Integrating Wind Energy into Power Planning: Lessons from the Pacific Northwest

Worldwide wind capacity has increased almost ten-fold in the past decade – to 196,630 megawatts (MW) in 2010, from just 23,322 MW in 2001.[1] A recent United Nations report states that worldwide investment in renewable energy increased by 32% in 2010 alone.[2] These impressive statistics hide an underlying problem. Wind power is intermittent, and requires back-up generation and more “balancing” (i.e. addressing variations in generation and demand) hour-to-hour and within hours than other forms of energy. The Federal Energy Regulatory Commission (FERC) has initiated a rulemaking[3] to address the impact of renewable energy resources – like wind – that impose variability on utilities. The proposed rulemaking would “require public utility transmission providers to offer intra-hourly transmission scheduling” designed to “remove barriers to the integration of variable energy resources.”[4] This is the first installment of a multi-part article that focuses on proposed adjustments to utility tariffs addressing the costs of integrating wind and other variable renewable energy resources. We begin by examining efforts by the Bonneville Power Administration (BPA) to incorporate wind as a variable energy resource on its system over the last several years.[5]

I. The Bonneville Power Administration – Balancing Loads and Resources

BPA is a Federal Power Marketing Administration within the U.S. Department of Energy. Under the Pacific Northwest Electric Power Planning and Conservation Act (NW Power Act), BPA is charged with, among other things, fostering “the development of regional plans and programs related to energy conservation, renewable resources .…”[6] In addition to providing about 80% of the high voltage transmission in the Pacific Northwest,[7] BPA is the Control Area Operator or Balancing Authority for large portions of the Pacific Northwest, and responsible for balancing the electric power loads and resources on an instantaneous basis to keep the electric power system operating without disruption.

When generation and load are out of balance (i.e. there is insufficient generation to satisfy demand, or insufficient load to consume all the power generated), a number of problems can occur, including damage to equipment and cascading blackouts. BPA balances generation and load by accessing reserve resources, including generators that are standing by ready to produce more or less power, and large industrial consumers such as aluminum smelters that are able to vary their loads.

II. The Increase in Wind Generation in the Pacific Northwest

BPA’s balancing responsibilities have become more challenging in light of the rapidly-growing number of wind turbines that have been installed in the Pacific Northwest during the past decade. Installed wind capacity in the Pacific Northwest has grown from nearly no wind power in 2000 to nearly 6,000 MW in 2010.[8] As of 2010, BPA had approximately 2,800 MW of wind facilities on its system.[9] BPA has offered about 9,300 MW of transmission to existing or planned wind projects[10] and BPA forecasts that by 2020 the Northwest will have over 14,000 MW of wind power.[11] At the same time the installed wind power capacity on BPA’s system is growing, the capacity factor of the wind projects on BPA’s system is declining from an average of 33.1% in 2008 to 27.1% in 2010.[12] This is not surprising since the best wind project sites, where wind is most constant, were presumably developed first. BPA’s peak load is roughly 10,500 MW. Measured by the percentage of installed wind capacity on various balancing authorities’ systems, BPA’s wind penetration by 2010 was roughly 31% of its peak loads (as compared to 9% for Electric Reliability Council of Texas (ERCOT) and 6% for the California ISA (CAISO).[13]

Recognizing that a great deal of wind power was under development in the Pacific Northwest, the Northwest Power Planning and Conservation Council (the Council)[14] released its 5th Power Plan in 2005, which called for up to 6,000 MW of regional wind development over the next 20 years. In response, BPA and the Council co-sponsored the Northwest Wind Integration Action Plan (Action Plan).[15] This collaborative effort brought together stakeholders to determine the technical feasibility of integrating 6,000 MW of wind energy into the Northwest grid. The Action Plan also identified what it would take, in infrastructure investment, operational changes, cost-recovery, and technology innovation to integrate the Northwest’s rapidly growing wind resources in a reliable and cost-effective fashion.[16]

The Action Plan also identified the importance of mechanisms to recover the costs of wind integration as a threshold issue. In 2007, BPA proposed a new rate to recover the costs of carrying capacity reserves to balance the within-hour variability of wind. BPA has historically relied on the Federal Columbia River Power System (FCRPS) to provide the capacity needed to balance variation in wind generation within the hour. BPA generally refers to the capacity reserve needed to account for within-hour variability as “balancing reserve capacity.” The large-scale export of wind generation out of the BPA balancing authority has placed enormous pressure on the balancing capability of the FCRPS because BPA must stand ready to provide balancing reserve capacity and energy for large quantities of wind exported to meet demand in other balancing authorities.[17]

When the large, geographically-concentrated wind fleet in BPA’s balancing authority experiences a significant ramp event (up or down), BPA sees substantial variations between the wind hourly schedules and the actual performance of the generators, which contributes substantially to the need for balancing reserve capacity. This balancing reserve capacity includes three components: regulation reserve (moment to moment balancing), following reserve (moment to 10 minute variation balancing), and imbalance reserve (balancing the difference between schedule and actual for the hour).[18] In FY 2009, BPA needed 203 MW of reserve generation to integrate wind resources.[19]

BPA’s Wind Integration Charge

In response to its concerns about recovering the costs attributable to balancing the rapidly-growing wind fleet in the Northwest, BPA commenced a public notice and comment process (the WI-09 case) in 2008 to develop a within-hour balancing service rate.[20] As BPA explained in its Federal Register notice:

As increasing amounts of wind generation have integrated into BPA’s transmission system, the variability and uncertainty of wind generation have led to increased costs through the need for additional reserve capacity, the shift of energy generation from heavy load hours to light load hours, and reduced system efficiency. The Wind Integration—Within-Hour Balancing Service Rate is intended to ensure that these costs are borne by the parties causing the costs.[21]

BPA’s resulting Wind Integration – Within-Hour Balancing Service Rate was designed to recover the costs BPA incurs as a result of reserves required to address within-hour variability of wind generation. Traditionally, within-hour variability has been the result of changes in loads (i.e. demand), and BPA has accordingly allocated the costs of its following reserves (moment to 10 minute variation balancing) to the rate charged to customer-owned utilities. Because the majority of wind generated in the Northwest is exported to consumers outside of BPA’s Balancing Authority Area, BPA declined to allocate its wind integration charge to rates. Instead, the Wind Integration – Within-Hour Balancing Service Rate was designed as a per-KW charge on wind generators based on the amount of their installed capacity. As BPA explained:

The [] Wind Integration – Within Hour Balancing Service Rate will ensure that BPA recovers the costs that wind generation places on the system. It will also better align cost causation with cost allocation, an important principle of rate design. Further, the proposed rate will inform market participants regarding the costs of integrating wind into the BPA Balancing Authority Area so that other utilities and resource provides can better understand these costs and respond accordingly.[22]

BPA’s Wind Integration – Within-Hour Balancing Service Rate is set at a maximum of $0.68 per kilowatt per month.

In addition to its wind integration charge, BPA has taken a number of other steps to address wind variability. Dispatch Standing Order No. 216 (DSO 216), was designed to ensure that there are sufficient within-hour balancing reserves by limiting the amount of reserves deployed to address wind variability. Under DSO 216, when unscheduled increases in wind generation and load exhaust the FCRPS’ decremental balancing reserves, wind generators are required to reduce (feather) their output. When unscheduled reductions in wind generation and load exceed the FCRPS’ incremental balancing reserves to increase Federal generation, dispatchers adjust wind transmission schedules down to reflect the lower wind output levels. For wind generation exports in these extreme under-generation cases, the load serving entities in the receiving balancing authorities must rely upon their own resources to make up any difference. BPA activated the current DSO 216 protocol in October 2009, and so far the DSO directives have only been activated a few times each month.[23]

Other BPA Efforts to Shape Loads

BPA had to resort to other unusual load shaping efforts and some mandatory generation reductions for wind producers in order to balance its power system. Most recently, in the spring of 2011, BPA experienced much higher than usual run-off on the Federal hydroelectric system. The resulting increase in hydroelectric generation coincided with increased wind generation due to heavy spring winds and much more installed wind capacity, as well as reductions in regional demand due to the economic recession. BPA found itself with more power that it could manage within its balancing area, particularly during off-peak hours. BPA responded by curtailing nearly 7% of the electricity generated at wind projects, typically during times of low demand (nighttime and weekends).

Furthermore, BPA has also tapped large industrial power consumers that have the ability to modulate loads – particularly, Alcoa Inc.’s smelter in Ferndale, Washington. Under an arrangement with BPA, Alcoa agreed to accept additional power from BPA during off-peak hours and reduce its power during on-peak hours.[24] There may be opportunities for industrial consumers in other regions to provide similar services to balancing authorities that are addressing increased hydroelectric and wind generation.

For more information on BPA’s efforts to integrate wind power, please contact any member of Marten Law’s Alternative Energy practice group.