Wind boom as prices spiral in Northwest

The Northwest of the United States is desperate for power -- and wind is helping fill the gap. Consumers want it, utilities need it and the high prices to be had on the market and the various incentives schemes on offer are making it a tempting area for wind developers to do business in

With power shortages and spiralling spot-market prices for electricity making regional news headlines, wind energy development is suddenly happening in the Northwest of the United States. Five projects worth as much as 400 MW in total capacity are in the works, including a massive expansion of FPL Energy's Vansycle Ridge wind farm in eastern Oregon. The 400 MW is in addition to 1600 MW of new gas power generation, also proposed in response to the shortages. To date, the only wind capacity in the region, which consists of Oregon, Washington, Idaho and western Montana, is the 25 MW of turbines turning at Vansycle.

Most of the upcoming wind plant are scheduled to be on-line in time to cash in on the federal Production Tax Credit (PTC), which sunsets December 31, 2001, and gives about $0.017/kWh to most wind projects on-line before that date. While the PTC deadline has much to do with the current spate of wind projects, utility mandates, green marketing, state deregulation and the power shortages play in as well, says Jeff King of the Northwest Power Planning Council, responsible for planning the region's energy future. "These are some pretty strong drivers that will continue to encourage wind development in the Northwest, even without the production tax credit," King says. He points out, though, that the credit puts the cost of wind power in the $0.03-0.04/kWh range.

FPL Energy and SeaWest are the two main developers behind the development (table). While the Vansycle expansion is furthest along, SeaWest is using its Condon project at Oregon's Columbia River Gorge as a test bed for 300-500 MW of future projects in the region (Windpower Monthly, July 2000). Utility initiatives are also making an impact. Both Seattle City & Light in Washington and the Eugene Water and Electric Board (EWEB) in Oregon have been told by their boards to meet a portion of their load with renewables. Seattle responded by issuing a tender for 100 MW of renewable projects over the next ten years; wind is expected to take a good chunk of the contracts (Windpower Monthly, November 2000). EWEB is part owner of SeaWest's 85 MW Foote Creek project in Wyoming, which feeds power to Northwest customers.

In need of more

August typically produces the Northwest's highest prices in the short-term power market. River levels are low and the Northwest's usually abundant hydropower production is down. This year, a combination of events in August -- largely driven by a shortage of generation and made worse by the need to feed California's hunger for air-conditioning during an unusually hot summer -- drove prices higher than ever throughout the West. Last summer, spot market power prices rose steadily until they exceeded $300/MWh, peaking at one point in mid-August at $1400/MWh. In August 1998, the average price was only $40.

"The price of energy this summer got everyone to look," says Rachel Shimshack of the Renewables Northwest Project, an advocacy group. "The Northwest has been able to skirt some of the generation problems experienced by others, but it's coming home. Now we need all types of power."

Now, after two years of growing wholesale prices, Northwest utilities are proposing to raise their rates. Oregon's two largest electric utilities applied for rate increases and a sharp jump in wholesale natural gas prices caused the state's three retail natural gas utilities to ask for double digit increases. The Bonneville Power Administration (BPA), which provides nearly half of the region's electricity, says it will increase wholesale power prices by 15%. The higher prices have made it more attractive for developers to build, and wind's plans in the pipeline make up a fourth of the total upcoming power development in the Northwest.

Wind has no fluctuating fuel costs, notes King, a big bonus over fossil fuel technologies, particularly gas at the moment. Shimshack adds that wind also has many of the characteristics that move utilities to action. For one, customers want more renewables. Survey after survey is proving this to be true, she says, and the success of customer education and green pricing programs are also proof of wind's and other renewables' success in the Northwest. More than two million Northwest electric utility customers now have access to some type of green pricing program, according to the Renewables Northwest Project.

"At this time, wind is the most economically attractive out of the market-basket of renewable energy," Shimshack says. "There are no fuel costs, so prices for wind are very stable. Plus, people can relate to it. It's been around a long time and it's easier to make the connection between wind turning turbines and electricity production."

Deregulation helping

The several Northwest utilities that market green energy to customers are finding modest success in the residential and commercial markets, but the Bonneville Environmental Foundation (BEF) is signing large chunks of clean power with its Green Tag program. Mid-year, sales to Tacoma Power, Portland General Electric and the US Environmental Protection Agency added about 10 MW of wind turbines to the Northwest mix and a large aluminium manufacturing plant is expected to sign on soon (Windpower Monthly, June 2000). That brings BEF's total wind power sales to 23 MW -- generation it will get from one of the five wind projects in development.

State deregulation is helping wind development in other ways too. In deregulating electricity in Montana earlier this year, the state legislature added a public purposes fund that collects a fee from retail customers to help pay for conservation and renewable resources in the state. Part of that money will go to a 22 MW wind farm on the Blackfoot Native American reservation (Windpower Monthly, October 2000). Oregon has passed a similar requirement that will go into effect in July, when commercial and industrial customers served by investor owned utilities will be able to shop around for power.

Another driver is the BPA's upcoming Conservation and Renewable Credit, which may contribute another 30-60 MW of renewable resources every year, says George Darr of the organisation. From October 31 next year, utilities will earn a credit of $0.0005/kWh of renewables generated electricity sold to the federal power marketing agency. BPA believes that this is enough of an incentive to encourage utilities to develop more renewables. Northwest utilities are indeed preparing for that credit, Darr says, something that may already be affecting development.