Implications of the FERC BPA wind ruling

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By Stephan Williams, smart grid engineer

Stephan Williams

When the Bonneville Power Administration (BPA) made the decision to limit spillover at its dams and force wind energy providers to curtail generation during an oversupply event in spring 2011, it may have unwittingly opened a different type of floodgate. A petition filed with the Federal Energy Regulatory Commission (FERC) by a coalition of five wind power companies has led the BPA to have to rethink its generation curtailment policies and contemplate increasing overall transparency in order to facilitate post-event analysis and ensure that transmission services are provided to all entities in a comparable fashion.

The tipping point

The event that led to the initial complaint seemed innocent enough: the confluence of above average snow and runoff, high spring winds and low energy demands (typical during spring and fall) led to an excess power supply. Following its own Oversupply Management Protocol (OMP), the BPA moved to first minimize thermal generation output and then to decrease hydropower, just to the point where dissolved gases from spillover wouldn't endanger wildlife. At that point, still experiencing an oversupply situation, it signaled for wind generators to curtail production.

With business models built not only on selling energy to customers for income but also on receiving credits and certificates from the federal government for each unit of energy produced and utilized, the wind energy providers chafed at the curtailment and quickly moved to lodge a complaint with FERC. And after much discussion in regulators' chambers and the industry, it looks as though the wind purveyors have prevailed.

Or have they?

The ripple effect

While it's true that FERC legally sided with the wind companies, ripple effects in decisions of this breadth can muddy the waters.

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FERC's ruling may lead to increased interest in centralized energy storage.
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First, the BPA is certain to look with more scrutiny at future renewable power purchase agreements. As the keeper of three-fourths of the transmission grid in the Pacific Northwest, not only does the BPA need to be a keen budgeting entity, it also has to keep an eye on environmental stewardship. Contracts that may potentially force the BPA to damage the environment on the one hand (spilling excess water) in the name of supporting it on the other (transmitting green wind power) may not sit as high on the stack as other, less egregious contracts. Future renewables providers should beware -- their contracts will almost undoubtedly be analyzed more closely going forward.

FERC's ruling may also lead to an increased interest in centralized energy storage. The ruling, taken in tandem with FERC's latest ruling on frequency regulation, is certain to have investors considering the merits of building large energy storage projects near the step-up points of intermittent energy sources, both as a way to hedge against curtailment protocols and create new cash flows by providing fast ramping frequency regulation.

The U.S. government has a history of supporting multiple battery research and development projects, and perhaps large scale grid installations are next. The Government Accountability Office recently conducted an investigation into overlapping large scale energy storage projects and found that $1.3 billion was allocated for such projects from 2009 to 2012, but not all were strictly power grid related. Federal policy needs to evolve and support energy storage projects similar to the way in which it currently supports wind and solar build-outs before this can have an impact on the market, but it seems likely to be a part of any large federal smart grid initiatives.

Another possible side-effect of the FERC ruling has the BPA looking into the value of increasing its transmission capacity and shunting more power south to California. In fact, the BPA and power technology company ABB have just announced a $260 million project to upgrade the high-voltage DC converter station that connects power systems in the Pacific Northwest and Southern California.

This order will make improvements to the station and add another 700 MW of capacity on the line -- an increase of almost 25 percent. This type of solution raises the threshold for oversupply event triggers and gives the BPA more flexibility in all of its power transactions. With new transmission projects being notoriously time- and capital-consuming, this FERC ruling may end up being just one factor in a much larger formula that the BPA uses to determine future transmission projects and upgrades.

FERC has given the BPA until March 20, 2013 to respond with a compliance filing that proposes "a methodology for allocating displacement costs under the OMP in a manner that results in comparability in the provision of transmission service for all resources".

Eyes of the industry

With many in the renewables industry watching, as well as many politicians (three senators from Washington and Oregon, along with half a dozen members of Congress, have communicated with FERC on the matter), BPA's filing will be highly scrutinized and may have a noticeable effect on renewable generation investments and power procurement agreements in the northwest. It will be interesting to see if BPA's new incoming administrator Bill Drummond's February 19th keynote speech at the American Wind Energy Association's Regional Wind Energy Summit will offer some ahead-of-the-curve insight into the filing that his hosts are forcing him to submit just one month later.