Wind power throws a curve at the BPA

PORTLAND, OREGON - Utility wonks have been quipping for years that the future of energy in the Northwest is windy and gassy.

When it comes to wind power, the future has already arrived, a reality that has come rushing home in the past two years and created major friction among the Bonneville Power Administration, wind power producers and the agency's utility customers.

The BPA, which markets the energy produced at 31 hydroelectric dams and a nuclear plant in the Columbia River Basin, has seen the amount of wind power flowing onto its grid nearly double in each of the past four years.

That surge not only taxes the existing transmission system, most of which is operated by the BPA, but relying on such an intermittent resource has also posed reliability issues for the hydro system.

Incorporating wind power also raises regional equity and environmental issues as the agency tries to balance mandates from states for more renewable energy against its obligations to its utility customers and a responsibility to protect migrating salmon.

The BPA's release of a 541-page order for setting future rates to public and private utilities brought new attention to the challenge it faces in absorbing an explosion of new wind power. Front and center in that order was a controversial decision dealing with how much it will charge wind producers to absorb and smooth out the intermittent stream of power they send onto the grid.

"Wind was the hardest issue in this rate case because it was completely new," said Steve Wright, the BPA's chief executive. "There was more thought on that issue than anything else."

The rate increase imposed on wind producers came in at about 90 percent. And while that sounds large, it is a fraction of the 300 percent increase that the agency announced earlier this year — a figure that created a firestorm of criticism.

"This is a cool breeze on what could have been a very hot day," said Rachel Shimshak, director of the Renewable Northwest Project.

The BPA says the lower rate increase resulted from efforts by the wind power industry to improve its forecasting and operational practices, allowing the federal hydro system to operate with lower emergency reserves.

But the agency's tack also reflects the change in political winds that blew in with the Obama administration. The administration, through the Department of Energy, is making renewables a centerpiece of its energy and climate change policies. A minor issue five years ago, integrating more wind power is now the Gordian knot that the BPA has been tasked with unraveling.

"This is the biggest issue for BPA with the Obama administration," said Bob Jenks, executive director of the Citizens' Utility Board. And for BPA chief executive Wright, he said, the rate case focus on wind "is the signal to his bosses in Washington that he gets it."

Renewables advocates and members of Oregon's congressional delegation hope that the rate decision and an accompanying wind integration plan reflects a wholesale change in the way the BPA approaches the industry. They concede that wind poses major challenges. But they insist that few of the problems are new, and say the BPA has been dragging its feet and blaming the wind producers while focusing on providing the lowest possible power prices to publicly owned utilities, its traditional constituents.

Oregon Sen. Ron Wyden said late last week that no matter where the rate increase came in, he was dissatisfied with the agency's approach and looking for change.

"At a time when everyone from the president of the U.S. to the folks in the tiniest timber dependent communities are looking at promoting green energy, our region cannot tolerate having the lead player adopting policies that are decidedly unfriendly," said Wyden, a Democrat.

The BPA is the 800-pound gorilla of the Northwest's electricity world. The hydropower it sells makes up 40 percent of the energy consumed in the Northwest, and it owns three quarters of the transmission wires that send electricity pulsing between power plants and customers as far away as California.

When it comes to wind, the BPA has a more central role. The region's wind turbine farms are geographically concentrated at the east end of the Columbia River Gorge, right in the heart of the BPA's control area.

While the BPA has a concentration of transmission lines in that corridor to serve dams, the lines are already overtaxed. And when the wind blows, all of the wind farms start sending power to the grid at the same time.

The federal hydro system is a great tool to integrate with wind because reservoirs are the only large-scale way to store energy and can quickly ramp up and down to balance intermittent supply and demand.

Yet the system has its limits, and when wind speeds jump or fall well beyond the levels forecast by wind farm operators, it can require the agency to operate with inadequate reserves or spill water in a way that is harmful to fish.

Elliott Mainzer, the BPA's head of strategic planning, says the agency has been working on the issue for years. Two years ago, working with wind producers and utilities, it came up with a 16-point plan to integrate 6,000 megawatts of wind generation by 2020. By next year, the region will be halfway to that total already.

The BPA initially focused on its transmission system and is moving forward on four priority projects, in some measure to accommodate wind.

In October 2008, it put its first wind integration rate in place, charging wind producers for the cost of absorbing and backing up their output. More recently, it proposed quadrupling that cost, before dropping down to the 90 percent increase in the recent rate order.

While the BPA has taken flak for focusing on increasing rates rather than improved operations, it has more recently shifted its focus, putting a definite timetable on a series of initiatives that could fundamentally change the way it operates the grid.

By October, the agency intends to establish a system to knock wind farms off its transmission grid when they are operating so far outside their scheduled output that it threatens to exhaust the agency's hydro reserves.

It intends to install 16 stations to measure wind speed and direction around the region to provide data to wind operators at five-minute intervals. And by mid-2010, it will establish an in-house forecasting desk alongside its existing hydro forecasting desk.

By December 1, the BPA will begin offering a pilot program to allow customers to change their power transmission schedules and sell power resulting from quick changes in wind output.

The agency also proposes to allow wind producers to purchase reserves from suppliers other than the BPA and will eventually seek to transfer some of its wind integration responsibilities to other utilities.

"It's a significant rate increase," said Don Furman, a senior vice-president at Iberdrola Renewables, which owns nearly 40 percent of the wind generation in Oregon and Washington. "On the other hand we feel good about this because BPA is really engaged in the implementation plan."