The Clock is Ticking: States Rush to Meet Renewable Portfolio Standard Deadlines

07.02.08

Henry Louie, Business Development Manger, 3TIER

In April of 2008, Ohio became the 26th state to adopt either a Renewable Portfolio Standard (RPS) or similar renewable energy goal. The passage of the Ohio RPS may turn out to be a watershed moment in American energy policy as there are now more states with renewable energy targets than without -- a milestone that is not lost on those championing a national RPS. Cautious energy policy experts point to the fact that no two state RPSs are alike as an argument against adopting a one-size-fits-all national policy. While it is not clear if a national RPS will remain in the realm of fantasy, utilities in 26 states are now faced with the very real task of complying with state RPSs, with deadlines rapidly approaching.

According to a recently released 2007 study performed by the Lawrence Berkeley National Laboratory, approximately 60 GW of new renewable resources – likely predominately wind-based -- will be needed to meet existing state RPSs in the year 2025. To construct and integrate this significant amount of generation will require innovative solutions by engineers and planners who will face a myriad of challenges, including:

* Transmission constraints
* Supply-chain bottlenecks
* Intermittency of renewable generation
* Ambiguity or rigidness in the interpretation of the RPSs.

This article presents a case study of the challenges and approaches taken by some utilities to overcome these challenges on the road to RPS compliance. The state of Washington is selected as a microcosm for the study. The salient aspects of the RPS in Washington are similar to that of many other RPSs, so relevance to other states is maintained.

A Mandate by the People

In November of 2006, the people of the state of Washington passed Initiative 937. The initiative required large utilities -- those with more than 25,000 customers -- to serve escalating amounts of their load with energy from renewable resources, beginning with 3 percent in 2012, climbing to 15 percent in 2020. The distinction between energy and capacity in the initiative is significant, as most renewable resources have capacity factors in the range of 25-35 percent. This means that three to four times the amount of nameplate resources must be built than if the standard was based on capacity. The abundant freshwater hydro resources of Washington are by and large excluded from counting toward the RPS target levels.

Accessing the Resource

In Washington, as in many other parts of the country, access to transmission remains a preeminent challenge. Transmission constraints through the Cascade Mountains serve as a barrier between the wind resource-rich Columbia Basin and the populous urban centers of Western Washington. It has been estimated that the current transmission system will reach its limit within the next nine years. Construction of additional transmission has been mired due to a number of speculative interconnection requests and an inefficient study process.

The Bonneville Power Administration is addressing these challenges through a network open season that will help to differentiate speculative interconnection requests in its queue from those with merit. Thereafter, integration studies will be performed on clusters of renewable projects to reduce the wait time before transmission service is available.

Supply Chain Bottlenecks

Procuring wind turbines has been another challenge as manufacturers may have order backlogs extending for several years. The rush of utilities to purchase renewable energy during times of tight supply has resulted in escalating capital costs. Calls for domestic investments in turbine or component manufacturing facilities are tempered by uncertainty over the extension of the federal production tax credit. As the demand for these parts continues to rise exponentially, it is believed by many that the supply chain problem will only get worse before it gets better.

Wind Integration

A study by the Northwest Power and Conservation Council found that 6,000 MW of wind plant capacity could be integrated into the Northwest in the next 20 years. The integration largely relies on the flexibility of the region’s hydro system to balance wind plant power output fluctuations. However, since the capacity of the hydro resources will not significantly increase, the scalability of this approach is questionable. Recent studies on the integration of wind plants in other parts of the country show promising results, with integration costs on the order of several dollars per MWh of wind generation. However, devising equitable allocation of the integration costs remains a contentious problem with no panacea in sight.

The Devil in the Details

Authors of RPSs in many cases have gone to lengths to understand the technical challenges of meeting the target levels. However, there are cases in which technical details were overlooked or not understood, resulting with unintended consequences. For example, yearly accounting of RPS compliance, instead of a multi-year rolling average, fails to account for long-term atmospheric oscillations -- \—such as El Niño -- in wind and solar plant power output. This is analogous, and in some respects related, to the wet and dry years that hydro generation engineers must prepare for. It is therefore possible for a utility to meet an RPS on average over the long term, but also be penalized for non-compliance for many of individual years. The end result is that utilities must overbuild renewable resources in order to consistently make RPS targets, with potentially adverse economic results.

Innovative Solutions

Despite the formidable challenges, 17 utilities serving a total demand of 68 million MWh are required to comply with Washington’s RPS. If the 15 percent target was required today, approximately 1,160 aMW (average MW) of renewable energy capacity would be needed. Currently, there are approximately 1,164 MW of wind plant capacity in the state, with approximately twice that amount in various stages of permitting and construction. Assuming that all the generation serves native load, roughly three or four times the current amount of installed renewable generation capacity in Washington will be needed to meet the 2015 target. Despite this deadline looming just 12 years away, many of the state’s utilities are on target to meet the requirement. A survey of the approach taken by the state’s three largest utilities follows.

Puget Sound Energy. In Washington, Puget Sound Energy (PSE) is on the forefront of procuring renewable resources. This investor-owned utility owns and operates two wind plants in the eastern part of the state, for a total capacity of over 360 MW. These projects currently serve over 5 percent of PSE’s load. In addition, PSE also owns a 500 kW solar plant adjacent to its Wild Horse wind plant. PSE has plans to expand its ownership of wind plants through additional development.

Seattle City Light. Seattle City Light, a municipal utility and Washington’s second largest load-serving entity has taken a different approach to meeting the RPS target. Instead of owning wind plants, Seattle City Light has signed a 20-year contract with the Stateline Wind Energy Center as an off-taker for a portion of the energy produced. The city has examined meeting future requirements through the purchase of renewable energy credits and acquiring the output from a portfolio of geothermal, wind and landfill gas generation.

Snohomish County PUD. While wind generation will no doubt be a large contributor to this utility meeting the RPS, Snohomish County PUD -- located adjacent to Puget Sound -- is exploring adding up to 100 aMW of tidal power. Local tidal power will allow Snohomish County PUD to circumvent the transmission congestion and added losses of acquiring distant wind resources.

Summary

The United States may be approaching a turning point in its energy policy, albeit through a patchwork of state-level renewable portfolio standards. What this approach lacks in unity it makes up in flexibility -- allowing individual utilities to identify the best course of action. While undoubtedly some utilities will miss the targeted levels, innovative solutions like those in Washington State and elsewhere paint an encouraging picture.