A FIGHT OVER THE PRICE OF WIND

US Utilities Target Costs Of Keeping Up With Wind Generation
Mark Peters, June 9, 2010 (Dow Jones Newswires via Wall Street Journal)

"Utilities increasingly are looking to pass on new costs they say come from growing amounts of wind power being added to the nation's electric grid.

"The on-again, off-again nature of wind farms forces utilities to ramp up and down the output of their coal- and natural-gas-fueled power plants to balance supply and demand. That creates wear and tear on plants and cuts performance, adding costs…[Xcel Energy] has started a study of the expense of backing up wind generation…with an eye on charging operators new rates. Westar Energy Inc. (WR) already has won initial approval from the Federal Energy Regulatory Commission, known as FERC, to collect costs…[but] faces a fight from the wind industry. The outcome of these early efforts are expected to play a critical role in shaping how costs are treated nationally…"

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"The issue creates challenges for wind developers and utilities alike. The dispute comes as the wind industry fights to stay cost competitive amid a slump in natural-gas prices and without a federal policy pegging a price for greenhouse-gas emissions. Passing on the costs would pressure wind-power developers…Westar estimates the new charges in its Kansas utility territory would add less than 2% to the hourly generating costs of a typical wind farm.

"In looking to pass on costs, utilities face their own challenges, as they try to publicly back wind farms, which elected officials and the public support, while also trying to pass on costs to operators they say their customers are absorbing…Most of the research will focus on ramping up and down the output of its coal-fired plants, which aren't designed for the variability, leading to higher maintenance costs…"

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"Southwestern Public Service added it will consider asking FERC to put in place new rates to charge wind operators once it assesses the costs…Westar already has gone to FERC pushing to levy new rates…The costs range from ensuring enough generation is in place to back up a growing number of wind farms to the loss of potential opportunities to use its plants to supply its own customers or sell the power to other suppliers.

"FERC has approved the new charges, and yet the American Wind Energy Association continues to fight the decision. Gramlich said FERC's ruling discriminates against wind power, since all generators on the grid need back up and benefit from extra power reserve. The trade group contends Westar wants to charge 38 times more than the actual cost of backing up wind generation…The same issue is emerging in markets where utilities have been broken up and electricity is sold at market prices. The issue sparked a fight among wind and natural gas generators in Texas' power market…"