United States

United States

Ferc finds BPA guilty of discriminating against wind

UNITED STATES: The commission's ruling sides with wind in the ongoing dispute over the Northwest transmission regulator's wind curtailments.

Bonneville Power Administration (BPA) has until early March to revise its transmission tariffs in the Pacific Northwest so they are not "discriminatory or preferential" for wind compared with its own hydro power.

This was the result of a ruling by the Federal Energy Regulatory Commission (Ferc) last month, which largely sided with wind operators over BPA's wind curtailments. These were caused by excess hydro power and lack of transmission.

BPA both oversees the Northwest's transmission and generates hydro power, which critics argue can lead to conflict of interest. From 18 May to 10 July last year, BPA curtailed 97,557MWh of wind power, or about 6.7% of the amount produced, and substituted hydro power for free. Water in BPA's dams was unusually high because of excessive snowmelt, while the ailing economy had dampened electricity demand. The situation could recur in 2012.

In June, wind operators Iberdrola, PacificCorp, NextEra, Invenergy, and Horizon complained to Ferc that BPA had reneged on agreements to provide transmission and was instead capping costs for its own electricity customers.

They said that wind power was being devalued. In fact, they lost more than $2 million in production tax credits, which are for electricity generated. Nor could wind customers accrue renewable-energy credits, because major hydro is ineligible.

In its ruling, Ferc was unanimous that BPA had discriminated against wind. The commissioners also said BPA could not use the Endangered Species or Clean Water Acts to justify curtailments. BPA had argued that if it did not over-generate power - which would destabilise the grid - it would have to route excess water through dam spillways causing the water to pick up nitrogen gas and harm salmon. That claim is rejected by some environmental groups.

Ferc gave BPA 90 days to file revisions. "We're very pleased," said Rachel Shimshak, executive director of regional advocacy group Renewable Northwest Project (RNP). "We can now focus on all of the options that regional players can pursue to reduce these high-water situations in the future."

Northwest-based BPA was displeased by the intervention of Ferc, a national regulator. "The temporary oversupply of energy is a Northwest challenge. We believe it is the region's responsibility to find the most appropriate way to address this," said Steve Wright, BPA's administrator.

No authority

BPA is not necessarily in Ferc's jurisdiction as it is a federal agency. The commissioners jumped in, they said, because the Federal Power Act gives them authority over discriminatory transmission.

"BPA has yet to decide whether or not to seek a rehearing (at Ferc)," said spokesman Doug Johnson. If Ferc was to side with wind in a rehearing, BPA could then appeal in a federal court, where wind operators have separately sued BPA for breach of contract because of the curtailments.

Significantly, Ferc declined to address whether BPA's past curtailments were prohibited, leaving that issue to be litigated in court. Nor did it address whether BPA should start to use negative pricing, when generation exceeds transmission and power's real-time price goes negative. That is, BPA could pay generators to produce less, a cost BPA says would be unfairly borne by its electricity customers.

Californian integration

Meanwhile, a significant but modest step was taken before the curtailment ruling, that will help integrate wind into the region's antiquated electricity system and rationalise transmission with California.

Energy producers in the two regions can now schedule electricity transfers every 30 minutes instead of hourly. Southern California Edison is the first utility to participate in the pilot project by BPA and California Independent System Operator, which runs California's wholesale grid.

The added flexibility, which is crucial to integrate renewables, should help contain costs by reducing the needed balancing reserves and generator imbalance charges while increasing system reliability. California, the world's eighth-largest economy, is a vital market for the Pacific Northwest's fast-growing wind industry. In California, 33% of electricity sales are to be from renewables by 2020.

The change was welcomed for improving an obsolete system, though some claim that scheduling every 15 minutes would be even better. "It's certainly a step in the right direction," said Mark Ahlstrom, chief executive of consultancy WindLogics. For Robert Kahn, executive director of regional utility organisation Northwest InterMountain Power Producers Coalition, the move was overdue. "[This] should have been atop the transmission operators' agendas at least two years ago," he said.

Yet renewables experts say the grid still needs improvement, especially in the western US where the power markets are less flexible and centrally planned. "In the west, the transmission system is still catching up with the rest of the country," noted Cameron Yourkowski, RNP's transmission policy associate.

RNP recommends more self-balancing, as in BPA's pilot project with Iberdrola, the region's predominant wind owner-operator. Iberdrola is allowed to self-supply the reserves needed when its output variation is unscheduled instead of buying reserves from BPA.

Crucial too, said Yourkowski, would be making the amount of balancing reserves carried by BPA, which are currently estimated on a two-year basis, more easily adjusted seasonally or because of market conditions in other regions.

The American Wind Energy Association (AWEA) also advocates "energy-imbalance markets" so grid operators can compensate for fluctuating generation across a wider area, said Michael Goggin, transmission policy manager at AWEA. The idea is being tested by regional utility organisation Southwest Power Pool.

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