Challenge on cost of integrating wind

Faced with the task of accommodating 990 MW of generating capacity that it cannot turn on and off at will, Hydro Quebec was quick to throw out an estimate for providing "balancing" services. It is way too high, say experts

Hydro-Quebec Production's claim that it will cost as much as C$9/MWh to balance the variable supply from 990 MW of wind power that the utility has just contracted for is already being challenged. A group of environmental organisations active in Quebec energy issues says it will ask the province's energy board to examine the claim. "We haven't seen any justification for it," says Steven Guilbeault of Greenpeace, one of seven members of the Regroupement des Organismes Environnementaux en Énergie (ROEE). "The feeling we get, looking at this, is that they just picked a number out of a hat."

ROEE is consulting with its analysts and lawyers to determine whether the issue can be included in hearings involving the utility that are already planned, or whether it will have to request a separate inquiry, says Guilbeault. A public hearing, he says, will allow for a complete cost-benefit analysis. "If there is a cost for balancing, is there also a benefit that could be credited to wind? For example, when the turbines are turning and we're filling up our reservoirs, shouldn't that be credited to wind? If the impact is more than the benefit, then what should be an appropriate price for that?" he says, pointing out that experience in other jurisdictions has shown wind integration costs are lower than Hydro-Quebec's estimate.

The controversy has arisen after Hydro Quebec's selection of two groups of companies to build 990 MW of wind power plant in eight projects on the Gaspe Peninsula, all to be equipped by GE Energy (Windpower Monthly, November 2004).

Robert Hornung, president of the Canadian Wind Energy Association (CanWEA), agrees that Quebec's balancing cost estimate is at the high-end of the scale. He believes, however, the utility will learn better. "It is a similar situation to what we saw with interconnection standards in Alberta. When they first came out they were at the high end of what has been looked at internationally. Then you go through a process of learning by doing and education and that starts to bring it in line," he says. "I expect we'll see a similar thing in Quebec."

Hydro-Quebec Production's plan is to take the output from the wind plants, store it in its 36,000 MW hydro system, then deliver it on a consistent schedule to Hydro-Quebec Distribution, a separate business unit that is the actual purchaser of the wind power, one week later. The electricity is "stored" by using the wind power to pump water into reservoirs for later release to turn turbines. The utility's André Cauchon says it is in a "very tight situation" with a supply capacity almost equal to its commitments and the delay will give it time to react to the variability in wind's output and still meet its delivery obligations. "We know that we will get the wind or we won't get it."

The cost of providing the service, he says, reflects a combination of a number of factors. The utility may have to buy power in the market if the wind plant are not producing as scheduled, he says. It may also have to assign more resources to provide regulating power, losing the opportunity to sell that power into the market or to use the equipment for maintenance outages. "It is a blended price that includes all of those risks and the service itself," says Cauchon.

Not studied yet

Hydro-Quebec Production's Christine Martin says the utility has not studied how much in the way of regulating reserves will be needed to balance the wind output. The C$9/MWh price, she says, is a best estimate. "It is an indication. We took market references that led us to this price," she says, pointing specifically to the hydro-based Bonneville Power Administration in the US Northwest, which charges US$4.50-$6 for a similar service, a cost deemed too high by some (next story). Both Martin and Cauchon say the price could change, up or down, as the utility gains a better understanding of the costs involved.

The Institut de Recherche d'Hydro-Quebec (IREQ), the utility's research arm, will be responsible for assessing the data. IREQ's Alain Forcione says that in a hydro system like Quebec's, there is no problem managing a large amount of wind over the long term, and "in fact, it does enable maximization of wind power's market value. That's a given and we have proven that," he said. "But in the short term there is a cost of opportunity for integrating wind."

Just what that cost is depends on a variety of factors, he says, ranging from the geographical dispersion of the wind plant to the market context in which the utility is operating. "The list is exhaustive. We have to go through all of these and really do our homework is assessing the real cost of integrating wind," he says. "We're at low penetration levels right now, but you all know that it is going to increase a lot in the next few years. We have to tackle it right now. I think we have to adapt and make more flexible many of our criteria and processes. They have to take into account these new variable resources." Forcione was speaking at CanWEA's annual conference in October.

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