First rejected by Xcel Energy in a 2000 solicitation as being too costly, that decision was reversed by Colorado regulators after the Land and Water Fund of the Rockies accused the utility of undervaluing wind due to its intermittent nature and of underestimating future natural gas values (Windpower Monthly, March 2001), even while US gas prices were rising to record highs. The Colorado Public Utilities Commission agreed with the environmental group and went so far as to declare the project the least cost of all resources considered by Xcel. That was a huge victory for the US wind industry and a signal to utilities that wind was fast becoming a low cost energy resource.
The project stalled again when the disgraced Enron Corporation declared bankruptcy, prompting Xcel to halt contract talks. It resumed negotiations after General Electric Power Systems bought Enron Wind in April 2002. GE, however, decided it did not want to be the project owner and has been looking for a buyer for it since last year. That problem was resolved in late October when GE sold the entire Lamar project to Shell WindEnergy and PPM Energy, who will each take an equal share.
Cost competitive
"The Colorado Green development was born through a competitive bidding process where it competed against all other forms of electricity generation, including natural gas and coal-fired generation," says PPM energy's Terry Hudgens. "That Colorado Green was found to be one of the lowest cost alternatives shows what we've said all along -- today's wind power is cost competitive with any other form of new generation."
Much has changed since 2001 in the way Xcel evaluates generating projects in Colorado. That is most apparent in the utility's resource planning process, which has changed from integrated resource planning to so-called least cost planning in which wind competes "head to head" with other resources, says the utility's Steve Roalstad.
Project economics are important in both methods, he says, but under the previous planning process, the utility was able to make its decisions based on other factors too, such as the cost of ancillary services, like imbalance charges, it attributed to wind energy. In 2001, Xcel argued that the intermittent nature of wind cuts the real capacity of the project from 162 MW to around 49 MW. Couple that with low natural gas prices used by Xcel in its 2001 decision and wind generation had little chance to compete. Under least cost planning, the utility will no longer be allowed to make such radical judgements, Roalstad says, adding that Xcel will likely go to the market to solicit additional generation in about a year.
While it was working out the details of the final sale to PPM and Shell, GE broke ground in July on the project, which will see the installation of 108 GE 1.5 MW turbines and 44 miles of 230 kV transmission line.
Both Roalstad and PPM's Jan Johnson confirm that the details of the power purchase agreement negotiated with GE did not change when ownership was transferred. The limited recourse financing was arranged with ANZ and Rabobank as lead in a consortium of banks. Johnson says this is the first financing PPM has taken on. Prior to this, PPM's owner, Scottish Power, has financed PPM projects. In addition, PPM holds rights to expand the Colorado Green project to as much as 400 MW, says Johnson.
