United States

United States

Tender designed for tax credit absence -- Largest renewables request ever

The largest request for proposals for renewable energy projects ever released in the United States is asking bidders to itemise two prices -- one supposing that wind's federal production tax credit (PTC) is not renewed and the other taking the credit's fiscal benefits into account. The size of the solicitation for green power issued by utility PacifiCorp -- a huge 1100 MW -- means developers are unlikely to be deterred by the unusual bid structure. It could end up revealing whether wind generation in the US can be viable without the PTC.

"The credit affects the overall economic viability of a project, but we will not deviate from our intent to pursue renewables," says PacifiCorp's Deston Nokes. If the PTC is not available its absence will have a "big impact" on PacifiCorp's ability to spur construction of new projects, he adds. "Price is a huge deal."

PacifiCorp released its solicitation last month. It wants to bring all 1100 MW online by 2010. But whether new wind projects can compete without the help of the federal production tax credit remains to be seen. Steve Yatsko at Enxco, a wind development subsidiary of French nuclear utility EDF, says the design of the solicitation certainly will not deter his company from bidding, but the price of any project will substantially change if the PTC is not available.

If the bids come in high, Nokes says the utility, which serves 1.5 million electricity customers in six western states, would probably turn to existing wind projects or to geothermal projects to initially fill its request, not to building or buying new wind projects that are not able to capitalise on the PTC. Congress failed to extend the PTC, worth $0.018/kWh, before it expired at the end of last year and in late February there was no indication if, when or how an extension would occur, prompting PacifiCorp's unusual pricing request.

Seeking 1400 MW

The solicitation is an outgrowth of the company's integrated resource plan (IRP), a ten year plan for electricity generation resources. PacifiCorp generates much of its electricity today at coal plants in Wyoming and Utah, but it expects more than a quarter of the 4000 MW it will need over the next ten years to come from wind generation. The IRP and its strong wind content received final approvals in January from six state utility commissions.

The plan, which is reviewed every two years, calls for the utility to add 1400 MW of renewable resources by 2014. A later solicitation will seek the remaining 300 MW once the current 1100 MW is met, but that figure could increase as the IRP is reviewed. When assessing resources, PacifiCorp factors in environmental costs, the volatility of gas prices and the potential of climate change regulation. As a result it refers to wind as both "cheap and reliable."

The utility, a division of the UK's Scottish Power, is seeking 100 MW of renewables by 2005, another 200 MW by 2007 and 200 MW more by 2009 in Washington, Oregon and northern California. It wants to acquire 200 MW in 2006, 2008 and 2010 in Utah, Wyoming and Idaho. The locations and timing could change after the company reviews the proposals, Nokes says.

PacifiCorp already buys or owns 132 MW of renewable energy, including 25 MW of geothermal and 107 MW of wind generation, which includes 16 MW from the Wyoming Wind project, 50 MW from the Rock River project in Wyoming and 41 MW from the recently completed Eurus Combine Hills project in Oregon.

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