Federal incentive payment of 1.8 cents/kWh for the generation of renewable energy—part of The Energy Policy Act of 2005—increases the economic attractiveness of many potential hydro sites,...
generation. At issue was the question of value. The commission evaluated the utility's "Preferred Portfolio + Wind" option solely on a capacity and energy basis and found that the capacity benefit was approximately $36 million (1999 net present value).
Assigning capacity value for wind, once a contentious issue, is now an increasingly well-documented exercise. Geographic diversity from wind farms built in new areas will ease wind integration into utility systems by smoothing out wind-power production. Depending on the wind resource, added wind-plant geographic diversity could contribute to utility peak-hour production needs (capacity value).
PJM Interconnection LLC, the regional transmission organization (RTO) that operates utility transmission and balances electricity supply and demand in seven states and the District of Columbia, allows wind-based generators to receive capacity credits based on a three-year rolling average of a unit's output during PJM's peak-use hours. For units with less than three years' operating experience, a "class average" credit applies, which PJM defines as 20 percent of a wind turbine's rated capacity. The average-updated periodically as more wind generation is added to the PJM system-is based on the operating experience of wind turbines in use in the region.
Third, and perhaps most important, ancillary services to back up new wind power were not a major cost. In the Colorado case, the PUC staff witness based calculations of these costs on the spinning reserve levels required by the Western Systems Coordinating Council, a body that oversees reliability in the region's grid. That decision was made because allocating system-wide ancillary service costs to a particular resource such as wind is both arbitrary and uncommon.
Moreover, evidence from various utilities with wind on their systems shows that the need for additional generation to compensate for wind variations is negligible, even at moderate penetrations. Pacific Gas and Electric Co., for example, has operated an integrated utility system with as much as 10 percent of its generation coming from wind, without any increase in ancillary service costs.
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