This year, with weather warm and rivers raging, thermal producers -- coal, nuclear and natural gas producers -- have already powered down, and BPA said it has had no choice but to cut wind power off the grid next. But unlike thermal power generators, wind farms lose money in the exchange. When hydropower is so abundant there is little financial gain to producing more, thermal producers save money by conserving fuel. Wind companies, however, have no fuel savings, lose money from power sales, and also lose lucrative federal and state incentives tied to production. As of June 13, wind companies had curtailed 74,114 megawatt hours of power during select overnight hours, worth $1.6 million in production tax credits alone.
Michael Milstein, spokesman for the BPA, said the policy was a last resort. "It was something that nobody here wanted. There wasn't really a good option. Ultimately the administrator felt that this was the safest and the best balance between bad choices, the best for protecting fish, for protecting the stability of the grid, and for trying to keep power rates reasonable," he said.
BPA has said paying to offload surplus hydropower would raise their costs, a sticky problem for an agency that operates as a nonprofit.
The policy, however, has left wind operators fuming, including private companies and utilities, and stoked real fear throughout the industry that BPA's move could disrupt future wind development.
Patrick Reiten is president of Pacific Power, one of three platforms under PacifiCorp, a six-state utility that both owns wind farms and purchases wind power within BPA's service territory. He believes BPA is simply pushing wind power offline because it's the cheapest solution to its balancing problem.
Reiten points to open capacity on transmission lines connecting southern California to Canada, and says, "What that tells you is this is an economic event, not a matter of physics or fish."
Power transmission organizations from the Midwest ISO (MISO) and PJM Interconnection, to New York (NYISO), New England (ISO-NE) and Texas (ERCOT), which together manage about 40 percent of the power consumed nationally, regularly pay customers to consume surplus power, according to Andy Ott, senior vice president of markets at PJM, which coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia. Wind operators in the Northwest have loudly argued for BPA to adopt a similar strategy. Ott said PJM has found that paying customers to shift power to overnight use, when balancing low demand with abundant supply is most difficult helped maintain consistent rates, even as factories cleverly shifted production hours and earned cash.
"If you had enough people respond to the incentive, it may actually cost them less, which is what we saw here," he said.
BPA has said paying to offload surplus hydropower would raise their costs, a sticky problem for an agency that operates as a nonprofit. Spokesman Mike Hansen said that while negative pricing is utilized in other parts of the country, "In many cases it is the wind projects that are paying the negative prices in order to have their power delivered to load. In the BPA situation, since the vast majority of the wind on our system is exported to other utilities, you have a cost shift from the users of the wind power to other Northwest customers (BPA ratepayers) who are not purchasing the power." He said the agency was actively discussing alternatives.
But after weeks of shutdowns, including hot-headed public meetings involving wind operators and BPA officials, the dispute has reached a stalemate, prompting Pacific Power's parent PacifiCorp to join Iberdrola Renewables, Horizon Wind Energy, NextEra Energy Resources and Invenergy Wind North America in parts of a three-pronged strategy to lob legal grenades at the BPA. All five companies joined the June 13 FERC filing, which claimed BPA abused its authority to benefit its own power generation business and broke contracts with wind power companies for financial gain. The American Wind Energy Association immediately filed comments in support. Lawsuits are also expected in the Ninth District Circuit Court of Appeals and the U.S. Court of Federal Claims. They will attempt to roll back BPA's policy, charging it violates the Northwest Power Act. Companies will also seek to recoup losses.
Don Furman, senior vice president of external affairs at Iberdrola Renewables, the U.S. subsidiary of Spain-based Iberdrola Renovables that operates about a dozen wind farms in the Pacific Northwest, says there is an important legal precedent at stake: whether BPA upholds the contracts it signed with wind operators and abides by federal energy policies.
"This is not about fish and wildlife. It's not about renewable energy as much.... It's really about whether the federal government is going to follow the rules that have been set down by other parts of the federal government. Bonneville is the dominant player in the power market in the Northwest. They own 80 percent of the transmission system. And they are using their control of the transmission system to gain an advantage for their power generation. That's what we're saying is not okay," he said.
BPA officials maintain that its contracts with wind operators provide the latitude to curtail power when there's too much and that they have the authority to limit power generation in general. Officials continue to note the strategy was in part an effort to minimize dangers to fish posed by rising gas levels, even while taking fire from salmon advocates. Pat Ford, executive director of Save Our Wild Salmon, said what's best for fish is increased development of renewable power so more dams can be removed.
"We don't want to see that industry harmed or derailed by threats to its business model," said Ford. He said BPA could have done more to avoid the crisis by spilling water over dams earlier in the season, but now BPA's fish defense is giving renewable power and salmon recovery a bad name. "What that's leading to is people thinking or saying, 'Wind energy kills salmon.' 'Wind energy and salmon are not compatible.' 'We are going to have to choose between wind energy and salmon.' None of those things are true,'" said Ford.
With the spring operating season in shambles, wind operators have set their sights on either reversing or resolving the BPA policy by 2012, and members of the Congress have joined the chorus, pressing the issue in Washington.
Sen. Jeff Merkley (D-Ore.) joined Rep. Earl Blumenaur (D-Ore.) in lobbying BPA to reverse the decision before BPA made it official in May. A week after wind curtailment was authorized, Blumenauer appeared at Windpower 2011 in Anaheim, Calif., a conference hosted by the American Wind Energy Association, to criticize the disconnect between BPA's short term maneuvers and the Obama Administration's long-term energy policy goals. He has since pressed the Administration for support, joined by Rep. Edward Markey (D-Mass.) and others.
They have asked U.S. Energy Secretary Steven Chu to urge BPA toward long-term solutions, including developing new energy storage tools, more transmission capacity and bettering management and forecasting techniques. They also want to see BPA displace more thermal power and modify its pricing to export surplus energy to other regions during high runoff and high wind scenarios.
In a letter to Chu, Blumenauer wrote, "BPA's decision, which in effect will curtail wind turbines during high water events in the Columbia River system, will undercut one of the most promising new energy industries in the United States. It also sends a mixed message from the Department of Energy that contradicts the Administration's clean energy agenda to advance renewables development, create jobs, and rebuild the economy..."
Images: 1. Associated Press; 2-3. Bonneville Power Administration.