Tony's Newsletter
Tracking Activities of the Colorado Renewable Energy Forum
and the Development of Wind Projects
From Colorado Working Landscapes, August 27, 2004
Volume 1, Issue 11
The Colorado Renewable Energy Forum (CREF) is an organization of energy, financial and legal professionals, local communities, and advocate organizations committed to the development of wind and other renewable energy resources. To be added to or taken off the distribution list for Tony's Newsletter please send an email to frank@workinglandscapes.com.
Is 500 MW of Renewable Energy Enough?
On August 27, Xcel Energy released its request for proposals (RFP) for 500 MW of renewable energy, primarily wind, following a two-month proceeding before the Public Utilities Commission (see following article for details). That’s a $500 million investment in eastern Colorado by December 31, 2006 when Xcel believes all of this wind energy will be on-line. This is a significant commitment by Xcel and a wonderful shot-in-the arm for communities that might be working with successful wind developers.
Lawyers for some of Xcel’s largest customers, along with the Attorney General’s Office of Consumer Counsel and about twenty other “interveners”, took a close look at the 500 MW proposal and its potential impact on electric rates. In the end, nearly all endorsed the RFP while the rest offered no objection. Xcel presented a convincing argument that wind energy is a prudent least cost option for ratepayers. Renewable energy advocates are asking two questions: “Why cap the benefits of wind energy at 500 MW?” and, “Why aren’t more utilities laying the groundwork for wind energy?”
Along with a 13.8 percent rate increase, Tri-State G & T recently announced plans to build a 1,000 MW coal-fired power plant along the Front Range to serve its rural customers. A growing number of these customers would like to see part of this growth served by wind power and some level of access to its resource planning process.
On November 2nd, Colorado voters will decide if the state’s seven largest utilities should be required to secure ten percent of their energy from renewable sources by the year 2015. The seven are Xcel Energy, Aquilla, Intermountain Rural Electric Association, United Power, Inc., Holy Cross Energy, Colorado Springs Utilities, and Fort Collins Municipal Electric. Fort Collins and Holy Cross have already made significant commitments to renewable energy and energy efficiency.
Speaker of the House Lola Spradley (R-Beulah), who has led a three-year effort to pass state renewable energy legislation, and Congressman Mark Udall (D-Boulder) are co-chairing the campaign to adopt the initiative.
CREF remains non-political and will not endorse the Ballot Initiative. Thus far, two farm organizations have endorsed the measure, the Rocky Mountain Farmers Union and the Colorado Farm Bureau. The campaign website, including the full text of the initiative can be viewed at the following link http://www.renewableenergyyes.com/.
Xcel Energy has joined Tri-State G & T and others to oppose the initiative, but have not yet established a website.
Details of the 500 MW Renewable Energy RFP debated before the PUC
Wind developers must submit project proposals to Xcel Energy by November 30, 2004 according to a complex Renewable Energy RFP recently approved by the Colorado Public Utilities Commission. CREF is hopeful that some of these proposals will include local ownership.
CREF partners, including the Rocky Mountain Farmers Union, Colorado Coalition for New Energy Technologies, Western Resource Advocates and the Colorado Renewable Energy Society provided testimony asking the PUC to rule on a number of issues. Four fundamental issues consumed considerable attention before the Commission:
· Expedited Renewable RFP: The decision to release the renewable RFP ahead of the upcoming “all-source” solicitation for traditional generation complicates the evaluation and comparison of bids and a determination of which are of greatest benefit to customers. However, a combined solicitation would have delayed the renewable RFP by a year running the risk of not getting projects on line before the pending Production Tax Credit (PTC) runs out again. The PTC will expire December 31, 2006 if versions of the extension currently before Congress become law (see story below).
· Ancillary Service Cost: $2.50 per MW hour will be added to the bid price for wind to account for the cost of incorporating an intermittent resource onto the system. The Commission ordered Xcel Energy to complete a study by April 2006 to determine ancillary service costs based on actual experience within Colorado. Another study was ordered to evaluate system impacts of wind at increasing levels of wind penetration. Existing (220 MW) and proposed (500 MW) wind generation capacity will result in a 10% penetration level.
· Curtailment Costs: Large electric customers were concerned with Xcel Energy’s proposal to continue paying wind developers even when ordered to curtail production due to an infrequent interruption of electric transmission. The Commission approved this practice after Xcel Energy demonstrated that, even with curtailment payments, the energy cost of wind is still a bargain for customers.
· Fuel cost forecasts greatly influence which resources are bid into the system and the Commission accepted an average of four sources.
CREF partners argued that several provisions in the RFP create barriers for small-scale projects. Xcel Energy suggested there may be barriers to small projects, but that they are not contained within the Renewable Energy RFP. The following is the status of selected “barriers” reviewed by the Commission:
· Security Fund: The approved RFP requires the bidder to provide $75,000 per MW for a security fund to pay damages in the event of a breach of contract with Xcel Energy.
· Interconnection Standards: If there is a problem, Xcel Energy felt it would be with other utilities, not Xcel.
· Green Credits: Ownership of green credits will be held by Xcel Energy.
· Phase I Environmental Assessment: Because the assessment is only required after the contract is awarded, it is not a barrier to small projects.
· Insurance: If bidders find that reducing insurance requirements will reduce their price, they may propose that alternative in their bid.
· Community Wind Preference: The Commission rejected CREF’s recommendation for a preference in the selection process for community wind if those projects provide the same cost savings benefits as other projects. Xcel Energy objected to this request saying “…there should be no preference based on who owns the project,” and “small resources are not [an Xcel Energy] issue.” Speaker of the House, Lola Spradley wrote a letter to the Commission asking them to acknowledge adoption of HB04-168 which states, “It is the policy of this state to encourage local ownership of renewable energy generation facilities to improve the financial stability of rural communities.” This legislation was signed into law by Governor Owens on May 27, 2004.
It is important to recognize that this Commission adopted the Least-Cost Resource Planning Rules making “financial stability of rural communities” and other benefits of renewable energy a non-consideration in their decision-making. Renewable issues continue as the PUC moves into its all-source docket and many issues surround Xcel Energy’s efforts to build and own a 750 MW coal-fired generating station in Pueblo.
Congress will consider extending the Production Tax Credit when it returns from summer recess
Both the Senate and House have adopted legislation to extend the Production Tax Credit retroactive to January 1, 2004 when the previous PTC expired. The PTC provisions are included in a corporate tax bill that congressional observers feel has a good chance of passing and signed into law. A conference committee has been named to iron out differences between the two bills. The PTC has broad bipartisan support making the extension dependent on issues within the broader tax bill. If extended, it is likely that the PTC will expire again on December 31, 2006 complicating the scheduling and financing of projects.
CREF submits a USDA Value-Added Producers Grant Proposal on Behalf of Four Producer Groups
Four producer groups seeking to develop local wind projects agreed to support the formation of the Colorado Renewable Energy Cooperative in an effort to coordinate efforts to establish and gain access to markets for locally owned and produced renewable energy. Two producer groups in Southeast Colorado and two groups in Yuma County have agreed to form a steering committee to oversee development of the cooperative. CREF anticipates additional producer groups joining the cooperative once grant funds are secured. Mike Bowman and the Colorado Farm Bureau led the grant-writing effort along with Tony Frank of Colorado Working Landscapes. The Colorado Cooperative Development Center has agreed to help structure the cooperative. A one-page summary of the grant proposal can be viewed at www.workinglandscapes.com/CREF.htm.
Next CREF Steering Committee meeting scheduled for September 10, 9 a.m.
The function of CREF’s Steering Committee is to coordinate activities among its partnership organizations in a manner that will facilitate renewable energy development. Membership is granted by CREF Chairperson, Tracee Bentley but is basically open to all partners wishing to contribute. The next meeting is scheduled for 9:00 a.m. on September 10, 2004 at the Colorado Farm Bureau office in Centennial, CO (9177 E. Mineral Circle, Centennial, CO 80112). Please contact Ms. Bentley at tbentley@colofb.com if you plan to attend. The agenda will concentrate on the development of a fundraising plan for CREF that would support communities and producer groups seeking community wind projects. Below is a preliminary agenda:
§ CREF Funding Status
§ Review Fundraising “Template”
§ Set standard time and date for future meetings
§ Kickoff Event
§ October meeting: workshop with “producer groups”
§ Status of PUC proceedings and CREF’s role
Colorado Working Landscapes (CWL) is a landowner-driven public policy forum seeking to build communication bridges between divergent interest groups while striving for win-win solutions. Our goal is to keep Colorado's agricultural landscapes intact, both economically and ecologically, while respecting private property rights and local control.