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Argument continues over Delta Wind Farm RCA investigation attracts contradictory views over whether the proposed facility can be viably connected to GVEA’s system Alan Bailey Petroleum News
A contentious case over the merits or otherwise of connecting a proposed Delta Junction wind farm to Golden Valley Electric Association’s power supply system continues in the Regulatory Commission of Alaska. Recent filings in the case highlight the gulf between the views of the would-be wind farm operator and GVEA, while also illustrating the complexities of wind farm economics.
Delta Wind Farm already operates a small 2-megawatt wind system at Delta Junction, connected to GVEA’s system. But Alaska Environmental Power LLC, owner of Delta Wind Farm, wants to build a new, larger farm with a capacity of 13.5 megawatts.
Wind power economics Wind power presents a challenge to an electricity utility, because the generated power fluctuates with the vagaries of the varying wind strength. That fluctuating power must be counterbalanced by equal and opposite fluctuations in some other power source, such as a gas or oil fired power station. This regulation of the wind power costs money. And the larger the amount of wind power in relation to a utility’s total power generation capacity, the greater the impact of the wind power regulation on the economics of the overall power system. On the other hand, the cost of wind power is typically stable over long periods of time because the power generation does not require the purchase of fuel.
Mike Craft, managing partner of Alaska Environmental Power, has argued that the scale of his proposed system is modest in relation to GVEA’s total power needs and that the utility already has to use its spinning reserves to guard against shortfalls in non-firm power supplies from Southcentral Alaska. Craft has said that Delta Junction is in a particularly favorable location for wind power generation because of a reliable wind system that flows north through the Tanana Valley.
GVEA has said that it does not need any additional power generation and that a consultant commissioned by the utility found that connecting the proposed farm would not be viable. Essentially, the consultant found that the cost of the increased use of the utility’s less efficient power generation facilities to regulate the wind power fluctuations would trigger a rise in the utility’s electricity rates.
PURPA regulations However, under RCA regulations, driven by the federal Public Utilities Regulatory Policies Act, or PURPA, electricity utilities are required to purchase power under reasonable terms from qualifying, independent renewable power producers. And so, with the proposed Delta Wind Farm being a qualifying facility, GVEA filed a Delta Wind Farm tariff in March of this year. After the RCA rejected that tariff, GVEA filed a revised version in May. On June 23 the RCA issued an order saying it was opening an investigation because of some unresolved issues relating to the tariff.
Comments on the tariff have been appearing in the RCA’s investigation docket.
The regulations associated with PURPA are complex and require a utility to calculate both the cost of integrating a varying renewable power source into its system and the benefit to be gained from the use of the renewable energy. The regulations use an approach that assumes that a utility will preferentially displace its most expensive power sources through the use of the renewable power. While GVEA has claimed that its tariff complies with the regulations, Alaska Environmental Power has questioned the tariff’s accounting for GVEA’s capital costs associated with its power generation, its accounting for the avoided costs associated with wind power use and its accounting of wind power integration costs and benefits.
Order following conference On Aug. 17, following an informal conference between the parties involved in the dispute, the RCA issued an order requiring GVEA to clarify some issues relating to its tariff, and to provide the results of the modeling of three power generation scenarios that the RCA specified. The order said that GVEA’s argument in support of its tariff is not completely transparent and hence the required clarification.
On Aug. 28 GVEA responded to the RCA order. Among the comments in this response, GVEA said that it was unable to use its coal-fired power capability to regulate varying wind power sources and that its existing wind farm at Eva Creek had been sized in a manner that would enable regulation using GVEA’s low-cost units. Any further wind power added to the system would require regulation using higher cost generation sources, GVEA told the commission.
Moreover, those higher cost units, if used for regulation, must be operated continuously at some required level, the utility said.
Comments on GVEA filing On Sept. 12 Delta Wind Farm commented on GVEA’s filing, in particular objecting to GVEA’s use in its modeling of long-term projections to set fixed annual purchase rates over a 20-year period for wind farm power. Those rates require, for example, the long-term projection of GVEA’s avoided costs associated with the use of Delta Wind Farm’s power. Avoided costs are inherently variable, Delta Wind Farm said. It is notoriously difficult to make long term forecasts in the energy sector, the wind farm company commented.
The Delta Wind Farm filing also raised a series of questions relating to assumptions in GVEA’s economic modeling.
And in a Sept. 11 filing the state attorney general’s Regulatory Affairs and Public Advocacy Section also homed in on the question of the setting of fixed versus variable rates for the long-term purchase of wind power. This question is at the core of the dispute between GVEA and Delta Wind Farm, RAPA said. State PURPA regulations do not provide clarity over this question and the RCA needs to make a ruling on the issue, RAPA said.
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