Western Renewable Energy
5 January 2011
Here is a snapshot view of some of the key developments in 2010 that helped shape the policy environment for clean, renewable energy technologies as we head into 2011.
This summary does not begin to fully represent the work that the Interwest Energy Alliance and many other groups conducted throughout the West in 2010, but it does help illustrate the breadth and depth of activity that took place in the past year.
Western states elect new governors, regulators and other key officials in 2010
—New officeholders bring track record of support for renewable energy policies
From newly elected governors to regulatory commissioners, officeholders elected in the 2010 elections expressed significant levels of support for clean, renewable energy policies, and Interwest looks forward to working with these new elected officials, along with officials already in office, to advance shared development goals that will benefit the West’s economy and environment.
Immediately after the election results were finalized, Interwest circulated a snapshot view of election winners and their views on renewable energy policies in all six of our states of Arizona, Colorado, Nevada, New Mexico, Utah and Wyoming.
Three western governors retire
—Govs. Ritter, Richardson and Freudenthal leave imprint on West’s energy infrastructure
Three key western governors retired in 2010: Colorado’s Bill Ritter, New Mexico’s Bill Richardson and Wyoming’s Dave Freudenthal, all Democrats. Each governor was instrumental in transforming the West’s energy policy landscape:
Dave Freudenthal, Wyoming: In 2004, Gov. Freudenthal signed legislation into law creating the Wyoming Infrastructure Authority (WIA), a quasi-governmental instrumentality with a $1 billion bonding authority whose mission is to “diversify and expand the state’s economy through improvements in Wyoming’s electric transmission infrastructure to facilitate the consumption of Wyoming energy in the form of wind, natural gas, coal and nuclear, where applicable.” WIA can participate in planning, financing, constructing, developing, acquiring, maintaining and operating electric transmission facilities and their supporting infrastructure. Passage of this law showed that Wyoming recognized its wealth of energy resources and the critically important need for transmission facilities to deliver these resources to markets around the West.
Bill Richardson, New Mexico: A longtime proponent of renewable energy since his days in Congress and as U.S. Secretary of Energy during the Clinton Administration, Gov. Richardson convened the North American Energy Summit in Albuquerque in April 2004. Together with California Gov. Arnold Schwarzenegger, Richardson spearheaded what became a multi-year effort by the Western Governors’ Association (WGA) to focus attention on the West’s wealth of clean and inexhaustible energy resources. This led to important WGA initiatives including the Clean and Diversified Energy Advisory Committee, the Western Renewable Energy Zones and the Western Governors’ Wildlife Council. Within New Mexico, Richardson advanced key policies such as the state’s Renewable Energy Standard, transmission development and other policies that have helped position the Land of Enchantment as a world leader in renewable energy generation and component manufacturing.
Bill Ritter, Colorado: Elected in the 2006 election with a strong mandate to create a “New Energy Economy,” Gov. Ritter fulfilled this campaign pledge and signed no fewer than 57 bills into law dealing with every facet of leveraging the many benefits that clean energy provides. From transmission expansion to the Renewable Energy Standard, from a Climate Action Plan to community-based renewable project initiatives, Ritter’s tireless work has made Colorado an international leader in the clean energy industry. One of the final bills that Ritter signed into law during his tenure was the landmark Clean Air-Clean Jobs Act which, over the next several years, will transition several old and inefficient coal-fired power plants from to cleaner sources of fuel.
Regional Transmission Expansion Planning project kicks off
In March 2010, the Scenario Planning Steering Group (SPSG) was created to provide strategic guidance to the Western Electricity Coordinating Council’s (WECC) Transmission Expansion Planning Policy Committee (TEPPC) on:
- scenarios to be modeled in transmission planning studies
- the modeling tools to be used, and
- key assumptions to be used in creating and reviewing the scenarios.
The scenarios created and/or recommended by the SPSG will assist TEPPC in its evaluation of long-term regional transmission capacity needs in the Western Interconnection by providing a comprehensive set of plausible future load, resource, and policy states. The scenarios and subsequent analysis will form a comprehensive package of stakeholder-vetted, regional planning models, data, and transmission plans for the Western Interconnection.
The SPSG activities are part of the U.S. Department of Energy-funded Regional Transmission Expansion Planning (RTEP) project.
Pro-active transmission planning and development is critical for the success of wind energy development in the West, and the SPSG’s goal is to facilitate stakeholder involvement, and to reach out to groups not traditionally involved in transmission planning in the Western Interconnect. This group has representatives from other renewable technology sectors, as well as conservation groups, consumer advocates, state and provincial representatives and other constituencies.
Interwest’s Craig Cox serves as the SPSG’s wind technology advocate and invites ongoing stakeholder comments and perspectives on this planning process that will help advance the further development of renewable energy markets throughout the West.
State and Provincial Steering Committee
Working in very close coordination with the SPSG, and also conducted through the DOE RTEP project, states and provinces in the Western Interconnection have formed a committee of representatives of Governors, Premiers and public utility commissioners to provide input in regional transmission planning and analysis in the interconnection. The State-Provincial Steering Committee consists of appointees from each state and province in the Western Interconnection. The Western States’ Water Council and the Western Governors’ Wildlife Council are ex-officio members of the Committee. The SPSC has three tasks:
- Providing input into regional transmission planning;
- Improving the efficient use of the existing grid; and
- Enabling the integrating of large amounts of variable generation
State legislatures pass clean energy legislation
Interwest’s legislative efforts focused on four states in 2010: Colorado, New Mexico, Utah and Wyoming. Here is a summary of key legislation that passed in each of these states during the 2010 legislative sessions.
Transmission tieline taxation (HB 1431): ensuring that tielines for renewable energy projects that go online after January 1, 2012 will be taxed at rates roughly equivalent to those of conventional energy generation facilities. Since renewable energy projects are typically located farther from the transmission grid than most conventional energy projects, these clean renewable energy projects faced the prospect of significantly higher property tax bills due to their inherently longer transmission “tielines,” or “extension cords” linking these projects to the grid. Therefore, as a matter of equity, the statute was amended to confirm the legislature’s intent related to taxation of tie-lines to be considered as part of the non-renewable facility cost comparison.
Replacing coal with gas generation (HB 1365): The Clean Air-Clean Jobs Act requires Xcel Energy and Black Hills Energy to sharply reduce pollutants by retiring, retrofitting or repowering Front Range coal-fired power plants by the end of 2017 and replacing them with facilities fueled by natural gas and other lower- or non-emitting energy sourcess
Increasing Renewable Energy Standard to 30% by 2020 (HB 1001): The legislature passed, and Gov. Bill Ritter signed into law, legislation creating the nation’s second-highest renewable energy standard for investor-owned utilities: 30% by 2020. This legislation also requires that three percent of these utilities’ entire portfolios be generation from distributed generation resources.
Increasing transparency in governance of rural electric cooperatives (HB 1098): This legislation helps increase accountability through transparency in governance of rural electric cooperatives to their member-owners.
Creating an advanced energy tax deduction and corresponding changes to the gross receipts and compensating tax deductions (HB 261/277 and SB 201/202)
Clarifying third party power purchase agreements (HB 181/SB 190)
Renewable Energy Financing Provisions (HB0145S02) allows Utah not-for-profit groups, local governments, and other non-taxable entities to take advantage of third-party financing (PPAs) and available tax incentives for renewable energy. This legislation clarifies that certain third-party financing arrangements are exempt from regulation by the Utah Public Service Commission. These arrangements are permitted in ten other states across the country;
Revolving Loan Fund for Certain Energy Efficient Projects Amendments (HB318) allows Utah’s Energy Efficiency Fund, a zero interest revolving loan fund, to be used for energy efficiency projects in buildings owned by political subdivisions (i.e. cities, counties, and towns) in addition to school districts.
Intangible property amendments (SB125) expands the definition of intangible property for property tax purposes to include renewable energy tax credits and incentives.
Renewable Energy Modifications (SB104) includes certain compressed air energy storage technology (derived from renewable energy resources, such as wind or solar) as a renewable energy source, eligible for consideration for the State Renewable Energy Development Incentives and to count towards Utah’s 20% Renewable Energy Standard Goal (S.B. 202, passed 2008). This bill is structured to avoid double counting of renewable energy certificates.
Political Subdivision Facility Energy Efficiency (HB116) clarifies ambiguity about the use of energy savings agreements by Utah political subdivisions, and provides guidance to political subdivisions about energy savings agreements.
Utah earned double “As” in Freeing the Grid 2010 Report, up from double “Fs” in 2007 – one of only two states (the other was Massachusetts) to earn As for Net Metering and Interconnection
HB 72 Regulation of wind energy facilities: Requires permitting by County Commissioners and establishes minimum standards and financial assurance for wind energy facilities also provides for Counties to refer a permit to the Industrial Siting Council under certain circumstances. Makes conforming amendments to the Industrial Siting Act
HB 79 Eminent Domain wind power collector lines: Places a one year moratorium on the use of condemnation for collector lines associated with commercial wind facilities. Also extends for one year, the wind task force to study this issue and come up with recommendations.
HB 101 Taxation of electricity generated from wind: Places a $1.00/MWh tax on electricity generated from wind. Goes into effect Jan. 1, 2012. Facility must have three-year generating history before tax is levied. Distribution is 60% to county where facility is located – 40% to state general fund.
HB 111 Electric Transmission consideration of regional issues: Expands PSC authority to allow regulatory commissions in neighboring states to meet in conjunction for fact finding, etc. on regional transmission projects.
SF 66 Industrial Siting amendments: Companion bill to HB 72, this is the second bill from the wind task force expanding the role of the Industrial Siting Council to include wind projects of 30 or more turbines. Dropped transmission threshold to 160kV from 500kV but left project dollar criteria amount alone.
How can we develop markets further in the West?
—Interwest points out that renewable energy needs legislative and policy certainty
The renewable energy industry has invested billions of dollars in western states in recent years and is poised to continue making significant new investments in states around the West. The industry’s recent investments in an otherwise bleak economy show how policy certainty can facilitate such large private-sector investments. Two key policy drivers revolve around transmission and tax certainty:
Transmission is perhaps the most important enabler of new power generation from wind, large-scale solar and geothermal energy resources. Transmission investments represent just 10-20% of the total cost of energy, meaning that a billion-dollar investment in new transmission capacity could leverage up to ten billion dollars in new, economically beneficial, clean energy project development. Transmission takes considerably longer to build than new renewable energy projects, which is why state, regional and federal governments and entities are actively seeking to advance new transmission development to spur further renewable energy development. This is a key area where state policies can, and must, be calibrated properly to benefit state economies through new transmission investments.
Tax certainty must be provided for the renewable energy industry, as with conventional energy industries, in order to achieve the kind of steady, sustained growth that will create substantial new growth in jobs, company investments and infrastructure improvements that the renewable energy industry can make possible. This means that state tax policies should not change abruptly, putting new renewable investments and infrastructure improvements in jeopardy.
Wildlife: working together, industry and conservationists develop landmark BMPs
Working together in an ongoing, collaborative manner throughout 2010, leading companies in the wind energy industry joined leading conservation groups under the aegis of the Colorado Renewables Conservation Collaborative (CRCC) to develop Best Management Practices (BMPs) wildlife, native ecosystems and landscapes in Colorado.
By December, CRCC participants successfully developed BMPs for migratory birds, playa lakes, intact landscapes (fragmentation), greater prairie chickens, lesser prairie chickens, sharp-tailed grouse, mountain plover, raptors, bats, rare plants, burrowing owls, and wetlands. These species, systems, and habitats are the natural attributes that CRCC determined to be most at risk relative to wind energy development in eastern Colorado. The BMPs were developed to abate those risks.
These BMPs represent the consensus reached through much hard work and dialogue on the parts of each organization and individual who participated in, or supported, CRCC. They are also the result of the commitment the members of CRCC made to each other and to the goal of making Colorado a place where wind energy and wildlife could both thrive.
The BMPs also build on the CRCC’s spring 2010 success in revising the Colorado Public Utilities Commission (PUC) Environmental Impacts rule. The rule creates an expectation that wind energy developers will act in good faith to avoid, minimize, and/or mitigate for impacts to important species and habitats. The BMPs are the basis for how to do that.
Together, the PUC rule and the BMPs provide Colorado with a “business-viable and conservation-credible” framework for developing wind resources in sensitive and biologically important landscapes.
This innovative, collaborative approach represents possibly the nation’s first such set of comprehensive BMPs developed on a voluntary basis, and demonstrates that the energy industry can work successfully with the conservationist community to achieve mutually important goals
Integration cost issues play key role in 2010
The Interwest Energy Alliance focused on integration issues in much of its work in 2010, particularly in regulatory dockets involving PacifiCorp’s IRP and Xcel Energy’s resource acquisition process. In PacifiCorp’s IRP, Interwest has an established track record at the Wyoming PSC for support of economic modeling of generation alternatives in the IRP as it relates to and planning of the Energy Gateway transmission lines, accurate wind integration costs, and appropriate cost assumptions for renewables.
Interwest and others challenged the wind integration study issued with the 2008 IRP. As a result PacifiCorp agreed to retain the Brattle Group, and in a settlement agreement with Interwest agreed to consult with Michael Milligan, Ph.D. from NREL to determine more accurate assessments of actual wind integration costs. PacifiCorp issued a draft of its Wind Integration Study to be included in the 2011 IRP in the fall of 2010. Interwest and others have pointed out significant technical errors in the wind integration study which resulted in 3-year levelized wind integration costs of $9.70 with 1,833 MW wind penetration.
Western Wind and Solar Integration Study
The final report of the Western Wind and Solar Integration Study was released in May. Prepared for the National Renewable Energy Laboratory by GE Energy, this report shows how 30% wind and 5% solar can feasibly be integrated into the Westconnect footprint.
Among the key findings from this report are:
- 35% renewable energy penetration is operationally feasible provided significant changes to current operating practice are made, including balancing area cooperation and sub-hourly economic dispatch.
- The 30% case reduced annual operating costs by 40% or $20 billion ($17 billion in 2009$) and CO2 emissions by 25% across WECC, assuming $9.50/MBTU gas. At a $3.50/MBTU gas price, operating costs were reduced by 25% and CO2 by 45%.
- Using state-of-the-art wind and solar forecasts in day-ahead unit commitment is essential and would reduce annual WECC operating costs by up to $5 billion ($4 billion in 2009$) or $12-20/MWh ($10-17/MWh in 2009$) of renewable energy, compared to ignoring renewables in the unit commitment process. Perfect forecasts would reduce annual costs by another $500 million ($425 million in 2009$) or $1-2/MWh ($0.9-$1.7/MWh in 2009$) of renewable energy.
- It is more cost-effective to have demand response address the 89 hours of contingency reserve shortfalls rather than increase spin for 8760 hours of the year. Demand response can save up to $600M/yr ($510M/yr in 2009$) in operating costs versus committing additional spinning reserves.
- Increased renewable energy penetration slightly increases use of existing storage, but additional storage was not found to be needed.
Tri-State public participation meetings culminate with filing of resource plan
Following a landmark settlement agreement with Western Resource Advocates in late 2009, Tri-State Generation & Transmission Association followed up with a series of public participation meetings in 2010 culminating in filing a plan with the Colorado Public Utilities Commission in November. This plan, similar to an IRP, provides an assessment of Tri-State’s existing resource mix and electric sales forecast, and discusses various alternatives for meeting the future system needs of its 44 member cooperatives.
As Tri-State points out, the resource plan “identifies a six-year resource acquisition period in which Tri-State could add new generation resources. In order to meet its member cooperatives’ renewable portfolio mandates and further diversify its generation portfolio, Tri-State will need to acquire additional renewable resources in the next three to four years. These resources are in addition to the new renewable resources from the 51-megawatt Kit Carson Windpower Project near Burlington, Colo., and the 30-megawatt Cimarron Solar photovoltaic project in northeastern New Mexico, as well as renewable energy projects developed locally by Tri-State’s member cooperatives.”
Clean energy advocates that took part in this process, including the Interwest Energy Alliance, applauded Tri-State’s public participation process and believe it is a big step forward in ensuring stakeholder involvement in the critical issue of developing power generation resources. Its plan, as filed with the PUC, is much more comprehensive than any past such plans. Now, advocates hope to see this process continued so that Tri-State’s resource decisions will be made in a transparent, accountable manner in every case.
Green jobs provide bright spot in West’s economy
The renewable energy industry has located new power generation projects and manufacturing facilities in every western state in recent years. A combination of renewable resources and state policies tends to drive the location of power generation facilities, while manufacturing facilities tend to locate in states that have been pro-active in their public policy support for renewable energy. In 2009 and 2010, numerous new power projects and manufacturing facilities were announced –and built– throughout the West.
This 13 July 2010 press release from Vestas provides a snapshot illustration of how the renewable energy industry has become an engine of job creation in an otherwise lackluster economic climate:
Vestas bolsters Colorado economy: 1,000 jobs created, hiring more local workers
July 13, 2010: Vestas is investing upwards of $1 billion to build four factories in North America and adding research and development to Colorado’s growing clean-energy sector. The three Colorado factories, which comprise Vestas’ current manufacturing base in North America, will serve the growing wind-energy industry in the U.S., as well as export product to Canada and Mexico. A fourth manufacturing facility, a blade factory in Brighton, is expected to begin operations in 2011.
Vestas, the world’s leader in producing high-tech wind power systems, has already created more than 1,000 highly skilled manufacturing jobs to meet growing production needs at its three Colorado factories. Vestas’ blade factory in Windsor, tower factory in Pueblo and nacelle factory in Brighton have been hiring to fill a variety of new jobs to prepare for several recently announced orders.
“Vestas is employing people in many desirable jobs ranging from engineering to welding to painting,” said Anthony Knopp, vice president for Vestas Towers America. “We have taken advantage of the downturn to hire a number of highly skilled employees who have been turned loose from other industries such as the industrial products and construction fields. We’ve hired all functions related to tower building including steel fabricators, finishers, welders, assemblers and maintenance personnel.”
The Interwest Energy Alliance represents leading companies in the utility-scale wind and solar energy industries, bringing these rapidly growing clean-energy industries together with leading non-governmental organizations (NGOs) in the states of Arizona, Colorado, Nevada, New Mexico, Utah and Wyoming. Working together, leading industry companies and NGOs collaborate on win-win public policy approaches to new project development, transmission and manufacturing facilities throughout the West.
Properly structured public policies have played a vital role in the successful development of every major modern industry, and this is equally true with the renewable energy industry. With proper state public policy frameworks, wind, solar and other modern renewable energy industries will continue to grow and provide important benefits to state governments and local communities alike.