There’s been a lot of talk in the industry about new super powers for market enforcement, conferred by Congress on FERC in last year’s energy legislation. But this hasn’t been the case entirely....
Bonneville's Balancing Act
In the Pacific Northwest, you either spill water or spill wind.
generation. For one thing, wind turbines operate with no variable fuel costs, giving wind farm owners little reason to ramp down, even if low load sends prices falling. Also, the wind farm and its customers lose federal production tax credits and state-issued renewable energy certificates when the resource goes off line. That provides yet another reason why wind generation won’t go quietly to allow BPA to power its turbines and avoid harmful spill in managing volatile flows on the Columbia and its tributaries, and why BPA has begun to face serious difficulties in meeting its statutory obligations. Then consider that BPA expects to see a doubling of wind capacity in the next few years, up from the 3,522 MW reported to be on line as of February 2011. That doubling, it’s believed, will represent a 1,900 percent (nearly 20x) increase in wind generating capacity over just six years (see Figure 1) .
BPA explained in its answer to the wind industry complaint, filed on July 19:
“In the past, Bonneville has managed high-water events by marketing its excess FCRPS generation [the Federal Columbia River Power System] at low prices in the Pacific Northwest and California. This strategy has been successful because thermal generators have been willing to be displaced by low-cost hydro…
“Today, however, with the combination of legally mandated spill requirements and the interconnection of a significant amount of wind generation on Bonneville’s system (which does not voluntarily curtail when prices approach zero), Bonneville is unable to continue to manage high-water events to meet its environmental obligations without employing additional tools.”
Just what those tools might look like became clear in May, during this year’s spring runoff, the fourth highest since 1929, as the Pacific Northwest experienced a record cold and wet spring, driven by the same La Niña weather pattern that brought scorching temperatures to the nation’s heartland this summer.
On May 13, BPA announced a new interim solution for managing high-flow, load-load conditions on the Columbia, to remain in place for 12 months, known as the “Interim Environmental Redispatch and Negative Pricing Policies.”
Under this new regime, developed through a stakeholder process that began after the spring 2010 runoff pushed resources to the limit, BPA announced that, if necessary to avoid harmful spill and satisfy its statutory obligations—to preserve fish and wildlife, to market low-cost hydropower to state and municipal preference customers, and to operate and recover costs in a businesslike fashion—it wouldn’t agree to accept a negative price in order to over-generate and divert water through dam turbines. That is, it wouldn’t agree to pay customers, as the market otherwise would dictate, for the privilege of running its turbines to avoid harmful spill when to do so would produce output in excess of the actual hydropower load requirement. Rather, it would simply curtail non-federal generation as needed—thermal plants first, followed by wind—and replace that power with its own turbine-generated FCRPS output, and send it to the would-be thermal and wind off-takers, using the same transmission capacity and schedule rights owned by the curtailed thermal and wind