Wind developers, wind advocates, power marketers, utilities and BPA worked for nearly a year to arrive at a solution to the excessive penalties. "This is a significant improvement," says Rachel Shimshak of Renewables Northwest Project. "This does a lot to further reduce barriers to wind generation in this region."
After releasing a 1000 MW solicitation in April 2001, BPA signed pre-development agreements with seven wind projects totalling 830 MW at an approximate cost of $0.035/kWh (Windpower Monthly, July 2001). But the transmission penalties nearly double the price and threaten the economics of the projects. Shimshak gives credit to BPA for trying to figure out what the barriers to wind are in the Northwest and then dealing with them so that wind "can be treated fairly."
Generation imbalance charges were originally designed to discourage "gaming" the system: they remove the incentive to schedule a chunk of the transmission system and then switch when a better deal came along, thus defaulting on promised power delivery, says BPA's George Darr. Shimshak says the penalty is not fair when applied to intermittent resources, such as wind, that do not have enough control over the resource to game the system.
As well as eliminating the imbalance charges, Darr says wind advocates also asked BPA's transmission group to eliminate the requirement to track imbalances hourly and to instead average imbalances over a month -- and to eliminate the 10% adder and discounts for imbalances. In exchange, wind generators can schedule transmission space based on a wind forecasting model, similar to that proposed by California to the Federal Energy Regulatory Commission in December (Windpower Monthly, February 2002). BPA will deal with these requests later. According to the American Wind Energy Association's Jim Caldwell, two-thirds or more of the penalties are removed when the $0.10/kWh energy imbalance charge is eliminated.
Darr says BPA will begin its shortened rate case procedure in April, but expects to go through the motions with little opposition because the proposal will result in no shifting of costs from wind generators to combustion turbine generators. In addition, he says, many Northwest utilities and power marketers are either building their own wind projects or buying the output from the projects.