Renewable energy | Ecotrope

What BPA's new rates mean for the wind industry

Ecotrope | Aug. 3, 2011 9:33 a.m. | Updated: Feb. 19, 2013 1:36 p.m.

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Delivering wind energy through the grid is trickier than delivering power from coal or natural gas. Hence, it can have higher delivery charges.

Delivering wind energy through the grid is trickier than delivering power from coal or natural gas. Hence, it can have higher delivery charges.

Last week, the Bonneville Power Administration announced it is reducing the charge for delivering wind energy on its hefty share of the Northwest’s transmission system. You’d think the wind industry would be thrilled. But it’s not that simple. The response from industry reps at Renewable Northwest Project was lukewarm:

“We are pleased that renewable energy integration rates on BPA’s system will remain relatively stable over this next rate period,” said Rachel Shimshak, executive director of Renewable Northwest Project.  “We continue to believe that BPA’s integration rates overstate BPA’s costs of providing integration services to wind energy producers, and that there is much more that can be done to improve the efficiency with which renewable resources are integrated into the grid. These policies must be improved upon to ensure rates are reasonable for customers in the future.”

Huh. A few questions here: Why, when BPA said wind power delivery rates are going down, did the wind industry only expect them to be “relatively stable”? What is the cost of delivering wind energy? And how would those costs come down for power customers of the future?

As I wrote earlier, managing the grid means making sure the lights go on when you flip the switch and stay on until you turn them off. It requires a precise balancing of electricity supply and demand, and it gets trickier when energy sources like wind turbines fluctuate unpredictably. As the Northwest adds more variable wind and solar power sources to its energy mix, grid managers have to find power sources that can balance them out as needed. They have to keep that flexible back-up power in reserve just in case the forecasts are off.

And, as Renewable Northwest Project’s transmission policy expert Cameron Yourkowski explained to me, that costs money:

The ties that bind Bonneville Power Administration to the wind industry in the Northwest. A huge influx of wind energy in recent years is changing the way the region's power is managed – including the cost of transmission.

The ties that bind Bonneville Power Administration to the wind industry in the Northwest. A huge influx of wind energy in recent years is changing the way the region's power is managed – including the cost of transmission.

“Load forecasting is done, has been done historically, on an hour-by-hour basis. That’s as close as you can get with forecasting instruments. Within that you just know you’re going to have some amount of error. That error is covered with generators set up on an auto-generation control system that moves on a moment-by-moment basis to make sure the system is balanced second by second. That flexibility has costs associated with it. Fixed costs. Capital costs. The machine fuel costs and opportunity costs from what those machines otherwise could have been doing in the market.”

In the Northwest, BPA manages 75 percent of the grid and generally uses its own hydropower system to balance loads. BPA’s transmission system already has 3,500 megawatts of wind tied into it – the equivalent of three nuclear plants. And it’s expected to grow to 5,500 megawatts by 2013. It costs the agency money to keep reserve power on hand just in case the wind suddenly picks up or dies down. The BPA set a new fee for wind energy producers in 2010 to cover those added costs. That fee, of course, trickles down into power rates and makes wind energy more expensive.

“We certainly recognize the BPA has done good job interconnecting wind into the system in Washington and Oregon. Both are in the top ten in the country in terms of installed wind capacity compared to other states,” said Yourkowski. “But when it comes to wind integration issues, we’ve really lagged behind the rest of the country. The effect of that is higher integration costs.”

In its new rate case, BPA dropped the wind integration rate by 4.7 percent, noting that there are a couple ways balancing the wind is getting easier: One, new energy projects (including new wind farms in a variety of places) are helping to balance out existing wind power; and two, the BPA and other Northwest utilities are switching to 30-minute power scheduling. That means the BPA will only have to keep a half-hour of power balancing in reserve at any given time instead of an hour. Cheaper!

But BPA is also trying something new. Instead of only using dams to balance changes in wind power, the agency administrator will now have the ability to buy power reserves from outside the hydro system if needed and pass the extra cost onto wind producers through their transmission rate. So, as Shimshak hinted, there’s potential for the rate to go up, too.

BPA spokesman Doug Johnson said his agency has found balancing wind power in the Northwest occasionally requires even more flexibility than the hydropower system can deliver – like when there’s too much water in the spring. If BPA needs to buy reserve power from someone else – the Hermiston gas-fired power plant, for example – the agency wants to be able to pass those costs onto wind producers:

“What we’ve done is given the administrator the discretion to augment the balancing reserves that we have in the rate case if we find we need to,” said Johnson. “If we’re not hitting that level of service that we need to make sure those balancing reserves are there and can meet needs, we may find we need to go out and get additional reserves. We would only do that if we found were weren’t meeting what we’d committed to during the rate case. And we would assign those costs to renewable energy producers. We would not just unilaterally increase the (transmission) rate. We would only do that if we had to procure additional resources.”

In other words, Johnson said, BPA wants to make sure as it lowers the rate for delivering wind power that the agency still has the ability to cover unexpected costs of balancing the grid when the wind picks up or dies off beyond what was forecast.

So while the baseline cost of delivering wind energy on BPA’s transmission system is going down, the delivery cost in the future could be higher or lower depending on how much the wind is blowing, how well power managers can predict the wind, and how much power BPA needs to balance out the difference.

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