Problems caused by an energy supply shortage and a volatile West Coast energy market, where prices have escalated ten-fold, are now being compounded by a drought in the hydro-dependent Northwest. The Bonneville Power Administration (BPA), a federal power marketing agency, is thus looking for power -- about 3000 MW of it -- as fast as developers can get it to market.
The BPA wants 1000 MW of that new power to come from wind (Windpower Monthly, March 2001) and plans to buy generation from at least some wind projects before the end of the year. Wind's cost must compete directly with that of other generating resources coming on-line at about the same time, however. Those prices are high now, but they are expected to drop. And once 2000 MW of gas generation comes on-line between this summer and 2004, competition will be stiffer yet.
"The RFP is not a commitment to buy a certain amount of wind energy," says BPA's George Darr. "What we buy will depend on price and a lot of that depends on timing. The earlier the wind comes on-line the more valuable it is to us."
Darr says the federal agency will compare wind bids "apples to apples" with the gas fired projects scheduled to go into service in the next few years. To do that, BPA will add to each wind bid the cost of energy needed to fill in behind wind turbines when they are not turning. He predicts this will add about $0.025/kWh to the cost of each project, but he's confident wind still will be competitive for most larger projects, at least in the short term.
A recent report by the American Wind Energy Association placed the future cost of power at FPL Energy's 300 MW Stateline project at $0.025/kWh. The going price for short-term -- about five year -- contracts with gas generators is now $0.05-$0.06/kWh. That will change, according to Jeff King of the Northwest Power Planning Council, which forecasts and plans energy demand and supply for the federal Northwest power system. King predicts that policy changes in California, an accelerated conservation effort by BPA and a couple of thousand megawatt of gas plant expansion will soon bring prices down again -- and already there is evidence that's occurring. "Some things will right themselves over the next few years," King says. "A couple of fundamentals are likely to get better," he adds, such as the Northwest drought, which has dropped the hydro generating capacity by about 4000 MW.
And that's why timing is so important, stresses Darr. "With all these gas plants coming on-line, the earlier wind projects can start producing, the more valuable they are," he says. He is hopeful the BPA solicitation will attract wind projects soon. "My ideal world would be to have seven or eight projects of about 50 average megawatt by the end of the year, all with expansion potential of 300 to 400 MW," Darr says. "That's the Foote Creek model, where the project is built out as demand justifies it."