Public Service gets mostly unqualified support for wind bids

The Colorado Public Utilities Commission on Sept. 23 took comments from several parties on the results of Public Service Co. of Colorado’s recent request for proposals (RFP) for wind bids.

Western Resource Advocates (WRA) was among the organizations responding to commission’s “Order Granting Initial Approval to Commence Contract Negotiations with Certain Production Tax Credit Wind Bids” (mailed date June 21), which provides parties the opportunity to comment on the wind bids in the utility’s 2013 All Source Solicitation 120-Day Report.

“The Commission’s approval of an expedited process for Public Service to solicit and evaluate wind bids has produced a successful result,” said WRA. “The 120-Day Report describes the solicitation results and proposes 450 MW of wind acquisitions that meet the goals the Commission set out in Decision C13-0328. Although the proposed wind acquisitions are not required for Renewable Energy Standard compliance, they do meet the statutory intent to acquire renewable energy resources to the ‘maximum extent practicable.’ Perhaps the most notable result of the analysis presented in the 120-Day Report is that the least-cost portfolio is not a gas-only portfolio of acquisitions but rather includes 548 MW of wind and 220 MW of solar resources. As Public Service notes on page 45, ‘At the time of the [Electric Resource Plan] hearings in 2012, there was a general belief that the lowest cost portfolios would consist of gas-only bids and that portfolios that included renewables would be higher cost. Portfolios 7-18 however show that this did not turn out to be the case.’”

WRA recommends that the commission approve Public Service’s request to acquire bids W013 and W023 totaling 450 MW of cost-effective, emissions-free wind resources.

WRA noted that Public Service has responded to questions in its 120-Day report. The utility said that wind curtailment peaked at 2.18% in 2010 and have otherwise been below that level during 2008-2012. The company said it further expects wind curtailments to drop by 67% between 2015 and 2020 due to Clean Air-Clean Jobs Act-inducted coal plant retirements. Regarding coal cycling concerns, by 2018, these coal plant retirements will also reduce the system minimum generation levels (representing the “lowest level of generation the fleet can reliably maintain”), WRA added.

State Consumer Counsel backs Public Service wind selections

The Colorado Office of Consumer Counsel (OCC) said in its Sept. 23 final comments that it agrees with Public Service’s selection of wind projects and recommends that the commission allow the utility to move forward with the selected wind projects.

In its June comments addressing the 30-Day PTC Wind Report, the OCC agreed with Public Service’s initial wind evaluation, and it continues to agree that the two wind bids providing approximately 450 MW are likely to be cost-effective and will save customers money under most natural gas price scenarios.

As might be expected, Sept. 23 testimony from a group of Colorado natural gas producers was less glowing about the wind bids, saying there are uncertainties about one of the wind projects that have yet to be resolved.

“Based on the data provided in the 120 Day Report, Colorado Gas Producers continue to urge the Commission to carefully evaluate the various portfolios, including the Preferred Portfolio and the request for authorization to contract with the developers of wind projects W013 and W023. In its evaluations, the Commission should consider the inclusion of projects W023 and W016 in the portfolio modeling, and the effects those inclusions have had on the relative values of the portfolios, especially where those may differ substantially from modeling where only the most cost effective project, W013, was included. The Commission should carefully evaluate the potential alternatives for modeling or ranking portfolios with only W013 included. The Commission should also take into account the information available about past wind performance from Limon II. Based on the data presented thus far, it appears that only W013 is sufficiently robust across all gas price sensitivities to warrant going forward at this juncture.”

The Interwest Energy Alliance, a trade association of wind and utility-scale solar developers, said in its Sept. 23 comments: “The Commission should approve the Company’s Preferred Portfolio, including both W013 and W023 bids. This combination will provide substantial savings to consumers: $231 million of PVRR savings, $85 million within the first 10 years of the projects. The savings grow to $695 million under a high gas price future and $471 million under the CO2 price future. Even under the low gas price future, these two wind bids add only $26 million in costs compared to the 0 MW of additional wind case. Balancing the risks and costs, these two wind bids reduce fuel price risks, regulatory risks, provide energy security due to their geographic diversity, with low cost.”

Interwest added that the modeling projections for the combination of W013 and W023 under base gas assumptions show no negative impact on the Renewable Energy Standard Adjustment (RESA) deferred balance. “This combination provides electricity over the 20 year term below avoided costs, so the reduced risks outweighs the small increased costs even under the low gas price futures. Wind bid 023 has provided assurances satisfactory to the Company about its financing and turbine supply, control of the land, and permitting processes sufficient so that the Company and developer believe they can qualify for the [federal production tax credit] and complete the project on a timely basis. RESA savings from these wind bids would commence in 2017, and savings increasing thereafter.”

Public Service considers the all-source solicitation a ‘watershed event’

Solar energy costs were historically cheap during a recent solicitation, so solar capacity figures heavily into a resource plan that the Public Service unit of Xcel Energy (NYSE: XEL) filed with the Colorado commission. A heavily redacted public version of the Sept. 9 report summarizes the results of Public Service’s 2013 All-Source Solicitation, which was issued in order to meet a 2018 electricity supply need of about 250 MW. The commission also directed the company to consider the retirement of two coal-fired units scheduled to permanently fuel switch to natural gas. When those retirements are considered the resource need is as high as 717 MW.

“The solicitation was successful in attracting low-cost bids from wind and solar photovoltaic generation resources and from new and existing gas-fired generation,” the utility told the commission. “In fact, the bid pricing received represents a watershed event for Colorado. For the first time, the Company received bids for utility-scale solar PV resources that are cost-effective head to head with natural-gas-fired generation under base-gas price forecasts and no carbon emission cost adders. The gas-fired bids were not only low cost themselves, but also offered operational flexibility which helps system operators integrate intermittent generation from wind and solar onto the grid.”

After a thorough analysis of bids under the commission’s resource planning rules and its Phase I decision, the company selected a preferred portfolio that includes a total of 809 MW of firm generation comprised of:

  • Short and long-term power purchase agreements for 317 MW from existing gas-fired generation (276 MW of which is flexible generation meeting the 30-minute Reserve Guideline);
  • 450 MW of new wind resources, which is 100 MW less than sought previously;
  • 170 MW of new solar photovoltaic resources;
  • Retirement of the Arapahoe Unit 4 coal-fired generator at the end of 2013; and
  • Continued operation of the 352-MW, coal-fired Cherokee Unit 4 on natural gas after 2017.

The only new construction included in this preferred portfolio is for renewable generation. All of the proposed gas-fired generation is from existing generating resources.

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.