Traditionally, BPA markets the output of 29 federal dams and one nuclear power plant in the Northwest. But with 330 MW of wind plant now operating in the region -- up from 25 MW in the autumn -- it has added wind generation to the mix. Cumulative wind capacity is expected to grow to 1500 MW by 2003. BPA created a negotiating list with developers for seven wind projects totalling 830 MW in June last year (Windpower Monthly, July 2001), although the federal power marketing agency has made little progress since then, largely due to the price of energy.
"The long range marginal cost of power is less than half what it was a year ago and the value of green tags is down," says the BPA's George Darr. "These are the two big pieces we use when evaluating the economics of wind."
Drastic cost cutting
He might add as the third piece the financial health of BPA. The agency reported a $76 million loss in the quarter ending December 31. It already had to increase prices in October by 46% after reporting a $642 million loss in 2000, but that loss was due to the combination of drought that reduced the hydro power system's output by 3000 MW -- and high market prices. All generating additions, including wind power, were welcome.
Now, power prices are low -- in the $20-30/MWh range -- and there is a glut of energy. BPA is making so little on its bread-and-butter wholesale sales that it may once again have to raise rates.
At this stage, however, the agency is in a drastic cost cutting mode to avoid that eventuality. "Management is taking a hard look at any kind of dollars, including those for environmental programs," Darr says. Rachel Shimshak of Renewables Northwest Project says that although the market signals are making it difficult, she still thinks BPA will follow through. "Market prices are down and many energy managers have amnesia about the previous energy crisis," she says. "Our job is to remind them what they need to do."
She points out that despite the PTC's expiration, not all development activity in the Northwest has stopped. Seawest is extending its 24.6 MW Condon Wind project in northern Oregon by another 25.2 MW. Darr says BPA worked with Seawest to lower the project's cost by increasing its size and, in the process, made a deal to buy the output of the plant regardless of the tax credit. That may force it to buy the power at a much higher price.
Work also continues on Energy Northwest's Nine Mile Canyon project in south east Washington, which relies on the Renewable Energy Production Incentive (REPI) for government and not-for-profit organisations that develop renewable energy. Unlike the PTC, the REPI will not expire until 2003.