United States

United States

Utility tests wind as least cost option

Wind's real and social costs are beinlg put to the test in Minnesota by utility Northern States Power. NSP is using its recent request for 1200 MW of new generating capacity to see whether wind could be the least cost option among bids from all energy sources. If it is, the utility is mandated to develop 400 MW of wind power in addition to the 425 MW of wind it must build by 2001.

Bidding for the 1200 MW tender, issued as part of an annual resource planning process, closed on September 27. It is for generation to come on-line between 2003 and 2005. NSP declines to disclose who bid at what price, the number of bids it received or if wind was even among the bidders. Several wind developers, however, were listed on the notice of intent to bid, says NSP's David Zuck. A short list of successful bidders is expected on November 8, with winners announced December 6.

If wind comes out the loser, NSP argues that the 400 MW mandate will not be "in the public interest under a least cost planning and resource planning analysis" as required (Windpower Monthly, February 1999). The mandate, issued in January by the Minnesota Public Utilities Commission, came in the wake of a 1994 state law allowing NSP to store nuclear waste if the utility committed to investing in plants fuelled by wind and biomass.

Of the first 425 MW of mandated wind, the utility has so far developed about 300 MW. A further request for proposals (RFP) is expected soon, this time specifically for up to 130 MW of wind generation in order to fulfil the remainder of the mandate -- regardless of its cost in comparison to other resources.

Social value

Whether the second wind mandate for 400 MW will be developed now seems to hang upon the results of the recent all-source bid. In wind's favour is a new requirement in the resource planning process that NSP evaluate environmental externalities.

"In the past, we've considered resources without the externalities, but this time around the evaluation will be more favourable to resources with a higher social value," says Zuck. In its bid evaluation, NSP will look at global climate change and carbon tax scenarios. "We will be considering the risk of future environmental taxes that favour more environmentally friendly resources," says Zuck.

Despite the social cost boost, one environmental group warns that wind and renewables will be at the same disadvantage that has plagued past resource plans. Bill Grant, of the Midwest Office of the Izaak Walton League, explains that NSP puts a high value on the availability factor of resources, comparing a dispatchable resource such as a gas turbine to resources that are intermittent like wind, solar or even run-of-the-river hydroelectric projects. "Fundamentally, there are two kinds of resources, and if you want wind -- but compare it to other energy resources with similar costs -- you will not likely get wind," Grant says.

A two-track bidding process is one suggestion, says Grant, where a certain amount of wind is built, followed by other resources. The difference, he says, is that the wind is built even if it is not cheapest. Another suggestion could be to combine wind turbines with dispatchable resources for single projects, but Grant doubts still that these could compete with a combined cycle gas turbine.

NSP expects to hold more discussions after the current bid process is complete.

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