United States

United States

Northwest renewables incentive from federal agency

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Bonneville Power Administration (BPA), a federal power marketing agency, is considering granting a credit to utilities in America's Northwest that could give them $30 million a year to encourage development of renewable energy projects and conservation. At least $6 million of the credit will be spent on renewable development, a figure that could add up to 30-60 MW of new energy production each year.

The proposal appears in the August US Federal Register as part of BPA's ongoing power rate case covering the period 2002 through 2006. If approved, BPA will give utilities a credit of about $0.0005 for every kilowatt hour bought from the agency, beginning October 1, 2001. As an additional bonus, in years of plentiful water when BPA sales exceed expectations, the agency is proposing to share its gains, spending as much as $15 million more on renewable and conservation projects.

"BPA's proposal generally sends the right market message, but it won't do much by itself," comments John Graham of the Conservation and Renewable Energy System, in Vancouver, Washington. The organisation represents seven Washington public utilities in developing conservation and renewable projects and participates in regional policy discussions. "We think that utilities need to spend at least 3% of their revenues to sustain conservation and renewable projects. Bonneville's proposal is roughly equivalent to only 1%."

Commitment demonstrated

Nonetheless, he feels it demonstrates the public agency's commitment to renewables and it will give impetus to state programs, such as the Oregon deregulation bill that calls for 3% collection and expenditures for renewables and conservation (story next page). Furthermore, the proposal will provide a market for green power in the future as well as giving utilities who have invested in conservation for a long time a good political reason to start investing in renewables.

While the conservation and renewable credit does not cover the entire cost of developing these resources, Bonneville believes it is enough of an incentive to encourage utility investment. BPA's John Pyrch says the proposal has been in the works for about a year. "Our goal has been to develop market incentives for renewables and conservation above and beyond what utilities would have normally done," he explains. "Included in the upcoming rate case is this market mechanism designed to encourage their development."

For renewables, the BPA credit would apply to new wind, solar, biomass, geothermal and hydropower developments and, for conservation, to energy efficiency improvements in homes, businesses, industry and weatherisation (insulation) of low income ratepayers' homes. Pyrch says BPA will guarantee at least $6 million for renewables and $4 million for weatherisation.

Free mi

xThe mix of resources to be developed year to year is left up to the local control of each utility. A utility could choose to develop all renewables, all conservation, or a mix of resources. "If, at the end of the year, we find that customers did not spend the full $6 million on renewables, Bonneville will make up the difference out of its own pocket," Pyrch adds.

The numbers come from a regional comprehensive review of Bonneville programs that determined 3% of revenues should be spent for public purposes programs, such as renewables and conservation. The review concludes that 19% of public purposes money should be spent on renewables, or about $6 million of the $30 million incentive.

Bonneville proposes to add the $0.0005/kWh to its rates, but not charge utilities until the end of each year, according to Pyrch. He says there will be an annual evaluation in which utilities report on their conservation and renewable activities. If a utility falls short, it pays the levy only on the energy it bought from Bonneville. "We assume everyone will do good things and we won't have to make that charge," Pyrch adds.

BPA still has work to do before it could begin offering its conservation and renewable discount. It has to complete its rate case, which is scheduled for final approval in March 2000, and it must develop a list of qualifying measures and the level of credit for each measure. Pyrch says Bonneville has asked the Regional Technical Forum of the Northwest Power Planning Council to develop a list of qualifying measures by September 2000. The council was established by the Pacific Northwest Power Planning and Conservation Act of 1980 to plan and guide power production and its effects on fish and wildlife in the US Northwest. The forum is the council's advisory committee on renewable resources.

BPA must also work through implementation details, such as how much of utility administrative expenditures will qualify for the conservation and renewable credit, an issue it will begin to tackle this month.

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