Lighting Up Montana With Wind Power is Easier Said Than Done

Lighting Up Montana With Wind Power is Easier Said Than Done

Apr 04 - Billings Gazette, Billings, Montana

Stand under the towering turbines at Montana's largest wind farm, south of Judith Gap, and the near-silent rotating blades give the illusion the earth is moving.

That is just one impression of the size and power of Montana's first and largest wind farm, now sporting 90 wind turbines 260 feet high that capture the mountain winds whipping off the Little Belts and the Snowies.

In just a decade, wind power has gone from being an "out there" idea in the United States -- technologically challenged and too expensive -- to being a popular and mandated goal.

As in surrounding states, a previous Montana Legislature ordered that wind or other "green power" sources supply at least 10 percent of the state's electricity in three years and 15 percent in eight years.

However, Montana's largest utility, NorthWestern Energy, has two big disadvantages. The state's transmission lines are almost at capacity.

Also, NorthWestern doesn't own its own dams or other power plants. The former Montana Power Co. sold those off to PPL Montana in 1999.

Without "regulatory reserve," or firming service to generate electricity when the wind doesn't blow hard enough, and the lines to move power, Montana can't fully develop its rich wind resources.

Judith Gap wind power, including the firming power, costs about $42 per megawatt hour, according to John Bacon, operations manager of the Montana project built by Invenergy Wind LLC of Chicago.

To back up Judith Gap, NorthWestern currently is buying 90 megawatts of firming service from Idaho Power Co. and Avista at $6.75 per megawatt hour. That is 23 percent of the cost of the wind power itself, when taxes and other costs are added in.

However, Montana Public Service Commission Chairman Greg Jergeson said that out-of-state power soon may be unavailable, or may come at a premium.

"The contracts for firming Judith Gap power will start coming up July 1 and if it is available at all, it will be more expensive," Jergeson said. "It will probably go to $12. Where it will stop? We don't know unless more resources are brought into the mix."

David Gates, NorthWestern vice president of wholesale operations, said that as neighboring states add wind power, supplies for firming power will be tighter.

"Idaho is in the $10 to $12 range," Gates said. "It's simply going to be more expensive."

Moving the power around In just a decade, the four states that make up in the Northwest Power and Conservation Council in Portland, Ore., have gone from using 25 megawatts of wind power to 1,400 megawatts.

And by 2024, the council predicts that Washington, Oregon, Idaho and Montana may produce 6,000 megawatts of wind power.

That means that these future wind turbines theorectically could produce 6,000 megawatt hours of electricity. That's enough power to light up two areas the size of Seattle, a city with a population of 650,000 and an urban footprint of 2 million.

The council recently released a study concluding that the region has enough capacity in its transmission grid to handle that much wind power.

"When we started this report, that wasn't clear," said Tom Karier, council co-chairman. "People said you can't integrate all that wind, but all these smart engineers said you can."

But that transmission advantage only lasts two more years, and then the region will need more high-voltage lines, which is one expensive and lengthy building project.

The transmission lines must distribute wind-generated power and bring in firming power.

When the wind blows, less power is needed from coal plants and other fossil-fuel plants. However, electricity can't be stored. Also, the wind usually doesn't blow on the hottest and coldest days, when demand for electricity is highest. The Judith Gap turbines produce electricity 37 percent of the time.

All these factors create volatility.

Because NorthWestern operates the transmission lines, the utility must meet federal reliability standards. That means keeping the power entering the system balanced with the demand, or electricity leaving the system.

You might imagine wind power as a child playing with a light switch: On. Off. On. Off.

That means NorthWestern must quickly dump or add power to balance its transmission lines.

When the turbines at Judith Gap produce too much power, NorthWestern sells it back mainly to Idaho Power, sometimes below cost, according to former Royal Johnson, a Billings businessman, a former state senator and a member of The Gazette editorial board.

When there isn't enough wind, NorthWestern may have to pay a premium, Johnson said, of up to $130 per megawatt hour.

Because these contracts for what is called regulatory reserve power are running out, the company sent out requests for bids for new contracts several months ago.

Ramping up for wind Since NorthWestern bought Montana Power in February 2002, electricity customers have seen their rates rise sharply.

After deregulation, rates were frozen for four years at $22.50 per megawatt hour.

NorthWestern now pays PPL an average of $32 per megawatt, but those contracts run out in July.

Starting this summer, NorthWestern will pay PPL $44.95 per megawatt hour for 36 percent of the electricity it needs for customers. That price will increase to almost $53 per megawatt hour at the end of the seven-year contract.

NorthWestern has been buying about 60 percent of its electricity from PPL. That will drop to 36 percent this July and continue to fall until the contract expires in 2014.

But other power is far more expensive.

Starting this July, NorthWestern will pay $69.85 per megawatt hour for 18 months for electricity purchased through an auction process.

Predicting electricity costs in the future is like predicting the stock market.

NorthWestern's own projections say that market prices starting in July will be at $65 per megawatt, and they predict lower prices into the mid $40s by 2014, Hoffman said.

Another wild card affecting future power prices is the offer by Babcock & Brown Infrastructure of Australia to buy NorthWestern for $2.2 billion.

While a legislator, Johnson unsuccessfully sponsored a bill to require NorthWestern to sign long-term and presumably cheaper contracts with PPL. Combine that contract history with the transmission and generation bottlenecks and the Montana model just isn't working, Johnson said.

"Two companies -- one supplies power and one distributes -- can't sit down and do a deal when there is more power at Colstrip than Montana uses," Johnson said. "Give me a break."

Rolling back the clock On Friday afternoon, the Senate Natural Resources and Energy Committee was scheduled to debate House Bill 25, which partially rolls back Montana's de-regulation laws.

The measure, which has passed the House, would allow NorthWestern to build its own power plants and charge the costs back to customers.

The bill isn't needed right now, Hoffman said, especially since there are dozens of last-minute amendments added by NorthWestern.

"The most difficult part is pre-approval (by the PSC of power plants), which is a blank check to buy or build generation and puts all of the risk on the customers," Hoffman said.

However, Gates said his company needs to own some of its energy supply to control future power costs for its 316,000 electrical customers. The company also serves 168,000 natural gas customers.

And the PSC chairman agreed.

"By 2010 or 2015, if there isn't some reasonable availability of those wind integration resources, I don't think the PSC would have any choice but to waive the requirement for green power," he said. "That kind of spoils the whole point of renewable energy standards."

Jergeson said the bill also gives the PSC more authority to prevent repeating a mistake made with Montana Power.

"If they do build a plant and the obligation that creates falls on the ratepayers at some later date, they cannot sell it without PSC approval and proof that there won't be harm to consumers," Jergeson said.

If costs for nonpolluting and renewable wind power grow too high, there may be a backlash, he said.

"If ancillary costs for firming power go sky high, then wind could be pushed out of the market and customer resistance will set in big time," Jergeson said.

However, Vice Chairman Brad Molnar, R-Laurel, has opposed most Montana wind projects, he says, because the side costs aren't factored into the price upfront.

"It might be the best wind project in the state," Molnar said. "The point is we aren't allowing for the costs of ancillary services or we're ignoring them."

Wind without backup or firming power is worthless, he said.

"Who wants to buy that kind of energy? Not me," he said. "It's like trying to ride a wild horse. It looks pretty standing out in the pasture, but you don't want to hop on and go."

Rising regional power costs Montana's wind future also is being buffeted by developments in neighboring states.

As Washington, Idaho and Oregon develop wind power, they will keep the firming power now being sold to Montana at home to support their turbines. If the power is available, it will cost more.

"What we're seeing in the market is there are few providers," Gates said. "What's happening is that as everybody else gets wind on their system, the backup power we were using may be going to other utilities."

Northwest Council's wind report mentioned Montana's largest utility several times.

The firming contracts for Judith Gap are ending and, the report said, "NorthWestern has run several solicitation processes and found a very small number of sellers."

Other studies call the region's market for this power "very illiquid."

In 2005, Bonneville Power Administration stopped selling its power to integrate wind even though it was collecting $10 per megawatt hour.

Montana has tons of proposed power projects cued up, Gates said, but one project depends on the other.

"They need transmission built, and the question is which gets built first," Gates said. "So it's the chicken-and-the-egg thing."

Another note of caution was sounded by Bill Drummond, who heads the Western Montana Generation and Transmission. His customers buy wholesale power from BPA, but those contracts run out in four years. Drought and rising demand is tapping the hydropower resources, so BPA is keeping its supply for its closest customers.

Right now there are few sellers of electricity to back up wind power, Drummond said.

"Faith-based power marketing is a dangerous thing," he said.

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