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Seeking diversity in a climate of uncertainty

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One-fifth of future electricity demand in the US Northwest could be met by a combination of conservation and renewable energy generation without harming the region's economy, if only market conditions would allow it

Meeting electricity load growth in the United States Northwest with a mix of "business as usual" combined cycle natural gas turbines and 20% renewable and conservation resources would have little or no impact on the region's economy. In fact, says a report by the Rand Corporation, an American think tank, such a change in the supply mix could even add as many as 15,000 new jobs.

"We're trying to put forward the message that we should look at electricity production like we look at an investment portfolio," says Mark Bernstein, a Rand analyst and a principal author of the report. "It's not wise to invest only in a couple stocks and by the same token we should look at multiple sources of electricity. The Pacific Northwest can diversify its power investments, which would spread the risks and give the region more options in the future."

The study particularly looks at the impact of removing four dams which threaten endangered salmon stocks on the lower Snake River -- and found they could be replaced by the same mix of gas, renewables and conservation, also without major economic impact. The fate of salmon is a serious conservation issue in the region.

The report's findings have been welcomed by a broad coalition of environmentalists and Native American tribes. "The Rand study confirms that economic development and energy efficiency go hand in hand," says Nancy Hirsch of the Northwest Energy Coalition. "This study makes the case for stabilisation. It reduces price instability, restores fish runs and provides a long term stable investment in renewables."

Whether a 20% goal can be met under current market conditions, however, is a question that is stirring debate among the region's energy stakeholders. Despite the report's economic findings, the authors predict that by 2010, hydro's share of the Northwest's generation mix will drop from 82% to 64% -- mainly because of the endangered salmon issue -- while the share for gas turbines would rise to 22%. The remaining 14% will be split among nuclear, coal and renewables.

Changing that mix to increase the proportion of renewables is going to take mandates, in the form of a renewables portfolio standard, or some type of planning process that targets alternative resources, argues Jeff King of the Northwest Power Planning Council, a regional energy planning agency. "The only way out of this is some level of planning to develop long term contracts and to develop projects," he says. "The only entity in a position to do that is the Bonneville Power Administration (BPA) and time and again Bonneville customers have said they don't want it to be in the resource development business."

Bristling at the assertion that renewables will likely never account for 20% of the Northwest's energy mix without some kind of market intervention, Renewable Northwest's Rachel Shimshak points out the region is a hive of activity for the wind industry, with ten developers at work on projects in Washington alone. "If you look at the region now, we have four times more wind than we had in 2000," Shimshak says. "The great thing about the Northwest is that all this happened because people stepped up and said they want it."

Somewhere between the call for mandates and Shimshak's belief that customer pull will do the job, is BPA. The federal marketing agency dispatches and sells the output of 29 federally owned hydroelectric dams, one nuclear reactor and 198.1 MW of wind energy to utilities in the region. Two years ago, BPA made a splash in the wind energy world with a 1000 MW solicitation for wind generation. In June 2001 it began negotiating with a list of developers on seven wind projects with a combined capacity of 830 MW that would go a long way towards achieving the Rand report's 20% target. But in February it said those negotiations had slowed as market prices declined (Windpower Monthly, March 2002).

Uncertainties mount

Wind power acquisition may also be slowed by other uncertainties facing the agency. Declining electricity demand, low market prices and high-priced power contracts with failed energy trading giant Enron Corp -- signed during the 2000 and 2001 West Coast energy crisis -- have all contributed to an expected revenue shortfall of up to $1.2 billion through 2006. In August, the BPA warned customers to brace for a rate increase in the near future.

Whether the Northwest's hunger for electricity will wane in response to those higher prices is still not clear, says BPA's George Darr. While a Power Planning Council study, released last month, predicts a growth in demand of 1.49% a year over the next 20 years, some of BPA's customers think demand is more likely to decline significantly in the short term as the market adjusts to a price increase.

An attempt by those same utility customers to get more control of the agency's power resources, by proposing a plan that places the onus of buying power to meet load growth on individual utilities, could also scatter BPA's efforts to work with wind power developers. The outcome of the Federal Energy Regulatory Commission's proceedings on Standard Market Design (Windpower Monthly, September, 2002), which will set the rules for transmission and power sales in the country is another unknown, says Darr, as is the question of whether Congress will again extend wind's federal production tax credit, which is set to expire at the end of next year.

Despite the uncertainty, Darr remains upbeat about the future for wind in the Northwest. He says Bonneville is well aware that the region's public interest groups and consumers support BPA's "strong presence" in renewable resource acquisition and will factor that into future purchase decisions.

In the meantime, BPA continues to negotiate with wind power developers to get the most competitive price possible. Darr says he expects to release the final environmental impact statement for Washington Winds' 150 MW Maiden Wind Farm in eastern Washington (Windpower Monthly, June 2001) this month. "That doesn't necessarily mean we will do the project," Darr says. "We could wait awhile."

Shimshak says her organisation and others are working with BPA, other Northwest utilities and end users to increase demand for renewable energy. But for now, she points to the 830 MW of generation BPA is negotiating under its solicitation, the recent completion of SeaWest's 25.2 MW Condon phase II (extending the project to 49.8 MW), Energy NW's 48.2 MW Nine Canyon project, and construction at FPL Energy's Stateline wind farm, which is bringing that project to a full 300 MW.

"Wind is looking pretty competitive these days and I'm hoping people got a lesson in diversity during the 2000 and 2001 energy crisis," Shimshak says. "I think there is enough activity now to keep wind developers here for a long time."

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