The $300 million supply contract was awarded last month by utility Northern States Power (NSP) to Northern Alternative Energy (NAE) of Minnesota. NAE had responded to a request for proposals for 1200 MW of new capacity from any source. It will build 50 MW of wind turbines coupled with 11 small gas units totalling 300 MW, broken into hybrid plant combinations at any of five proposed sites in the five states where NSP has customers.
None are in transmission-restricted areas, such as Buffalo Ridge where output from the wind plants there has had to be curtailed at times because of inadequate transmission capacity out of the site. The distributed combinations of wind and gas are to be on-line by early summer 2001.
"This is a rather unique proposal that combines wind and natural gas to provide a firmer resource," says Bill Grant of the Izaak Walton League in Minnesota. "We're very excited. It overcomes some of the persistent concerns about wind as to its intermittency." He adds: "The evidence is in: wind can be a least cost resource." NSP's David Zuck concurs. Combined with peaking power, wind overcomes cost penalties it has suffered in the past for not being a steady source of power, he says.
NAE's Greg Jaunich explains that one of the reasons why the combination of gas and wind is perfect has to do with the particular dynamics of wind and gas interaction in the Midwest. Gas prices change seasonally, rising in winter when demand for heating power is high, and then falling in summer. When the wind stops -- typical of summer months -- and NSP needs peak power, the gas turbines will kick in. When the wind blows, the gas plant can run on partial load. "In this part of the country, they work together well. It makes for optimal capability," says Jaunich.
The deal has already piqued the interest of natural gas plant developers wanting to "green up" their plants and offset emissions. Jaunich says he has been contacted by utilities from as far afield as Mexico, Canada, New Mexico, Nevada and North Dakota wanting to know more details.
The contract includes base load, intermittent and peaking power. Running the gas only some of the time makes economic sense if it gets the peaking rate when it is needed. Jaunich notes that NSP has guaranteed to buy a certain amount of peak power, so if the wind is blowing, NAE will get the higher price for wind as well.
The small size of the projects gives NSP siting flexibility, says NSP's Zuck, adding that location decisions are expected this month. The variety of sites increases the possibility that wind will always be available, adds Grant, particularly with the Midwest weather patterns where wind flows from the west across a wide landscape. "The power will be distributed over a number of projects keyed to available transmission or transmission support," he says. "It's one way to address wind's intermittency issue. Spread the projects out, lower the transmission cost and get greater capacity factors."
NSP's Dave Zuck stresses that wind alone is not least cost, but this particular hybrid arrangement overcomes wind's traditional cost barriers. Otherwise, wind still has a problem with cost and intermittency in a typical integrated resource planning process, he says.
The utility had hinted previously that it would use the results of its all-source bid to determine whether wind could be the least cost option against all energy sources. NSP is mandated to develop 425 MW of wind by 2001, followed by another 400 MW by 2012. If wind is not least cost, it has threatened to protest the second mandate (Windpower Monthly, November 1999). NSP has not yet said whether it will apply the wind portion of its contract with NAE to one of two state mandates.
"Even without going to extraordinary efforts to level the playing field, wind can be competitive," says Grant, referring to the deal. "The outcome of this [request for proposals] proves that. This is NSP's first commitment beyond its mandate and that's significant."
NSP awarded two other contracts under the all-source RFP -- for hydropower and coal fired resources. It declined a bid by Enron Wind for wind energy alone.