20041214Petition for Reconsideration of Renaissance Engineering.pdf

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Idaho Public Utilities Commission
Case IPC- E-04-1 0
Case IPC-04-
Order number 29632
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Dear Commissioners:
Please excuse my handwritten notes attached to this letter. I was under the impression that I had
until December 20th to submit my request for reconsideration - as was stated in your press
release.
I am faxing this letter and the notes and will f()llow with a hard copy to your office tomorrow.
My petition is quite simple in truth. The order as written is simply unreasonable in requiring a
PURP A QF facility to be predicting monthly output of a natural resource such as wind and then
get penalized in current market price scenarios over 50% of the monthly revenue amounts.
This requirement is a huge burden for a small project even to forecast from the perspective
most of the farmers and ranchers I'm working with. They are installing state of the art
equipment with a proven 98% availability and typically improving the local power grid in the
places we have explored with capacitor banks and voltage regulation. Even when the wind is not
blowing, the local grid will be more reliable in the case of the 10 MW class of installations we
are currently exploring.
The burden of forecasting monthly generation with a potential penalty so very high is too severe
and restrictive.
I truly believe that capturing wind through PURP A projects for Idaho Ratepayers will have a
huge long term value. I spent 11 years working for Idaho Power with various generation
technologies and the past three consulting on my own. Wind is a valuable, stable resource from
an annual production standpoint and 10MW scale proj ects are a boost to the grid, not a
detriment.
Sincerely,
Brian D. Jackson
7800 Alfalfa Lane, Melba Idaho 83641 ph 208-495-1111 fax [phone] brian~clever-ideas.com
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Avoided Cost Pricing
The 20 year contract pricing is crucial to the project financing and being able to build these
projects at all.
The fact that the rates are set in the contract makes a huge difference to potential investors and
bankers.
That price provides stability to the project, but also helps ratepayers by creating price stability for
at least an element of the future generation. Over the past couple years the comparison to the
Mid-C price index would indicate that the utility could buy surplus energy at much lower rates
than the cost of PURP A QF contracts or even from most of their own resources as well.
However, if we go back just a few years more, all the QF contracts and the utilities resources
were the best thing going.
It's probably as difficult to predict energy prices into the future years as it is to predict monthly
wind generation.
This case was well presented that under PURP A from both a Federal and a historical State of
Idaho perspective there is no precedence or justification for differentiating between generation
technologies or for paying less than the published rates for the appropriate QF.
The concept of "Firmness" is well established in the merchant powerplant marketing of
wholesale energy to utilities.
That concept however, is not applicable to the utility s own generation resources which are
dedicated to serving their own loads with all of their generation. PURP A was designed to
stimulate diversity of ownership and local supply of energy to the extent a PURP A QF is
dedicating all of its energy production to the utility at a contracted price for the next 20 years
that resource is committed to and exists for the benefit of the utility s ratepayers in the same
manner as the utility s own generation assets. The concept of firmness as it applies to a QF
facility was clearly demonstrated in the evidence presented at the hearing to be a determination
that all of the energy from such a facility would be provided to the utility.
To the extent that this commission requires a PURP A QF to look and operate and act like a
Merchant Powerplant with a FIRM commitment of Energy instead of a PURP A QF with a
dedicated resource, that plant should then be allowed to market excess energy, beyond its
commitment to the Idaho Utility, at market rates on the open market.
7800 Alfalfa Lane, Melba Idaho 83641 ph 208-495-1111 fax [phone] brian~clever-ideas.com
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The addition of PURP A resources should increase supply stability and reduce price volatility for
the ratepayers - it is not appropriate to pass that risk to QF developers as if they were merchant
plants pretending they have control over things they don
When I heard about the cases I was excited and hopeful that what the commission had started in
giving 10MW sized and 20 Yf terms would become established.
When the commission set the size limit to 10MW and the contract term to 20 years, it seemed
clear to me that Idaho was embracing an element of distributed generation that could provide a
meaningful contribution to the power supply for the state.
10-20MW is in fact a major economic crossover point in generation projects. They are just large
enough to spread some economies of scale across enough units to reduce construction risk and
shorten payback periods to attract investors. For the grid, 10-20 MW is small enough that any
individual project can come online and go offline and look more like a load. In fact - the initial
modeling of such projects and their effect on the power grid is performed by the utilities as a
negative load. Loads come on and go off all over the power grid every moment of every day.
A wind project in typical operation ramps up and down smoothly in power output. It can trip
off-line quickly - usually in response to a problem on the utility line requiring curtailment.
Problems on the generator side are typically solved with the shutdown of individual units.
In asking the commission to reconsider their decision, I don t see how more evidence could be
presented or brought out better than that already done at the hearings.
I attended both days of the hearings and felt the facts were very clearly brought out to show how
the utility definition of "firmness" as it applies to a merchant powerplant is not applicable to a
PURP A QF facility. Rather - in the commission s own rulings historically - the issue of
firmness" when applied to a PURPA QF has been defined to mean that all of that plant's output
was dedicated to the utility and the generator could not send some energy through the QF
contract and other energy elsewhere.
Commission Staff often defers and refers to Idaho Power to understand these issues - they lack
the depth and breadth of expertise to fully understand the implications of long reaching policy
such as this...
In informal discussions with Idaho Power I have been offered "a penny less per kwh" or the
F ossil Gulch" contract terms approved by this commission before the hearing results were
7800 Alfalfa Lane, Melba Idaho 83641 ph 208-495-1111 fax [phone] brian~clever-ideas.com
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published. I just don t know how to advise my clients to accept such terms even if they are
manageable because they are so absolutely wrong philosophically.
In the end, some projects will be built because of our passion for renewable energy and for wind.
We will mitigate risks, reduce project returns, create strange operational paradigms, creatively
try to add backup generation resources, create a whole industry around predicting monthly
gneneration, and otherwise make complex something that was initially simple, clean, and
efficient.
7800 Alfalfa Lane, Melba Idaho 83641 ph 208-495-1111 fax [phone] brian~clever-ideas.com