20050923Reply comments.pdf

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Ted Sorenson
President
Arrow Rick Wind, Inc.
5203 South 11th East
Idaho Falls, Idaho 83404
Telephone: [phone]
ted~tsorenson. net
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"f/SSION
BEFORE THE
IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION OF)
IDAHO POWER COMPANY FOR
APPROV AL OF A POWER PURCHASE
AGREEMENT FOR THE SALE AND
PURCHASE OF ELECTRIC ENERGY
BETWEEN IDAHO POWER COMPANY AND)
ARROW ROCK WIND, INC
CASE NO. IPC-05-
REPLY COMMENTS OF ARROW
ROCK WIND, INC.
COMES NOW, Arrow Rock Wind, Inc. ("Arrow Rock") by and through its President
Ted Sorenson and hereby lodges its reply comments to the comments filed by the Staff of the
Idaho Public Utilities Commission ("Staff") in the above captioned matter.
Arrow Rock appreciates and endorses the Staff recommendation that the contract with
Idaho Power be approved by the Commission. The purposes of Arrow Rock's reply comments
are to clarify the record and correct some factual errors in Staff's comments related to the
development, cost and structure of the Arrow Rock project.
THE COST OF DEVELOPMENT OF
WIND POWER FAR EXCEEDS THE JUDITH GAP "DEAL"
At page three of its Comments Staff observes, correctly, that Northwestern purchased
135- 150 MW of wind trom Judith Gap at the price of $31.71. In reviewing the various filings in
Montana, the price stated does not include all of the property tax cost, which is a direct pass-
through for the project. Albeit, the price associated with JG is much less than that available in
the market today. Informal communication with NorthWestern assisted in explaining the price
disparity. NorthWestern began its procurement review of wind resource in 2002 and the Judith
Gap project was under plan and development since 2001. The ultimate procurement of the
Judith Gap resource in 2004 was benefited by substantially lower cost turbine costs. The JG
PP A price is far ttom representative of the cost to develop a wind proj ect today. In fact, the cost
to develop a wind project today is in the $50 to $60 dollar range, as can be identified by the
procurement of the Wolverine project in Idaho by PacifiCorp and a refresh of the wind resource
bid in Idaho Power s latest RFP. To further explain the increasing cost of wind resources
attached is an article ttom the trade publication Wind Energy Weekly Volume Colorado
Prairie Wind Project Scrapped" (p 7), which identifies that the production costs and demand-
related factors have contributed to an 18% (approximate) increase in wind generation equipment
over the last year. Arrow Rock's cost for wind turbines is not related to the procurement of the
135 MW for the benefit of NorthWest em and unfortunately, such cost structure is not available
to ARW. Comparison of the Judith Gap prices to current wind resource acquisition is akin to
claiming that today s natural gas prices should be benchmarked against the $3.85 natural gas
prices that were available just a couple of short years ago. It should also be noted that the
increase in costs must be directly recovered by the off-take energy agreement, since FTC
benefits have not increased.
The site, adjacent to the Judith Gap site, was chosen by Arrow Rock because i) the
benefit of the wind resource; ii) the mobilization cost of construction; and iii) the deliberate and
beneficial studies with the USF&W in the area on avian (bird) impact. The Montana site area
demonstrates a wind resource capacity factor of approximately 35% to 37% compared with 28%
Reply Comments
to 30% in Idaho and Oregon. The increase in wind energy production assists in lowering the
fixed cost of the project. However, this benefit is substantially offset by transmission costs to
deliver the energy from Montana to Idaho. The Arrow Rock structure with Idaho Power also
incurs an additional cost of integrating, firming and shaping the wind energy into a fixed-rate
schedule to Idaho Power. This structure is a value-added component of the Arrow Rock
resource, as communicated by Idaho Power in the filing. Arrow Rock must compensate the
integration agent, NorthWestern, for such services.
ARROW ROCK IS NOT INTENDING TO SELL
ANY ELECTRICAL ENERGY
TO NORTHWESTERN ENERGY
On page 3 of its comments the Staff observes that in March, April and May Arrow Rock
will sell its output to Northwestern under a separate agreement. To clarify, the energy produced
from the ARW resource during those months will be integrated and stored by NorthWestern for
later delivery to Idaho Power. The integration service contemplated with NorthWestern is
similar to the services provided by the Bonneville Power Administration and is intended to be an
energy-neutral service at market-based rates. (Please see the attached brochure
, "
BP A Wind
Integration Services , which explains their various services including the "Storage and Shaping
Services" on page 2). Thus, the provisions of the integration agreement do not contemplate
substantial energy sales to NorthWestern. Rather, almost all of the energy produced by the
AR W resource will be delivered to Idaho Power, pursuant to the Firm Energy Sales Agreement.
Northwestern s role is limited to that of general integration services and transmission provider
pursuant to its Open Access Transmission Tariff and the protocols adopted by the Western
Energy Coordinating Council (WECC) and the North American Reliability Council (NERC).
Reply Comments
identified by the BPA brochure, NorthWestern is simply providing an integration service and
OA TT transmission that is offered by other utilities.
ARROW ROCK IS NOT PROVIDING
A 10 MW FLAT PRODUCT TO IDAHO POWER
Staff states the Arrow Rock resource will deliver a flat 10 MW product to Idaho Power.
While it is true that Arrow Rock will deliver a flat product to Idaho Power the actual energy
quantity each month is stated below. Therefore, the ARW Project is designed to provide the
integrated annual energy requirements under the Firm Energy Sales Agreement with Idaho
Power, without any significant excess energy.
Base-load, Firm Energy Deliveries to Idaho Power:
January 9 MW
February 9 MW
June 7 MW
July 7 MW
August 7 MW
September 9 MW
October 9 MW
November 9 MW
December 9 MW
It should be underscored that Arrow Rock's deliveries are flat and are firm in that Idaho
Power may rely on the schedule that is supported by the integration services provided by
Northwestern (at ARW's sole expense). The value to Idaho Power of such a product far exceeds
the value for other wind projects that are located in its load control area.
SUMMARY
It is hoped the above information, along with a copy of the executed LOI for the purchase
of wind turbines (previously submitted) is useful to the Commission as it makes its deliberations
as to the reasonableness of the agreement between Idaho Power and Arrow Rock. We appreciate
this opportunity and remain available at the Commission s convenience to respond to any
questions it may have.
Respectfully submitted this -CL day of September, 2005.
Reply Comments
Arrow Rock Wind, Inc.
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Ted Sorenson
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President
Reply Comments
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VoL 24, #1158
9 September 2005
IN TmS ISSUE
Michigan utility boosts green power offering with new supply
COllSlmlers Energy has reached supply purchase agreements for renewable energy with
five independent developers proposing seven separate projects, two of which are wind
projects.
Community Energy partners with investors to finance new wind farms
Community Energy, Inc., a wind energy marketer and developer, has closed a $50
million investor fInancing package on two new wind energy generation facilities under
constmction in Pennsylvania and New Jersey.
Northern Power Systems names new President
Distributed Energy Systems Corp. has announced that it has promoted Darren Jamison to
President of its Waitsfield, Vt.-based Northern Power Systems subsidiary.
ComEd cancels wind energy solicitation
Commonwealth Edison has announced that it intends to delay opening its wind energy
request for offers solicitation.
Renew abies lab offers to work with private partner to build dynamometer
The Department of Energy s National Renewable Energy Laboratory is seeking a partner
to collaborate in developing a dynamometer spin test capability for testing large scale
bines.
Prairie Wind project unable to find wind turbines
Xcel Energy has announced that the 69-MW Prairie Wind facility will not be built this
year.
DOE grants money for wind resource research, other energy-saving technology
The U.S. Department of Energy has announced that it will provide over $16.5 million for
178 energy efficiency and renewable energy projects in 42 states.
California RPS undermined by new amendments
A WEA signed on to a letter developed by the Independent Energy Producers Association
in California that raises concerns regarding implementation of the California renewables
portfolio standard.
Wind plant developer re-proposes Vermont project
Endless Energy Corp. has resubmitted plans for a new wind farm on Equinox Mountain
in Vennont.
FaD Symposium offers panel on optimizing project operations
What happens to wind power production when a weather front moves through the area?
News summaries from the rest of the wind world
A summary of other recent news in the wind industry.
Announcements! Advertisements:
Sponsorship opporttmities available for fInancial workshop in October
EMS seeks Construction Manager
Trade Wind Energy seeks Project Development Manager
Will you be attending the HUSUMwind Trade Fair taking place September 20-24 in
Husum, Germany? If so, come visit A WEA in Hall 4, Stand # 4AOl!
4. Access to the facility by other wind industry members to be offered by the partner (20010).
Proposal submissions should be sent to:
Neil Wikstrom
National Renewable Energy Laboratory
National Wind Technology Center
1617 Cole Blvd.
Golden, Colorado 80401-3393
Xcel Energy has Prairie Wind facility will not be built this
year. The project was to have been an array of about 46 turbines built by a collaborative of five
landowners in southeastern Colorado.
COLORADO PRAIRIE WIND
PROJECT SCRAPPED
Priarie Wind said that it could not obtain wind turbines at the cost that would allow it to
meet the contracted terms. "There are so few turbines out there right now that they demand a
premium. We ve been unable to secure equipment at a price that would make it work
economically," said Chris Rundell, a spokesman for the project. Rundell said that the price of a
1.5-MW-sized wind turbine has gone from about $1.4 million last fall to about $1.65 million
today because of higher steel prices and scarcity of wind turbines.
RWIdell said the group would continue to seek ways to build the project. Prairie Wind
has submitted another bid under Xcel Energy s larger "least.cost resource" request for proposals.
Xcel said that it has received bids for about 4,570 megawatts, of wind power WIder that
solicitation.
Xcel spokesman Mark Stutz said the company could add another 750 MW of wind power
through 2010 to comply with the Colorado state law that requires Colorado s top utilities to
provide a percentage of their retail electricity sales from renewable resources beginning with 3%
by 2007, increasing to 10010 by 2015.
In the fall of 2004, the Colorado Public Utilities Commission granted Xcel Energy
request to acquire up to 500 MW of wind power by 2006. Xcel Energy announced in March that
it had signed a contract with the Prairie Wind Energy facility, along with a 60-MW project being
developed by Invenergy near Peetz, Colo. (see Wind Energy Weekly #1134, March 18). The
Peetz facility is now under construction and expected to be complete by the end of the year.
BP A Wind Integration Services
Over the past two years, BP A has
undertaken an extensive research and
development effort to evaluate the costs and
opportunities associated with integrating
wind energy into the Federal Columbia
River Hydroelectric System (FCRPS). This
evaluation phase is now complete and we
are pleased to announce two new services
that will utilize the flexibility of the hydro
system to integrate wind energy into our
control area on behalf of electrical utilities
in the Pacific Northwest. BP A has
established a goal of providing up to
450 MW (nameplate) of wind integration
services over the 2004-2011 time period. At
least 200 MW of these services will be
earmarked for public power customers.
Network Wind Integration Service
Network Wind Integration Service has
been designed to serve the needs of public
power customers with loads embedded in
the BP A control area who elect to purchase
all or a portion of their power from a new
wind resource. Once the customer has (a)
signed a bilateral power purchase agreement
with a new wind resource, (b) procured flfm
transmission and ( c) determined a
scheduling agent for the power, the BP A
Power Business Line will use its hydro
system to integrate the scheduled output of
the resource with the customer s load. The
scheduled energy from the wind resource
will offset an equal amount of~H and
LLH PF energy that BP A otherwise would
have provided. BP A will continue to meet
, and follow the customer s load at all times
including during those periods when there is
no output from the wind resource. The
customer s PF demand billing determinant
will not be reduced for the amount of wind
generation scheduled to its load on the hour
of the generation system peak.BP A PBL
cannot count on the generation being there
and thus must hold sufficient generating
capacity available to fully back up the
resource. The PF Load Variance charge will
continue to be based on the customer s Total
Retail Load, so will not be reduced by the
amount of wind generation.
The customer will be charged a fee of
$4.50/MWh for all scheduled energy that
BP A integrates into its system. This fee may
be subj ect to annual escalation depending on
the length of the requested contract. For
contracts that extend beyond the current rate
period, the fee will be escalated at the rate
associated with the Gross Domestic Product
Implicit Price Deflator, which is the same
index used to escalate the Federal
Production Tax Credit for wind.
Network Wind Integration Service
Time
Wind Enet9Y Delivered ~i~~k)~ Cu5tome.- lOl'dtoCuitOlner "
..........-.
Energy OeIllleredto
Customer by liP!\.
(CUst!IIIIel Load, Net of
Wmd Project Output)
Transmission
With respect to transmission, customers
will be able to import power from new
resources using their NT transmission rights.
BP A will work with public power customers
and wind project developers to identify
regions of the BP A grid best suited for wind
development with respect to the availability
BONNEVILLE
of ftfm transmission. BP A plans to take an
active role in developing a diversified
portfolio of regional wind resources. This
diversification will be a key factor in
increasing the amount of wind energy
selling into the BP A grid.
Network Wind Integration Service
Transmission
One Trano;mio;slon WhE!el Uo;ing Customer's
Network Transmission Rights
Scheduling and Generation Imbalance
The customer (or its scheduling agent)
will be responsible for transmission
arrangements and for scheduling the wind
output from the point where the generation
is integrated into the BP A transmission
system to a point of delivery where the
customer s system interconnects with the
BP A transmission system. Generally, the
customer will need to request a new Point of
Receipt under its NT transmission contract
and there is no guarantee that firm
transmission capacity will be available.
The wind project operator or its
scheduling agent will provide the
Transmission Business Line with a Day-
Ahead Generation Estimate followed by
revisions up to 30 minutes before the start of
the hour if changes are required. The project
operator will be responsible for paying the
BP A TBL Generation Imbalance charges for
deviations between wind project actual
generation and the Generation Estimate.
Whether the project operator directly assigns
these generation imbalance costs to project
participants or not will depend on the
specific contractual agreements between
those entities. Accurate wind forecasting
will minimize these charges. If changes are
made to the Generation Imbalance tariff in
the future, these changes will be amended to
the Network Wind Integration S ervi ce
Contract.
Storage and Shaping Service
Storage and Shaping Service has been
designed to serve the needs of utilities and
other entities outside of theBP A Control
Area who have chosen to purchase the
output of a new wind resource but do not
want to manage the hour -to-hour variability
associated with the wind output. To
facilitate such an arrangement, BP A's Power
Business Line will take the hourly output of
new wind projects physically located and/or
scheduling directly into the BP A Control
Area, integrate and store the energy in the
Federal hydro system, and redeliver it a
week later in flat peak and off-peak blocks
to the power purchasing customer. In order
to help reduce transmission costs, returns
will be capped at 50 percent of the
participant's share of project capacity. The
base charge for storage and shaping service
is $6.001MWh, escalated annually at the
GDP Implicit Price Deflator.
Transmission
Storage and Shaping Service is for
energy delivered to and from the BP A
system. Thus, two transmission wheels are
required to receive the service. Generators
will be responsible for Generation
Imbalance charges for generation scheduled
into the BP A system. BP A expects that the
transmission arrangements will vary from
project to project, depending on ( a) the
BONNEVILLEpow" ....o,..u"oo
locations of the project and the end-use
buyer, and (b) the availability of firm
transmission along both transmission paths.
Storage & Shaping Service
Power Redelivery
Production
(Stored when
""-.. to
BPA s,rt"",) ~
Redelivery
Volumes
W~kl
ScMdull!dWlndGe~tI"" .nto SPA
Week2 Week 3
..
l6&-hoonetufJ\flarbj~kand off-pealq"eJ\Od. Rerum'
"'pped at 50% of pr~
nomoplale capacity.
This service is energy neutral.
BP A is committed to working with
potential customers to minimize the
transmission costs associated with Storage
and Shaping Service. So far, we have been
able to limit the cost of the wheel out of our
system by agreeing to cap returns at 50010
the nameplate rating of the participating
project. During periods when generation
exceeds the 50% threshold (i.e. greater than
50 MW on a 100 MW project), BPA will
bank this excess energy in a storage account.
When generation falls below the 50010
threshold, BP A will draw from the Excess
Storage & Shaping Service
Transmission
PoInHo.Point ..
Transmission '
==COnlrOI ~:hoo'd
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~~;.
POInr-ot-de1lYery ,
on 8m System
Transmission Into SPA System.
Transml,oIon oul of8PA', ""pp..d at SO% of pro)...1 n......plat" ""pad!y.
Customer purchases point-to-point transmission out of BPA'
Control Area into their own area.
Energy account and redeliver additional
quantities above and beyond the current
redelivery obligation. This will reduce the
amount of transmission required to move the
stored energy out of the BP A system. We
are also examining a number of potential
cost-saving approaches to the transmission
wheel into our system.
BPA plans to work closely with project
developers, Investor Owned Utilizes and
other entities with well-developed and active
purchasing plans to help determine which
projects can be most efficiently integrated
into the BP A system. Siting projects in areas
of the grid with minimal congestion and in a
way that takes advantage of regional
diversity in wind patterns is essential to the
growth of cost-effective wind energy in the
Pacific Northwest.
For More Information
To learn more about Network Wind
Integration Service or Storage and Shaping
Service, please contact your PBL or TBL
Customer Account Executive or the BP A
PBL Renewable Power Group at (503) 230-
3530. We look forward to working with you
on these exciting new services.
BONNEVILLEpow" A...."nA1ION