A no-holds-barred interview with the electric industry’s chief architect of wholesale electric market design.
Bonneville's Balancing Act
In the Pacific Northwest, you either spill water or spill wind.
during times of low load and low power prices—which might or might not correspond to periods of high TDG levels.
“The mistake,” Bonneville argued, in an answer filed August 15, “is concluding that this means there is no correlation between environmental redispatch and TDG levels.”
While Congress created the Bonneville Power Administration in the spirit of New Deal egalitarianism, to serve the public good, BPA nevertheless remains bound by statute to be fiscally self-supporting—to ensure the distribution of low-cost power to its preference customers, yet operate according to sound business principles.
So why wouldn’t BPA be required to pay compensation to curtailed wind generators, as a “sound business principle?”
As it turns out, the FERC initially sought comment on that very question in its notice of inquiry regarding redispatch and curtailment practices necessary to accommodate variable energy resources (VERs) in real time, and received comments from wind developers, including Iberdrola and NextEra, urging FERC to institute market reforms that would require payment of compensation to wind generation curtailed during an over-generation situation.
However, as was pointed out in written comments in the BPA case filed by the National Rural Electric Cooperative Association, FERC declined to propose such a rule in its still-pending proposed rulemaking on VERs, explaining that further study was required (See, Integration of Variable Energy Resources, Notice of Proposed Rulemaking, Dkt. RM10-11, Nov. 18, 2010, 133 FERC ¶61,149) .
Meanwhile, Bonneville appears dead set against going negative— i.e., paying for the privilege of running its turbines to manage the hydraulic system when demand for electrical energy is lacking.
Bonneville concedes that negative prices sometimes prevail in power markets, but only for brief periods, and without much advance warning. By contrast, it argues, the heavy spring runoff in the Pacific Northwest can be anticipated and milked by resources such as wind, which can live off PTC and REC revenues, and thus run at a zero price for an extended period, sparking a race to the bottom.
Negative pricing, Bonneville argues, could produce the converse of the California power crisis seen a decade ago:
“CAISO was forced to offer sky-high prices to keep the lights on… Just as the ISO purchased power at any price to avoid blackouts, Bonneville could be forced to pay any negative price to avoid spill.”