BPA won’t pay negative prices to get wind power producers to curtail

Michael Giberson

At a December 2010 meeting, the federal Bonneville Power Agency announced that it would not pay wind power producers in its area to curtail during overgeneration events that sometimes result from the way the agency manages water flow through hydropower facilities to comply with environmental regulations.

When reservoirs are full, the BPA’s dams can either generate power or spill any excess water. High water conditions common during late spring in the Pacific Northwest sometimes put the BPA up against environmental limits on how much water it can spill, so driving it to want to produce and distribute as much power as possible. (Spilling too much water leads to high concentrations of dissolved gas in the water, a hazard to fish.)  In the past, BPA would essentially give away power in order to maximize power generation, and utilities in the area were happy to take the cheap power and shut down their thermal power plants which were costly to run.

Over the past few years, however, the growth of wind power in the BPA’s area has presented the agency with a new problem. Wind power producers who can obtain from $20 to $40 per MWh in federal and state subsidies while they are producing power don’t want to shut down for nothing. If the BPA wants to curtail them, they’d like to be compensated for their losses. The BPA says it will not pay; in a statement it explains why:

While one possible outcome would be for BPA to compensate wind generators the value of the foregone incentives, BPA does not believe that is an appropriate consequence of actions taken to protect fish. …  Currently, qualifying renewable energy receives PTCs and/or RECs when it generates, and the cost is shared broadly by taxpayers. If BPA were to pay negative prices to comply with ESA and the Clean Water Act during high runoff events, the cost burden would shift and would be narrowly focused on BPA preference customers. We do not think the law was designed to place this cost burden on a narrow class of utility ratepayers, and we are not prepared to initiate this change.

The BPA claims it has sufficient legal authority under existing generator interconnection agreements to implement its new policy of “environmental dispatch,” but to clearly articulate the authority it will unilaterally amend provisions of its standard generation interconnection agreements to reflect the policy.

In areas with RTO/ISO power markets, negative prices are now the conventional way for coordinating resource supplies during periods of potential overgenation (mostly also involving high wind power among other contributing factors).

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3 thoughts on “BPA won’t pay negative prices to get wind power producers to curtail

  1. Bravo BPA… but not because wind is bad like Fat Man implies. Bravo BPA because the subsidies wind power recieves are only justified if the energy they produce is useful… if it’s energy that is only worth a negative price, it’s pretty clearly not useful.

  2. BPA’s motivation likely more financial than heroic. It isn’t so much that they are worried about what wind power plants gets paid, but they do worry about what they get paid for all the extra power they are trying to shop around. In a pinch they’ll give it away cheap, but they don’t want to actually have to pay people to take it.

    In the RTO markets I tend to think that allowing prices to go negative is a fine idea – let power producers and power consumers work out at what price is needed to balance the market. BPA is not a market, they’re a federal power agency with significant market positions (in generation and transmission) and many legal and regulatory restrictions on how they can operate. I don’t pretend to have a clue as to whether allowing negative prices would be an improvement in the current BPA environment.

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