Message from your Manager...
Will You Pay For Negative Pricing?
The abundant snow that fell in the Northwest’s mountains last winter has been melting and rushing down rivers in the region during May and June. The Bonneville Power Administration has had the difficult task of balancing the flow of water through generators versus spillways.
The difficulty exists when wind power from the region’s wind generators combines with high amounts of hydropower, causing an oversupply of power during certain times of the day. Because of low demand and transmission constraints, BPA cannot move enough power elsewhere over its transmission lines to avoid curtailment of generation. With wind generation capacity in the Northwest heading toward 6,000 megawatts, the problem has grown worse the past few years.
The dilemma is whether to shut down hydro-generation or restrict incoming power from other generators. When hydro-generation is shut down, more water flows through spillways, causing more gas bubbles in the water. This is harmful to fish and potentially violates environmental laws.
BPA has developed a policy called environmental redispatch to cope with high wind and high runoff events. BPA first limits all coal, natural gas and other thermal generation to minimum levels. As a last resort, BPA limits wind power generation. BPA replaces any reduced thermal and wind generation with free hydropower from federal dams.
When wind generation is curtailed, the wind project owner might not receive revenue relating to production tax credits or renewable energy credits. This has led wind developers, environmental groups, some politicians and others to insist that BPA pay for the lost revenue.
The payment, on top of BPA replacing power for free, is known as “negative pricing.” Negative pricing would affect BPA cash reserves, which likely would be replenished through rates charged by BPA to its customers, including Big Bend.
Big Bend supports the BPA environmental redispatch policy of preserving power reliability, protecting fish and avoiding cost shifts to BPA customers. If you hear individuals, organizations or companies argue that BPA should offer negative pricing, they are saying they don’t mind if your electric bill goes up to mitigate lost revenue of wind developers.
Wind generation is a tremendous renewable resource that will no doubt play a large role in the Northwest’s future power supply portfolio, along with hydropower and other renewable resources. There is, however, a price to pay for integrating wind generation. Will it include negative pricing? We will have to wait and see.
—Jim Johnson, Manager