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Funding Support from the Northwest Energy Efficiency Alliance

CWEB.106/October.29.2004


1) Council Targets 700 aMW of Conservation from 2005-2009; Lists 2,800 aMW of Regional Energy Saving Potential through 2025
2) Council Recommends Actions, Strategies to Attain 700 aMW Five-Year Conservation Goal
3) Council Advocates Wind Issues Exploration, Supply-Side Resource Preparation Activities in Coming Years
4) Outlines Emerge for BPA Post-2006 Conservation, Including Targets, Policy Guidelines, but Many Key Details Remain Vague
5) Wind PTC Extension Will Spur Development, Mostly for Well Advanced Projects
6) Proposed 300-KW-Capacity Community Wind Project in Washington Would Benefit Low-Income People
7) Huge Proposed Vancouver Island Wind Project Could Deliver Power to U.S. Pacific Northwest


POLICY

Counting on Conservation

Council Targets 700 aMW of Conservation from 2005-2009;
Lists 2,800 aMW of Regional Energy-Saving Potential through 2025

The Northwest Power and Conservation Council emphasizes the first "C" in its title in drafting a regional plan for the coming five years.

Energy conservation should be the foundation of Northwest resource development from 2005 through 2009, believes the Council. The regional planning agency has targeted 700 average megawatts of cost-effective energy savings as a least-cost, least-risk, environmentally sound resource strategy during an era of apparently ample power supplies (see Con.WEB, Sept. 30, 2004 for more on the draft fifth power plan).

"The portfolio analysis shows that a sustained and significant pace of investment in conservation to be beneficial in terms of reduced need for more expensive new resources and reduced exposure to periods of high market prices, fuel price volatitility, and possible future carbon penalties," the draft plan said.

Council officials consider the proposed conservation campaign ambitious but attainable.

The agency's regionwide estimate of cost-effective and realistically achievable savings is 2,800 aMW by 2025, at an average levelized cost of 2.4 cents per kilowatt-hour. That energy amount compares to more than eight, 400-megawatt-capacity coal-fired plants, at about two-thirds the cost, the draft plan states.

The Council's 700 aMW five-year energy-saving target would cost an estimated $1.2 billion to $1.35 billion for the Northwest utility system, and $1.64 in regional total. But achieving it would contribute to net present value savings estimated by the Council at $2 billion to $2.5 billion over 20 years, for accelerated conservation compared to a lesser acquisition scenario.

Nearly half this prospective conservation, about 1,275 aMW, is found in the residential sector. The commercial sector could contribute slightly more than 1,100 aMW, according to the plan. Industrial conservation potential is conservatively pegged at 350 aMW, and irrigated agriculture efficiencies could save another 80 aMW.

For the next five years, the Council recommends annual regional energy-saving targets starting at 130 aMW and rising to 150 aMW ( see related story for the Council's proposed action plan).

The Council's draft plan is now out for public comments, including a regional series of hearings. Comments are due Nov. 19.

Conservation Targets

Although the prospective acquisition and spending levels are big numbers, there are regional historical precedents, according to the Council.

Getting 700 aMW over five years would be less than the region's average annual energy savings from 1991 to 2002, accounting for Bonneville Power Administration, utility and Northwest Energy Efficiency Alliance programs, along with federal standards and state codes. It's also roughly comparable, annualized, to regional program savings in 2000 and 2001.

Meanwhile, the proposed spending levels are potentially less than average utility system conservation investments from 1993 to 1996 (in 2000 dollars), and lower as a share of total regional electricity revenues (nearly 4 percent was spent from 1993-1996; about 3 percent is projected for 2005-2009).

(Courtesy of Northwest Power and Conservation Council)

Many utilities already are planning their proportional share of the regional energy-saving target in the coming years, said Council conservation resources manager Tom Eckman.

The Northwest also can take advantage of more and enhanced conservation acquisition avenues these days, the Council noted, including the Alliance, public-purposes funding in Oregon and Montana, better regulatory mechanisms, standards and codes, a regional energy efficiency industry and two decades of program experience. Plus, higher power prices offer an economic incentive for conservation.

Achieving the Council goal will be "a challenge," said Eckman to BPA's post-2006 conservation work group Oct. 7 (see related story). Yet, he added, "I think it's doable. We've done that much in the past."

Conservation Potential

Much has been accomplished already in the Northwest, Eckman reminded the BPA advisory group: some 2,500 aMW from 1980 through 2001 through programs, codes and standards, and market transformation ventures.

Yet a comparable amount of cost-effective and viable energy savings remains, owing much to technology advances and rising power supply costs.

The Council figured more than 4,600 aMW of Northwest energy savings are theoretically available through 2025, under medium regional power demand forecasts. That number dropped to about 3,900 aMW of realistically achievable conservation, with the assumption some potential efficiencies simply won't be adopted. And, when a cost-effectiveness standard was applied, the Council identified 2,800 aMW of readily available and cost-effective savings.

Northwest conservation possibilities (under medium growth) have changed since 1995 estimates prepared for the fourth power plan. Technology improvements added 1,240 aMW of potential, while expected higher costs of generating resources (avoided costs) rendered an additional 767 aMW of conservation cost-effective. The Council took away potential identified in the fourth plan because of new and revised federal standards (730 aMW), utility program savings (600 aMW) and regional market transformation (170 aMW).

Sector by Sector

The region's most abundant energy-saving opportunities over the next 20 years, the Council believes, await in Northwest residences.

An estimated 1,275 aMW of cost-effective savings could be practically and affordably gained by 2025, which would cut forecasted Northwest residential loads by about 13 percent, according to the plan. Weighted levelized cost of these efficiencies is 2.9 cents/KWh.

Switching incandescents to compact fluorescent lamps would be the biggest potential contributor, tabbed at 530 aMW over 20 years, at a total resource cost of 1.7 cents/KWh. " ... recent improvements in product quality (size, color rendition, 'instant start,' etc.) and dramatically lower product prices have increased the size of this conservation resource by nearly tenfold," the plan said.

Water heating is the next largest category, at slightly more than 300 aMW, led by heat pump water heaters at 195 aMW. This technology has long been commercially available, but has not gained market traction, Eckman acknowledged. It probably needs a big regional demonstration venture, the plan said. Water heating tanks with better insulation and waste heat recovery from shower drains are other notable efficiency possibilities.

Space conditioning could furnish a similar amount, about 290 aMW, primarily through heat pump conversions or installation of highly efficient heat pumps, and weatherization measures.

Residential appliance opportunities are pegged at about 150 aMW, almost entirely from clothes washers (135 aMW). More stringent federal efficiency standards greatly limit further savings from refrigerators and freezers in coming years, the plan said.

In the commercial sector, the Council found slightly more than 1,100 aMW cost-effective and achievable by 2025, at an average levelized cost of 2.1 cents/KWh.

As in the residential sector, lighting efficiencies are the single most promising commercial opportunity, at about 335 aMW over 20 years. The plan lists high-performance T-8 lamps with high-performance ballasts, pulse-start metal halide fixtures, high-output linear fluorescents, ceramic metal halide and halogen infrared lamps, and CFLs and fixtures as among promising opportunities.

The equipment and infrastructure category (including efficient power conversion devices, packaged refrigeration, power management in networked personal computers and municipal sewage treatment) could deliver 420 aMW, while various HVAC efficiencies could contribute about 265 aMW.

Considerable energy-saving prospects lie in the practice of integrated design for commercial buildings, a projected 155 aMW at 2.3 cents/KWh in the Council's view.

A host of specific commercial measures are listed by the Council, 16 in lost opportunities and 12 in retrofits. The lost opportunities group is considered more cost-effective, at a weighted levelized cost of 1.8 cents/KWh, versus 2.5 cents/KWh for retrofits.

For the industrial sector, the Council draft plan lists 350 aMW of realistic savings, "at a minimum," based on analyses from the Alliance, Energy Trust of Oregon and other sources. These efficiencies could come from motors and motor-driven systems, lighting, compressed air and power supply systems, along with other avenues in specific industries, such as optimized pump systems and controls/process stabilization measures in pulp and paper.

The Council also identifies 80 aMW of potential savings in Northwest irrigated agriculture, from low-pressure center-pivot watering systems, more efficient pumps and reduced water leaks and friction losses.--Mark Ohrenschall

More Information:

***Return to Contents


Road Map

Council Recommends Actions, Strategies for
700 aMW Five-Year Conservation Goal

The Northwest Power and Conservation Council has proposed both a destination and a large-view road map for regional energy-saving endeavors over the next five years.

In addition to its call for 700 average megawatts of Northwest conservation from 2005-2009 (see related story), the Council has put forth actions and strategies by which the region could progress toward that goal.

Those include more attention to so-called "lost opportunity" resources, increased "discretionary" conservation, expanded market transformation, more local spending on conservation, a regional strategic plan and upgraded government codes and standards. The Council, in its draft fifth power plan, also wants to remove systemic barriers to utility conservation, notably financial.

In addition, an array of potential approaches are outlined: direct acquisition ventures, market transformation, regional infrastructure, codes and standards, and tax credits. The Council suggests strategies for many specific measures, as "starting points for a regional dialogue of how best to capture the targeted conservation."

Council officials have acknowledged challenges in reaching the conservation targets, but they also believe the numbers are achievable and represent a least-cost, least-risk, environmentally friendly resource strategy for the Northwest.

Conservation Action Plan

The Council's Action Plan starts with a focus on acquiring 700 aMW of energy savings regionwide in 2005-2009.

More specifically, the draft calls for 600 aMW of discretionary savings and 100 aMW of lost opportunities. The Council defines discretionary conservation as that which can be realistically acquired as needed; building retrofits are a prime example. Lost opportunities, meanwhile, tend to have narrow windows during which efficiencies are viable. That prominently includes new construction, but also major remodels and equipment replacements, noted Council conservation resources manager Tom Eckman.

Both categories should be expanded in the coming five years, according to the action plan. It calls for 120 aMW of annual discretionary efficiencies, and a gradual increase in lost opportunities from 10 aMW in 2005 to 30 aMW regionwide in 2009. By 2017, the Council wants the region to get 85 percent of available cost-effective lost opportunities each year. At the moment, "Many of the lost opportunity resources identified in this power plan are relatively new and do not have established programs or approaches for their acquisition," the Council said.

On the money front, the action plan seeks more dollars. Bonneville Power Administration and Northwest utilities collectively spent about $200 million on conservation in 2002. The Council forecasts the annual utility system bill for its targets at $240 million in 2005 and $300 million by 2009 (all figures in 2000 dollars).

Some of this increase should be earmarked for expanded market transformation, which promises a more efficient and effective way to realize some of the proposed additional savings, the action plan said. It adds, " ... the level of investment in regional market transformation initiatives should be resolved during the development of the strategic plan for conservation acquisition."

The Council intends to gather stakeholders in early 2005 to "develop a strategic plan to achieve the conservation targets set forth in the power plan." That blueprint should be given to the Council within a year.

This conclave will also look at regional initiatives that might not fit under market transformation, such as coordinating and funding incentives for certain measures. These could be assigned to BPA, an expanded Northwest Energy Efficiency Alliance, another regional avenue or some combination, according to the draft plan.

The Council recommends upgraded energy codes and standards to gain further efficiencies, especially for lost opportunites. For example, states should adopt appliance standards not pre-empted by federal laws, for such technologies as commercial refrigerators, freezers and ice-makers. State and local codes should at least match the Council's Model Conservation Standards for new buildings, and program agencies should adopt MCS, the plan said.

The Council also thinks it "essential" to track conservation spending and savings, whether by the Regional Technical Forum or other entities.

The draft plan seeks to knock down a number of barriers to utility conservation, particularly on the financial side. For lost revenues, the Council broaches rate structures that "reduce the fixed costs recovered in per kilowatt-hour charges combined with carefully designed increasing block rates." Splitting utility revenues from kilowatt-hour sales (known as decoupling) is another option, if "limited to the effects of conservation."

Another thought is financing conservation similarly to other resources. This would lessen near-term conservation rate impacts compared to the common current practice of capital expensing, though it could increase long-term costs. State legislatures could help by "defining conservation investments as a non-resource regulatory asset ... backed by the states' ability to guarantee cost recovery."

The Council also encourages BPA to avoid conservation disincentives in its power supply allocations, and BPA and utilities to keep supporting cost-effective low-income weatherization.

It pledges to examine public-purposes funding, in the Northwest (Oregon and Montana) and beyond, by 2008. "If utility disincentives seriously impede utility investment in conservation, consideration should be given to a system benefits charge approach to conservation funding and acquisition."

In addition to conservation, the Council wants the region to pursue 500 megawatts of demand response, which it characterized as pricing programs and demand purchases. However, the Council acknowledged, "The size and value of this resource ... are somewhat uncertain."

Recommended actions for demand response include expansion and refinement of existing programs, development of cost-effectiveness methodologies, inclusions in utility integrated resource plans and technology evaluations.

Acquisition Strategies

The Council's draft plan includes an appendix titled "Conservation Acquisition Strategies." This includes approaches for specific measures, which are deemed open for discussion in the upcoming regional conservation planning process.

In any case, these strategies should be diverse, the Council said: " ... a suite of mechanisms should continue to be the foundation used to tap the conservation resource."

They fall into six broad categories.

One is direct acquisition, defined as "typically programs run by local utilities, system benefits charge administrators, regional organizations, BPA and others that offer some kind of incentive to get decision makers to make energy-efficient choices." The Council calls this approach "relatively expensive," but initially necessary for many new products and services.

Market transformation is another strategy, designed to further marketplace adoption of efficiency measures. The Council praised the Alliance's "impressive track record" of gaining 100 aMW of savings at about $1 million per first-year average megawatt saved.

Conservation infrastructure development is a third category, encompassing education, training, common specifications, market research and program evaluations.

Energy codes, appliance/equipment standards and tax credits--enacted at various levels of government--round out the primary strategies.

The Council lays out recommendations for a host of energy-saving measures.

Residential clothes washers, as an example, are covered by minimum federal efficiency standards through 2012. In the meantime, the Council recommends a regional market transformation effort supported by local acquisition ventures and state tax credits for high efficiency models. Another promising residential measure, heat pump water heaters, should be promoted with a demonstration program (to allay technology concerns) and a regional and/or national market transformation venture.

In the commercial sector, where nearly two-thirds of identified conservation prospects are considered lost opportunities, the Council suggests "a relatively larger role for market transformation activities and regionally coordinated acquisition approaches compared to the residential sector." These could include, for example, education, training and marketing for influencing energy-saving practices and services, such as integrated commercial building design. Other approaches--including market transformation, acquisition programs, codes/standards and regional specifications--also have potential roles for commercial lost opportunities.

For Northwest industries, the Council recommends a mix of coordinated utility and public-purposes funding acquisition programs, along with regional market transformation. A regional industrial conservation strategy should be formulated, the plan said.

And, for irrigated agriculture, a blend of utility and public-purposes funding would best capture the potential savings, the plan said.--Mark Ohrenschall

More Information:

***Return to Contents


The Supply Side

Council Advocates Wind Issues Exploration,
Supply-Side Resource Preparation Activities in Coming Years

The Northwest Power and Conservation Council's draft power plan emphasizes energy-saving actions over the next five years.

Yet the plan also encourages some near-term supply-side resource activities, including an extensive look at issues surrounding a big expansion of Northwest wind energy development. It advocates preparations for building coal-fired power plants as early as 2010, and wind farms slightly later. New natural gas-fired resources play a lesser and later role in the Council's long-range plan, owing to higher and volatile gas prices.

This Council blueprint comes amid a current surplus of regional power resources--estimated at 1,000 average megawatts for 2004--attributed to lower demand and new plants built earlier this decade.

However, the Council's supply-side guide has at least two notable caveats.

For one, individual Northwest utilities may need new power resources for their own circumstances, such as more peaking capacity or reducing market purchases, the Council said. In fact, all six major Northwest investor-owned utilities are actively seeking, or planning to seek, new generating resources before 2010.

In addition, the Council's draft plan said more new regional generation could be required later this decade if power demand surges, existing capacity diminishes and/or conservation efforts falter.

Conversely, the plan noted, "To the extent regional utilities build generating resources in the near term, the regional surplus will be extended and the need for additional generating resources will be deferred."

Supply-Side Action Agenda: Wind, Construction Preparation, Lost Opportunities

The action agenda in the Council's draft plan centers on conservation (see related story), but also covers supply-side work in three broad categories: an examination of large-scale wind development issues, preparation for building new plants after 2009 and pursuit of so-called "lost opportunity" resources, such as combined heat/power and biomass.

Wind power, the draft plan notes, "is expected to play a much-expanded role in the region." This is driven by potential carbon dioxide emission policies, lower costs, technology gains and rising and unstable natural gas prices.

The Northwest already hosts more than 500 megawatts of wind capacity, and several hundred megawatts more are in various development stages. But, according to Council senior resource analyst Jeff King, many questions remain about wind's true regional potential. "What we don't know very well is can it grow to 4[,000] to 5,000 megawatts, at least under the conditions we're assuming in the plan ... There's a lot of uncertainty there. If [wind is] going to be a big player in the long term, now's the time to figure out if it can be a big player."

He listed shaping costs and transmission availability as among specific unresolved issues for big wind.

The Council also wants to explore prospects for wind development in different parts of the Northwest--King mentioned Central Washington, Southern Idaho and Montana--to learn more about the effects of such geographic diversity. Existing Northwest wind farms are gathered along the Oregon-Washington border, east of the Columbia River Gorge.

The Vansycle Ridge Wind Farm in
northeastern Oregon was the Northwest's first operating
wind project. Now, the Northwest Power and Conservation
Council wants to examine issues surrounding a big expansion
of regional wind power.
(Photo by Mark Ohrenschall)

"What I think we're looking for here are projects that are generally representative of what could be a considerably larger scale of [wind] development," King said.

Some of these questions have already been regionally examined to some extent, he said, such as integration costs.

But more answers are needed. "Over the next few years, the plan calls for gathering more experience and information about wind resources and their performance and cost within the regional power system through limited commercial-scale development," the Council said.

Another main supply-side task is preparation.

"The region should secure sites and permits to be prepared to start construction of new coal generating resources as early as 2010 with additional wind generation shortly thereafter," the draft plan summarized.

Coal's presence as a resource of choice is attributed to three main reasons, according to King: less costly generating technology, stable and potentially lower long-range fuel costs, and higher natural gas prices. Those advantages counter the risk of future carbon dioxide emissions penalties, in the Council's view of the future. The most likely place for new coal-fired plants is Montana, with power delivered westward, King said.

Improved coal-fired generating efficiencies and affordable carbon sequestration methods "would further increase the attractiveness of coal generation," the draft plan said.

As for natural gas, which has been the regional power fuel of choice in recent years, "New gas-fired generation does not figure in this power plan until late in the [20-year] planning period, largely because of higher gas prices and the expectation of greater volatility in gas prices," the plan said. "Nonetheless, it could figure prominently later in the planning period as the more promising wind sites are developed and carbon emissions concerns become more significant."

The Council also encourages actions for transmission: "Needed transmission upgrades should be identified so all these resources can be constructed and brought on line quickly when required. If major transmission upgrades are needed, that work will have to begin before construction of the power plants."

A third supply-side focus in the Council draft plan involves so-called "lost opportunity" resources: " ... efforts to identify and develop cost-effective lost-opportunity generating resources, including combined heat and power (cogeneration) and biomass applications, should be reinforced."

King said such ventures "generally solve more than one problem," such as waste disposal in the case of biomass. Commercial/industrial cogeneration ventures, meanwhile, offer "really attractive" environmental and economic benefits, he said.

Although not yet ready for a leading role, some promising resources warrant a closer look in the coming years at their availability and costs, the Council plan said. It lists oil sands cogeneration, coal gasification, carbon sequestration, energy storage technologies and demonstration of renewable/high efficiency generation.

Geothermal and solar resources don't figure prominently in the Council's draft plan.

King said geothermal potential is "pretty localized" and may amount to a few hundred megawatts in the next 20 years, at reasonable costs. Solar has many viable small-scale applications, King said, but its prospects as a major regional energy resource are limited by high costs.

The Council plan also suggests a "policy framework to ensure the ability to develop needed resources." It advocates voluntary resource adequacy targets for the Northwest and West and continuing regional activities to address transmission issues. Bonneville Power Administration's post-2006 role in power supply also is included in this category.

Finally, the Council wants to monitor developments that could affect the plan, listing load-resource balance, conservation achievements, wind understandings and climate change science and policy.--Mark Ohrenschall

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BONNEVILLE POWER ADMINISTRATION

Looking Ahead

Outlines Emerge for BPA Post-2006 Conservation, Including
Targets, Policy Guidelines, but Many Key Details Remain Vague

Some outlines are apparent for Bonneville Power Administration's post-2006 energy conservation plans, but many details remain sketchy.

BPA has pledged to pursue its load-based share of regional energy-saving targets set by the Northwest Power and Conservation Council--an estimated 56 average megawatts a year starting in fiscal year 2007, more than 25 percent higher than the current annual target of 44 aMW. Bonneville officials anticipate $80 million annual budgets for post-2006 conservation acquisitions, similar to current spending levels.

Bonneville has offered other broad guidelines for its 2007-2011 energy-saving efforts, notably including focuses on low costs (a projected goal of $1.3 million per average megawatt saved), minimal wholesale rate impacts, verifiable savings directly beneficial to BPA, regional collaborations and local initiatives. Acquisition is a main watchword.

BPA is also leaning toward more limited qualifications for any future rate discount, compared to the present Conservation and Renewables Discount Program. These potential standards, as currently broached by BPA, would eliminate credits for renewables and for utility donations to the Northwest Energy Efficiency Alliance.

Meanwhile, numerous other post-2006 BPA conservation topics remain somewhat more uncertain. These include specific program features, BPA oversight requirements, small utility options and the key policy decision of how conservation savings affect utility shares of low-cost BPA wholesale power.

BPA and a regional advisory group have started to address Bonneville's post-2006 conservation future, with the intent to develop general and specific recommendations over the coming year.

BPA's Role

In BPA's proposed power supply role for fiscal years 2007-2011, the federal power marketing agency pledged its ongoing commitment to energy conservation but offered only broad guidelines for its post-2006 blueprint. "BPA envisions some form of collaborative planning process in which experienced individuals can develop a fully defined proposal for conservation that can then be brought to the entire region for consideration," said the proposal.

(Courtesy of BPA)

The resulting work group for BPA post-2006 conservation consists of more than 50 members, primarily from utilities but also from other conservation interests. It is charged with first proposing a general program approach and direction for BPA energy-saving ventures, and then moving into program design and implementation. Five subcommittees have been formed, addressing funding mechanisms and levels, small utility options, oversight and evaluation, creative strategies and program design.

BPA hopes to roll out its post-2006 conservation offerings by fall 2005, allowing a transitional period before they formally begin in October 2006.

Some Parameters

From background materials and discussion at the work group's first meeting, Oct. 7 in Spokane, some parameters for BPA's future conservation are apparent.

BPA energy efficiency implementation manager John Pyrch reaffirmed for the group that Bonneville will target its proportional share (based on loads it serves) of Council energy-saving goals, which projects to about 280 aMW over five years, or some 56 aMW annually. Pyrch said the agency is on track to meet its 220 aMW goal over the 2002-2006 rate period.

Starting in 2007, "We've got to deliver our conservation at a 27-percent level higher than we are right now," he said, adding, "I don't envision our budgets being increased substantially." About $80 million a year are tentatively earmarked for BPA conservation acquisitions in 2007-2011.

BPA energy efficiency vice president Mike Weedall spoke about regional utility pressure on Bonneville to control costs and keep down rates. "We need to be pursuing the cost-efficient megawatts," he told the work group. "Therefore, that is pointing us to a direction we have to be in a [conservation] resource acquisition mode … for the foreseeable future."

This cost concern is especially likely to influence the fate of C&RD, which Pyrch described as "an infrastructure establishment program getting folks re-engaged in conservation. We allowed a lot of things under that program we would probably not allow under an acquisition program."

C&RD conservation credits are based on a measure's system value, which, Pyrch said, "is substantially higher in a lot of cases than what it costs to put the measure in place." Some utilities have used that differential for non-conservation purposes, which he called "perfectly fine, legal" but not appropriate for an energy-saving acquisition emphasis.

Established for the 2002-2006 BPA rate period, the C&RD now allows some 3,200 qualifying measures, according to Pyrch. That number would drop to about 1,200 to 1,500 under proposed cost-effectiveness criteria.

A BPA handout listed other desired conditions for any future rate credit in its conservation portfolio, including elimination of green power/renewable generating resources, which would take the R out of C&RD.

BPA also is considering getting rid of rate credits for qualifying donations other than to low-income weatherization, Pyrch said.

Among other consequences, this would render ineligible utility funding earmarked for the Alliance. Alliance executive director Margie Gardner called this "a big issue," because numerous public-power utilities have indicated they wouldn't financially support the Alliance without a rate credit. At least two other work group members also expressed concern about this proposal.

However, BPA has pledged $10 million annually in direct Alliance funding through 2009. Pyrch also referenced the Council's recommendation to substantially expand regional market transformation, which he said raised for BPA the question of whether it should "supplement the market transformation budget beyond what we're already doing."

Other BPA rate discount "leanings" for conservation include options for small utilities as long as those "contribute to BPA's conservation acquisition efforts," allowance of utility administrative, marketing and education costs, and program designs aimed at considerable "lost opportunity" conservation.

BPA also prefers "a consistent payment structure" for conservation throughout its programs.

The future of Bonneville's other key energy-saving initiative, Conservation Augmentation, was less prominently discussed at the meeting and in materials. Pyrch called it "a good program" that has gained about 62 aMW already this rate period for about $1.3 million per average megawatt. He allowed that ConAug may have excessive BPA oversight requirements, while C&RD may have too much slack in that regard.

Among Bonneville's "key policy directives" for post-2006 conservation are that BPA-funded savings directly benefit the agency, and that those negawatts, and dollars, are carefully accounted.

BPA's post-2006 conservation policy outlines are described in a handout as "firm direction regarding BPA's leanings. There would have to be very compelling reasons to deviate from these guidelines."

However, this still leaves considerable discretion for the structure of BPA initiatives come FY 2007. Pyrch said BPA wants to carry forward "the best features" of current BPA offerings, "to help us get the new megawatt targets." As examples, Pyrch later said many utilities like the reporting features, multiyear funding and local control inherent in C&RD, while for ConAug, BPA appreciates the rigorous verification of savings.

One vital policy issue outside the work group deliberation involves whether conservation-minded utilities would somehow get a lesser share of relatively cheap BPA wholesale power as a result of successful energy-saving efforts. This issue, described as "BPA's allocation and net requirements determinations under the new power sales contracts," will be addressed in the Regional Dialogue process, along with BPA conservation beyond its direct loads. Renewables rate credits will be separately determined as well.

Stakeholder Thoughts

Representatives of utilities and other stakeholders have expressed recent thoughts on Bonneville's post-2006 conservation, as summarized in BPA documents.

Local control and flexibility are deemed "huge issues" for utility customers, but with different meanings. Some want a hands-off conservation role for BPA, while others are interested in an array of BPA programs from which to choose.

Many stakeholders indicated a desire for stable BPA programs and funding, and simplicity for program implementation.

A number of commenters believe BPA's planned threshold of $1.3 million per average megawatt "is too low to acquire the needed energy conservation or is too low to acquire residential conservation," according to a BPA summary. Many people believe BPA should pay for utility administrative costs.

On the C&RD, the vast majority of commenters who expressed an opinion thought it should continue, at about the same funding amount. Quite a few people thought the credits too liberal. Several wanted to keep renewables eligible.--Mark Ohrenschall

More Information:

***Return to Contents


RENEWABLES/GREEN POWER

PTC Lives Again

Wind Energy Tax Credit Extension Will Spur Wind
Development, Mostly for Projects Well Advanced

The recent extension through 2005 of the federal wind energy production tax credit will spur wind power development in the Northwest and beyond, with some ventures already moving forward.

But the relatively short length of the PTC renewal is likely to most affect projects already far along the development trail, according to wind industry sources, who nevertheless praise continuation of this vital subsidy. Wind farms must start producing electrons by year-end 2005 to qualify for the 1.8 cents per kilowatt-hour tax credit over 10 years, and that means time is growing short.

"We effectively have 14 months and counting," said Terry Hudgens, chief executive officer of PPM Energy, at an Oct. 19 green power conference in Seattle. He listed equipment manufacturing arrangements, permitting and power sales contracts as among necessary precursors to building wind. "If we don't get our positions all nailed down in the next two, three months, these projects will not fit the … schedule to be operational in late 2005."

PPM Energy is among entities that have announced specific wind development plans, following the Oct. 4 signing by President Bush of federal tax legislation including the PTC extension. PPM will construct the 75-megawatt-capacity Klondike II wind farm in north-central Oregon, and is negotiating a long-term power sales agreement.

Elsewhere, Portland General Electric and PacifiCorp officials told the Oregon Public Utility Commission Oct. 19 their utilities are pursuing wind power deals that could meet the 2005 PTC deadline.

Another planned Northwest venture, the Wild Horse Wind Power Project in Central Washington, also is targeted for a 2005 debut.

Other projects may yet follow.

PTC Extension

The wind PTC expired at year-end 2003, which led to a "sharp drop" in new installed wind capacity in the United States, according to the American Wind Energy Association. In 2003, the country added nearly 1,700 MW of wind capacity, but 2004 expectations are for less than 500 MW.

A PTC extension had been considered in Congress for some time, and it passed as part of House of Representatives Bill 1308, approved by the House and Senate in September, and approved by Bush Oct. 4. It applies to wind projects that begin operations in 2004 (retroactively for projects earlier this year) or 2005.

"Even though there is a tremendous amount of bipartisan support for the extension of the PTC in Congress, it had been held hostage for lots of other issues," said director Rachel Shimshak of Renewable Northwest Project. "At least we got clarity on another year.

"Quite a lot of activity could happen in 2005" as a consequence of the renewal, depending on circumstances, she said.

Among the chief variables for projects to meet the PTC deadline are transmission and power sales agreements, permitting approvals and equipment purchasing arrangements, according to sources.

"Unless things are pretty much ready to go by January ... I wouldn't think [a wind project] would necessarily happen next year," said Jeff King, senior resource analyst for the Northwest Power and Conservation Council.

Manufacturing bottlenecks are possible, according to Shimshak. "I have been told by some of the developers that they're hoping to be able to negotiate [power sales] agreements now, so that they can order turbines and be assured turbines will be available for construction in 2005," she said. "As you can imagine, everybody in the whole country is doing the same thing ... it puts a tremendous drain on the turbine manufacturers."

GE Energy on Oct. 18 announced contracts for more than 750 MW worth of its turbines for new 2004-2005 U.S. wind projects, including unspecified ventures in Idaho and Oregon. Steve Zwolinski, head of GE Energy's wind energy division, in a news release called the PTC extension "a tremendous impetus" for the U.S. wind industry.

Northwest Wind Perspectives

One potential beneficiary of the PTC renewal through 2005 is the Wild Horse Wind Power Project, planned for up to 220 MW capacity at a site about 15 miles east of Ellensburg.

Puget Sound Energy in September announced a non-binding letter of intent with developer Zilkha Renewable Energy to acquire the project (see Con.WEB, Sept. 30, 2004).

"Obviously the extension of the PTC is a good thing, and elicited sort of a collective sigh of relief from developers and renewable energy advocates alike," said Zilkha project development manager Chris Taylor. But, he added, "Everybody's pretty frustrated it's only for another year, and it comes so late this year ... For 2004 it's really too little, too late. For 2005, I think there's a lot of projects that are going to be aiming in under the wire."

That includes Wild Horse, Taylor said. "We're working hard to make that happen, to get that project lined up for 2005 completion." Wild Horse is under permitting review by the Washington Energy Facility Site Evaluation Council; final approval would probably be needed in the second quarter next year to finish Wild Horse by year's end, Taylor said. "We're working hard with Puget, EFSEC and the [Kittitas] County to make that deadline, and I think it's fair to say that all those parties understand that timing."

Portland-based PPM Energy will build the 75-MW-capacity Klondike II wind farm in Oregon's Sherman County, and a 100-MW-capacity wind farm in Minnesota, a company news release reported Oct. 5--the day after Bush inked the PTC extension. PPM controls 830 MW of wind capacity, and, "With the addition of these new and pending projects, that number will swell to more than 1,200 MW by the end of 2005, well on target toward PPM's goal of at least 2,000 MW online by 2010," Hudgens said in the release.

Meanwhile, Oregon's two major investor-owned utilities are working on wind deals that could qualify for the renewed PTC.

"The fact it was only extended such a short period of time will cause everybody in the industry to push hard in terms of taking advantage of the credit. PacifiCorp is going to be one of the entities pushing hard," Mark Tallman, who oversees PacifiCorp power purchasing, told the OPUC Oct. 19.

PacifiCorp announced in August seven leading unidentified projects from its February solicitation for up to 1,100 MW of additional renewables capacity by 2010 (see Con.WEB. Aug. 31, 2004). Now, Tallman said, the utility has broadened its review to 15 (also publicly unknown) proposals, of which about eight could launch in 2005. "Our next steps will be to focus on these near-term opportunities," looking at permitting, transmission, financing, resource deliveries and other project elements. He said he anticipates the list of eight will quickly shrink, and PacifiCorp hopes to complete negotiations for selected projects by year's end. The IOU is looking for 100 MW of added renewables capacity in 2005. PacifiCorp will turn its attention to other renewables prospects after it clarifies the 2005 situation, Tallman said.

PGE received 900 average megawatts of wind energy proposals through an all-source resource solicitation, said Jim Lobdell, vice president of power operations, also to the OPUC. PGE's integrated resource plan calls for 65 aMW of wind (about 200 MW of wind capacity).

The utility is "in active negotiations with several developers" that could lead to wind farms spinning out electrons by the end of 2005, he said. "It's premature at this time to discuss specifics of any project." Lobdell did note PGE is "exploring various financing and ownership models in comparison to a standard power purchase agreement," and is also discussing "scalability" with bidders.

The region's largest operating wind project, the nearly 300-MW-capacity Stateline Wind Energy Center, is unaffected by the PTC extension. Developer/owner/operator FPL Energy has Oregon-approved plans to expand Stateline by up to 184 MW, but first it needs to sell the additional power, said local FPL official Anne Walsh.

"The PTC is definitely an incentive for wind power development and with its [renewal] passage there'll be new projects that FPL is currently pursuing and will be constructed … not necessarily, though, in the Pacific Northwest," she said.

The tax credit is "very, very high" on the list of wind project fundamentals, as a means to significantly lower costs, Walsh said. But so are transmission, good wind resource and, of course, a market for the power. "If you have a PTC in place and don't have transmission access, that doesn't do any good," she said. "They all are important."--Mark Ohrenschall

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Unique Northwest Wind Project

Proposed 300-KW Community Wind Project in Washington
Would Benefit Low-Income People

A unique wind energy venture is beginning to swirl in south-central Washington.

Luna Point Community Wind Project in Klickitat County would be Washington's first community-based wind energy facility. It reportedly would be the nation's first in which low-income citizens would directly benefit from wind-generated revenues, in the form of energy bill assistance. And, it would make energy-productive use of an area that hosted demonstration wind turbines in the 1980s.

This distinctive 300-kilowatt-capacity venture, planned east of Goldendale by six participating entities, is at least a year away from operation. It still needs permitting approval and most of its financing; a recently awarded $307,000 federal grant will cover up to one-fourth of the projected $1.2 million cost. Other key details, including specific power, transmission and green tags arrangements, are pending.

Luna Point would generate power more expensively and intermittently than a large-scale wind project.

Still, project officials share enthusiasm and optimism, and the hope Luna Point could serve as a model for other such ventures.

"We are excited by this opportunity to collaborate and to demonstrate how communities can benefit from a Northwest renewable energy resource that is locally owned and generated," said Robin Rego, president of Last Mile Electric Cooperative, in a news release.

Other participants are Klickitat PUD, Northwest Sustainable Energy for Economic Development, A World Institute for a Sustainable Humanity (A W.I.S.H.), Klickitat Skamania Development Council and Our Wind Co-op.

"I like the idea that it's bringing together both the environmental benefits as well as direct assistance for low-income households in the county," said Heather Rhoads-Weaver, community partnerships director of Northwest SEED.

Low-income people generally aren't directly involved in any aspect of Northwest utility green power programs, noted Michael Karp of A W.I.S.H. "This is a chance to make that link," he said.

Luna Point Background

Luna Point evolved from an Our Wind Co-op initiative to install 10-KW-capacity wind turbines in the rural Northwest, financed partially by aggregated green tag sales, according to Rhoads-Weaver. Two of these small wind machines are in Klickitat County, near the proposed Luna Point project site.

One of the local 10-KW turbine participants, Ed Kennell, wanted to generate wind-powered money for low-income people, but the relatively modest potential dollar amount was outweighed by administrative issues, according to Rhoads-Weaver. "We came up with the idea of working togther on a large project," she said, bigger than 10 KW but smaller than a commercial-scale wind development.

The six participating groups signed a memorandum of understanding this summer, she said.

In September, Last Mile was announced as recipient of a $307,000 grant for Luna Point from 2002 Farm Bill funding earmarked for rural renewables and efficiency projects, said Last Mile executive director Deb Ross. This would provide up to 25 percent of the anticipated $1.2 million project cost. "We've got a pretty major fund-raising challenge in the next six months to raise that other $900,000," said Rhoads-Weaver.

This is the 100-kilowatt-capacity
Fuhrländer wind turbine model planned
for the Luna Point project.
(Photo courtesy of Lorax Energy Systems/
Northwest SEED)

Luna Point, if successfully developed, would represent a number of firsts.

It would be Washington's inaugural community-based wind venture, according to Rhoads-Weaver. The Midwest already hosts a number of such projects, which Rhoads-Weaver described as typically larger in generating capability than Luna Point, and developed for public-sector entities. Luna Point's setup "really fit our specific needs and capacity for this particular project," she said.

In addition, Karp said, it would be "the first in the country ... linking low-income households and renewable energy sources in this way."

The specific beneficiary of Luna Point would be Operation Warm Heart, a low-income winter energy bill assistance program funded by Klickitat PUD customers and others, and administered by Klickitat Skamania Development Council.

Operation Warm Heart would receive a projected $600,000 over 20 years, most of it in the later years as financing is paid off during the first decade, according to Northwest SEED estimates.

These funds could make a significant difference in this economically troubled area, according to KSDC executive director Linda Schneider. "This project has the potential for generating revenues for Operation Warm Heart we wouldn't be able to find anywhere else," she said. During the past winter, the program served 83 households with slightly more than $15,000 in energy bill assistance.

Luna Point could enable the community action agency to expand other low-income energy services, Schneider told Con.WEB. "Depending on the success of it, we're hoping we can combine it with our weatherization program and our energy conservation education program so we can really offer people an entire package of services, and make a long-term change in their lives, rather than a one-shot energy payment."

Another noteworthy distinction of Luna Point is its proposed location in the same vicinity as the MOD-2 wind demonstration project undertaken by Bonneville Power Administration and the U.S. Department of Energy in the 1980s. MOD-2 consisted of three 2.5-MW-capacity turbines manufactured by Boeing. A Northwest Power Planning Council 1989 paper said the turbines encountered some material and design problems, but most were resolved, and the project disbanded in 1986 from lack of funding.

This aspect offers "a model for recycling and re-powering former energy sites," said a news release.

Project Particulars

Klickitat PUD owns the proposed Luna Point site, which utility power manager Allen Barkley described as slightly back from bluffs above the Columbia River, with "a pretty fair wind resource."

Plans call for three 100-KW-capacity turbines, manufactured by Fuhrländer, according to Rhoads-Weaver. Participants looked into used turbines, she said, but those would have shorter lifetimes and require more maintenance than new equipment.

Luna Point power would be delivered to Klickitat PUD's system via utility wires, but, "We haven't established all the details on that yet," said Barkley. A nearby substation is available, according to Ross, although it "may require some upgrades and refurbishing."

Also unclear is the exact means by which Klickitat would acquire the generated wind power. The PUD may credit Luna Point power against the utility's BPA purchases, according to Barkley. This intermittent energy resource would, in any event, represent a miniscule part of Klickitat's load, which peaks at 38 megawatts, he said.

"We don't see it as a big impact on us," said Barkley, and it would create "a very positive influence on our customers. It's a good project."

The proposed location has already hosted a wind venture, and some environmental assessments have been conducted, participants noted. In addition, the 0.2-MW-capacity Mariah wind project lies adjacent, Barkley said.

Consequently, Luna Point participants don't envision major permitting problems. Approvals are needed from entities including Klickitat County, which is developing energy overlay zoning that, as currently proposed, would allow the project without a conditional-use permit. "We're hoping it will be a smooth process," said Rhoads-Weaver, adding that the local nature of the project should be an asset. She expects up to six months for permitting.

Beyond the $307,000 federal grant, many financial aspects of the project are undetermined. "We're still in the process of identifying ... the fund-raising campaign," said Ross.

Green tag sales are one potential avenue, according to participants.

"We are definitely open to working with additional partners," Rhoads-Weaver said. "Certainly the benefits would be allocated according to the level of investment for the project. While we want to set aside as much of the net proceeds to Operation Warm Heart as we possibly can, in order to make the project happen, we need the investors to come forward ... We're open to ways of structuring the payments."

She said participants are looking into whether the project could somehow take advantage of the recently extended federal wind energy production tax credit, with a federal taxpaying entity (see related story). In-kind contributions from various sources are also anticipated, up to 10 percent of the total cost.

Luna Point power would not come cheap. Rhoads-Weaver estimated close to $4 a watt for total installed cost, roughly 25 percent less than for 10-KW turbines, but three to four times more costly than large, commercial-scale wind ventures with economies of scale and other advantages. Forecasted capacity factor is 23 percent, roughly between the 10-KW experience in a similar wind climate (17 percent) and big wind farms, which typically have capacity factors in the range of 30 percent to 40 percent.

Participants are aiming for spinning wind turbines by the end of 2005, a timetable Rhoads-Weaver described as "ambitious" but "doable."

Model?

Could Luna Point serve as a model for other, similar Northwest ventures? Possibly.

"Not all that many PUDs own land that have wind capabilities like this," said Barkley. But, he added, "It could be a model as far as PUDs incorporating wind into their system, particularly for purposes of supporting low-income customers."

Ross and Karp both noted other Northwest communities are exploring community-based wind projects, which could take different forms of size, ownership, funding and power arrangements. "There are lots of variations on the theme," said Karp. "We're just trying to get something going."

A W.I.S.H. is aiming for an eventual 12 MW of installed wind power to support low-income people. "Klickitat is very small," he said, but, "You need to get building blocks in place to get to where you want to go. We consider it a really good building block."--Mark Ohrenschall

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450 MW Planned

Huge Proposed Vancouver Island Wind Project
Could Deliver Power to U.S. Pacific Northwest

What could become the world's largest land-based wind power project has been permitted on British Columbia's Vancouver Island, and the developer hopes to sell some of the renewables output to U.S. Pacific Northwest utilities.

British Columbia regulators in late September announced the awarding of an environmental assessment certificate to Sea Breeze Power Corp. for its proposed 450-megawatt-capacity Knob Hill Wind Farm, planned for northern Vancouver Island.

In June, the Vancouver, B.C.-based firm announced it had filed an application with Bonneville Power Administration and other agencies to build a 990-MW underwater transmission line from Vancouver Island across the Strait of Juan de Fuca to Port Angeles, WA. The 12-mile line could deliver energy from Knob Hill and other renewables projects on the island to Washington state.

Paul Manson, president of Sea Breeze Power Corp., told Con.WEB he hopes the $550 million project is operational by 2007. Meanwhile, he is marketing the project to several Northwest utilities.

Seeking Power Buyers

"The next step is secure some power purchase agreements," Manson said, adding that Sea Breeze officials have spoken with representatives of Puget Sound Energy and PacifiCorp about the project.

But Knob Hill was not included on PSE's short-list of generation projects released in June, culled from responses to requests for proposals. In September, the Bellevue, WA-based investor-owned utility announced it had signed a letter of intent to acquire the 220-MW Wild Horse Wind Power Project near Ellensburg, WA (see Con.WEB, Sept. 30, 2004). Two other prospective Washington wind farm acquisitions are under consideration by Puget.

"Our preference would be to sell to BC Hydro first, but we are actively engaged in several RFPs in Washington," Manson said.

BC Hydro has already rejected the company's proposal once, but Manson hopes another call for tenders will be coming soon from the Crown-owned utility. BC Hydro nixed the company's initial proposal earlier this year in a call for tenders after the utility's plan to build a natural gas-fired power plant on Vancouver Island was rejected as too expensive.

British Columbia is the only Canadian province that does not get a portion of its energy supply from wind.

A BC Hydro spokeswoman told the Toronto Globe and Mail the utility rejected the project over concerns that wind energy might not be available when its needed. "The problem with wind is that it isn't always windy," Elisha Moreno told the newspaper.

Despite rejection by the local utility, Manson is confident the project would shape nicely with BC Hydro's needs. "The beauty of this project is that seasonally, wind is at its strongest when the reservoirs are at their lowest during winter months," he said.

Sea Breeze is studying 150,000 acres on Vancouver Island and interior British Columbia as potential wind farm sites, Manson said.

"I am very confident that renewables will be the next major chapter in energy production, just as dams have sustained us in the last half of the 20th century--wind has the promise to be the next great chapter," he said.

If built, the 450-MW Knob Hill project would surpass the 300-MW-capacity Stateline Wind Energy Center on the Oregon-Washington border as the largest land-based wind farm in the world.--Steve Ernst

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