United States

United States

Wind project owners act to stop nightly curtailments

Wind-farm owners in the Northwest Pacific region last month took legal action against nightly curtailments of their output imposed by Bonneville Power Administration (BPA), which they say could cost them up to $50 million this year.

On June 13, Iberdrola, PacificCorp, NextEra Energy Resources, EDP Renovaveis subsidiary Horizon Wind Energy and Invenergy filed a 113-page complaint with the Federal Energy Regulatory Commission (Ferc) against BPA's actions which, at the time of the filing, had already stopped around 74GWh of output.

Since the shut-offs began on May 18, wind operators have struggled to receive payment for the electricity delivered, even though their buyers are getting free hydro instead of the curtailed wind. Operators are also not being paid for renewable energy credits (RECs) and do not get the production tax credit (PTC). The credits, which are worth $42/MWh, only accrue if electricity is produced, and the curtailments have already cost wind owners millions of dollars in foregone credits.

The high-profile, complex fight has reached boiling point because of an unusually high over-supply of hydropower in the region, the result of extra snow-melt coming down from the mountains. Lower-than-usual electricity demand due to the recession has made matters worse, while in the longer term the region suffers from BPA's refusal to adequately integrate wind, a lack of transmission and an outdated power market.

Wind operators and their allies are outraged over the curtailments. They say that wind is being singled out, devalued and is no longer a guaranteed product. Operators fear that investment in the region - a US hot spot - will start to falter. They also claim they are being forced into breach of contract with some power customers, who are receiving hydro electricity during wind curtailments, and can no longer claim RECs because the existing hydro is ineligible.

"This is gentrified highway robbery," says Robert Kahn, executive director of the Northwest & InterMountain Power Producers Coalition. "It's a planning failure. It could have - and should have - been avoided."

The American Wind Energy Association (AWEA) has come out strongly in favour of the action against BPA, accusing the federal agency of illegally breaking contracts and harbouring a bias against wind.

"BPA is using its control of the region's transmission system and exploiting unusually high water levels to break contracts," says Rob Gramlich, senior vice-president for public policy at AWEA, and a former Ferc policy adviser. "Contracts cannot be broken for wind or anything else. BPA, a government-owned monopoly, cannot play by different rules and shred contracts with private companies. Ferc can rise above the politics and adjudicate based on facts and the law."

Claims of bias

According to the industry, BPA is illegally refusing to run the transmission system for the benefit of all users and should compensate operators. It is violating its transmission contracts with operators by substituting hydro electricity in scheduled deliveries and prioritising its power-marketing role over its transmission role.

BPA was created in the 1930s to market hydro power. The agency views itself as primarily a hydro marketer, says Mark Ahlstrom, chief executive of renewable-energy consultancy WindLogics and an integration expert. Regional transmission operators, including independent system operators in California and the Midwest, have different priorities: "BPA is just not integrating wind (in the way) other regional transmission authorities are. The fundamental problem is lack of transmission and how it's used," he says.

Rachel Shimshak, executive director of regional trade body Renewable Northwest Project, notes that the region has, in recent weeks, sometimes had twice as much hydropower available as there is load. Nevertheless, Shimshak says: "The BPA is smart enough to run the hydro system, so they're smart enough to fix this."

Allies in the dispute include utilities that own wind farms and power marketer Powerex, which is part of Canadian power utility BC Hydro. PacifiCorp says it is now harder to meet Oregon's state renewable-portfolio standard because of the shut-offs. BPA is both the region's transmission operator and a power marketing authority, mostly for hydro. Its region has around 3.5GW of wind - one of the highest concentrations for any US transmission authority. An additional 3.7GW of wind generation has transmission rights and could connect by 2013 or 2014, it says. The agency is currently in the process of completing a major new transmission line, where hydro accounts for 20GW of capacity and thermal plants account for 7GW.

Grid reliability

BPA insists it can legally curtail output, a fact that, it says, is reflected in its contracts with wind operators. The organisation argues that grid reliability must be protected - supply must match demand - and that it has a statutory obligation to protect fish. According to Mike Hansen, a spokesman for BPA, it cannot spill too much water over dams, as that would affect the quality of the water. The wind industry disputes that, and has backers among fish conservationists who argue that the changes would not be harmful to fish.

BPA says it is seeking a resolution to the complaint. "We are disappointed that this filing has proceeded," says Doug Johnson, a BPA spokesman. "BPA is participating in mediation sponsored by Ferc that we believe is worthy of effort."

The problem could be helped if BPA used negative pricing - when generation exceeds transmission and power's real-time price becomes negative. BPA could pay additional power providers such as coal plants outside its service area, for example in Montana, not to generate, suggests Kahn.

BPA, however, will not do so because, it argues, this would unfairly burden its public power utility customers who do not benefit directly from wind. Critics say this stance shows how much BPA is shielding one set of stakeholders - the public power utilities, who happen to be the source of more than half its revenues.

Kahn says there should be a market mechanism for wind operators to pay others outside BPA's service area to curtail, as they stand to lose so much because of the RECs and PTC.

There is also some available capacity to export the excess power to California or the Southwest on transmission inter-ties, critics of BPA's policy argue, although Shimshak says that power might have to be wheeled straight through northern California for a fee. But BPA spokesman Hansen denies there is a market or, where there is, it is already being serviced by other providers.

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