had clearly caught the attention of delegates. Susan Patterson from the Sacramento Municipal Utilities District (SMUD) told the gathering of SMUD's plan to increase its reach to 20% by 2011, including the development of a 100 MW wind farm in Solano County. About 7% of SMUD's portfolio is from non-hydro renewables.

Declining cost

Both Van Alderwerelt and Patterson were firmly behind the California RPS and highlighted the declining cost of wind. Van Alderwerelt said he expects it to reach about $0.02/kWh by 2010. He also favoured a federal RPS. Meanwhile, said Navigant Consulting's Richard Germain, California's new standard, the toughest in the nation, is expected to drive significant new investment in renewables. He estimated it could increase renewable energy usage in the state by up to 780 MW a year, most of it from wind. Pacific Gas & Electric and Southern California Edison, which already supply 12% and 15% renewables, respectively, will need to add 150-350 MW a year. San Diego Gas & Electric, with less than 2% of its portfolio provided by renewables, must buy another 30-80 MW a year.

Michael Niggli of Sempra Energy Resources, however, voiced concerns over focusing too strongly on the RPS in an otherwise confused policy picture, calling for stronger overall market design. "Developers aren't rushing into renewables due to financial uncertainty in the markets as a whole," said Niggli.

Luis Pando, an analyst at InterGen, countered by saying that the RPS had gone a long way to easing funding concerns for wind. "Though it's harder to finance new plants, banks are aware of the RPS," he said.

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