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).