PacifiCorp says RFP for renewables isn’t needed in the near term

PacifiCorp d/b/a Rocky Mountain Power has no plans to issue a request for proposals (RFP) for new renewable energy resources, and will instead rely on any opportunities that arise during the normal course of business.

That is one of the points that PacifiCorp made in Aug. 7 rebuttal testimony filed at the Wyoming Public Service Commission as part of an integrated resource plan (IRP) case. PacifiCorp filed the IRP earlier this year with several state commissions.

Among the intervenors that the utility rebutted was the Powder River Basin Resource Council (PRBRC), which believes that PacifiCorp should consider adding renewable resources, particularly low­-cost Wyoming wind, in the IRP Action Plan.

The council believes that unbundled renewable energy credit (REC) purchases do not represent the least-cost, least-risk way of meeting renewable portfolio requirements (RPS) requirements. PRBRC also stated that PacifiCorp should issue an RFP to assess possible opportunities to take advantage of extension of federal production tax credits (PTCs). PRBRC further said that PacifiCorp’s capacity contribution assumption for renewables only considers system-peak hours. Finally, PRBRC states that the cost for utility-scale solar assumed for the IRP was overstated.

PacifiCorp has presented a cost and risk analysis showing that an RPS compliance strategy for the state of Washington that relies upon unbundled REC purchases is lower cost, accounting for risk, when compared to an alternative that includes wind resources that would otherwise be added to the system for the sole purpose of achieving compliance with Washington state RPS requirements.

“The Company has not and is not proposing to issue a request for proposals (RFP) for a renewable resource,” said PacifiCorp. “An RFP would take a minimum of 12 months from a process standpoint. Even though the Company does not have an RFP for renewables in the 2013 IRP Action Plan, the Company is in continuous discussions with counterparties on both a bilateral basis for unique opportunities and through qualifying facilities under Public Utility Regulatory Policies Act (PURPA).”

Another intervenor, the Interwest Energy Alliance (IEA), notes that the company’s preferred portfolio relies on firm market purchases, avoiding investment in fossil fuel plants and “clean energy” resources. IEA said that firm market purchases are shielded from public policy considerations, including carbon costs and price volatility, and use of these resources prevents PacifiCorp customers from benefiting from a “buyer’s market” in long-term stable priced renewable energy contracts.

“The Company’s preferred portfolio, which includes firm forward market purchases, is the least cost least risk alternative among the wide range of portfolios studied in the 2013 IRP,” PacifiCorp responded. “IEA’s claim that these market products are shielded from public policy considerations such as carbon costs and price volatility is not correct, nor consistent with how PacifiCorp analyzes these resources in the IRP modeling process. The price for market purchases is tied to the cost of producing power in a given market region. For example, fuel costs are a key driver to the cost of producing power, and as fuel costs rise, the prevailing market price for power rises. Similarly, should generators face C02 emission costs, the prevailing market price for power would increase. In this way, the market price for firm forward purchases is dynamic and subject to fluctuation with changing market conditions.”

IEA said that wind offers a unique competitive advantage over natural gas due to the stable or fixed long term prices available from wind and the lack of long-term fixed prices available for natural gas. So IEA requested that the commission require the company to incorporate wind energy acquisition as an integral part of its hedging strategies. Moreover, IEA commented that PacifiCorp should include in its natural gas price forecasts a natural gas volatility adder to reflect the risks of price volatility.

In contrast to IEA’s comments, PacifiCorp said its IRP modeling approach accounts for both natural gas and electricity price volatility. Natural gas prices and wholesale electricity prices are included as stochastic variables in this phase of the IRP modeling. In this way, the IRP modeling process captures how wind resources affect system costs in the face of natural gas price and electricity price volatility. “The effect of natural gas and wholesale electricity price volatility is captured as an output of the IRP modeling process, and it would not be appropriate to establish a predetermined natural gas price volatility adder as an input to the modeling process as recommended by IEA,” the utility said.

There are numerous benefits and costs associated with wind resources in PacifiCorp’s portfolio, the utility noted. Wind resources provide fuel diversification benefits and produce emissions-free energy, which are captured in the IRP modeling process. Taking these benefits into consideration, PacifiCorp said its analytical framework evaluates how wind resource alternatives compare to the overall cost and risk of other resource alternatives when developing and analyzing the cost and risks of any given resource portfolio.

“Any requirement to include a specific resource such as wind in developing a hedging strategy would remove from consideration the comparative cost and risk among a broad range of resource alternatives, is counter to the planning principals used in the IRP, and would not be in the interest of customers,” PacifiCorp said.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.