Power-hungry California is hot for the Northwest's clean energy

by Gail Kinsey Hill, The Oregonian

Sunday August 24, 2008, 12:00 AM

Brent Wohan / The OregonianWhen the newly built Willow Creek wind farm in Oregon's Gilliam and Morrow counties begins operating by year's end, the power it generates will flow to California

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Competition for renewable energy has whipped up a wind war in the West.

California is the big dog in the fight, reaching into the Northwest to buy large amounts of wind power from Columbia River Gorge projects.

"They're certainly trying to grab it everywhere they can," said Lee Beyer, chairman of theOregon Public Utility Commission, which regulates the state's large utilities.

Los Angeles Department of Water & Power and San Francisco's Pacific Gas & Electric are among those securing long-term contracts for hundreds of megawatts of wind power in Oregon and Washington.

The motivation behind California's quest? A rigorous law that says renewable energy must account for 20 percent of electricity sales by 2010.

Electricity has flowed among Western states for decades. Now the stakes are higher.

Oregon and Washington also face clean energy laws that have made wind power the most coveted of resources. Competition from a rival of California's size -- it uses six times as much electricity as Oregon -- makes home-turf purchases more difficult and more expensive.

New energy will cost considerably more than the cheap hydroelectric power that has kept Northwest electric rates among the lowest in the country. The premium that local utilities might pay to beat a competing bid from California would drive prices higher still.

"The issue is cost," Beyer said. "California can pay more."

Powering California

Here's a list of Columbia River Gorge wind farms that send power to California, with the project name, location, developer/seller, electricity generated and California buyers: 
Oregon

• Klondike III, Sherman County, Iberdrola Renewables, 175 megawatts, Pacific Gas & Electric

• Willow Creek, Gilliam and Morrow counties, Invenergy, 72 megawatts, Los Angeles Department of Water & Power

• Rattlesnake Road, Gilliam County, Horizon Wind Energy, 103 megawatts, Pacific Gas & Electric

• Pebble Springs, Gilliam County, Iberdrola Renewables, 99 megawatts, Southern California Public Power Authority, Washington

• Big Horn, Klickitat County, Iberdrola Renewables, 200 megawatts, Modesto Irrigation District, Silicon Valley Power and city of Redding

Californians are used to heftier utility bills. Residential customers pay about 15 cents a kilowatt hour for electricity; Oregonians pay 9 cents.

PacifiCorp, which operates Oregon utility Pacific Power, owns several wind farms in the Northwest and Wyoming and is building more. That power stays local, meeting PacifiCorp customers' demand.

The strategy was designed, in part, to parry California's influence in the marketplace. Instead of going to independent developers to negotiate long-term contracts, PacifiCorp can produce its own power.

"We're not going to enter into a bidding war with a PG&E (Pacific Gas & Electric in San Francisco) or aSouthern California Edison," said Scott Bolton, PacifiCorp's director of government affairs. "What's cost effective for them is not cost effective for us."

Portland General Electric, Oregon's largest utility, has taken a similar tack with its Biglow wind farm in Sherman County.

Even so, both utilities buy from developers such as Portland-based Iberdrola Renewables. PGE will announce several new contracts this fall.

PGE and Pacific Power together account for almost 70 percent of the state's energy use.

Oregon law requires a 25 percent contribution from renewables by 2025. Interim targets call for 5 percent by 2011 -- far lower than California's 20 percent goal -- and 15 percent by 2015.

California's requirements increase to 27 percent in 2015 and 33 percent in 2020.

The power from the region's large hydroelectric dams doesn't count toward the requirements in any Western state.

Wind power isn't the only way to meet the goals. Solar, biomass and geothermal also qualify. But at this point, wind energy is the most affordable and available.

PGE and PacifiCorp have met the 5 percent requirement, utility officials said. They'll also meet the 15 percent target.

As deals are negotiated, California looms as an intimidating rival. It boasts a renewables cache that delivers about 35,500 gigawatt-hours of electricity annually, or 11.8 percent of total demand. That's enough to serve all PGE and Pacific Power customers combined.

San Francisco's PG&E would need 2,400 megawatts of wind to meet the 2010 requirement, if it were to rely on a single renewable resource, Oregon's PGE told regulators. That's more than the total capacity of the 20 wind farms operating in Oregon and Washington.

Of course, PG&E isn't relying on one type of clean energy. It's also gathering supplies of solar, geothermal and biomass. The utility, which serves more than 5 million customers (Oregon's PGE serves 813,000), prefers in-state purchases because transmission and other costs tend to be lower, officials said. But they will make deals elsewhere if the terms are right.

"We're aggressively adding renewables," said Jennifer Zerwer of Pacific Gas & Electric. Renewables account for about 12 percent of PG&E's electricity. "We're on track" to meet the 2010 goal of 20 percent, she said.

The utility has secured 175 megawatts from the 300-megawatt Klondike III wind farm in Oregon's Sherman County and the entire output of the 103-megawatt Rattlesnake Road project in Gilliam County. (A megawatt, adjusted to account for wind's variability, will meet the annual electricity requirements of about 300 homes).

Officials declined to disclose a purchase price. Industry experts peg wind power prices at $70 to $90 a megawatt-hour.

The Eugene Water & Electric Board bought a block of power from the Klondike III wind farm in an early round of negotiations and paid about $55 a megawatt-hour, spokesman Lance Robertson said. It was interested in more, but by then prices had soared, and EWEB walked away.

"Prices are steadily going up," Robertson said. "You're seeing premiums of $10 to $20 a megawatt-hour."

PG&E also has signed a contract to buy 120 megawatts of geothermal energy from a project near Central Oregon's Newberry Crater. Developers are in the exploratory phase and have yet to decide whether building a power plant is worthwhile.

The Los Angeles Department of Water & Power has found Northwest wind attractive because a high-voltage transmission line, which it owns in part, runs from the Columbia River to just outside the city. The utility has purchased power from two gorge projects scheduled for completion this year: Willow Creek in Gilliam and Morrow counties, and Pebble Springs in Gilliam County. Together, they carry a capacity of 170 megawatts.

Los Angeles will pay $83.75 a megawatt-hour for Willow Creek wind generation, said H. David Nahai, the utility's chief executive and general manager.

Columbia Gorge winds blow hardest in the mornings, a nice complement to Los Angeles' projects in the Tehachapi mountains, where afternoons are windiest, he said.

Renewables account for about 8 percent of the utility's electricity. In two years, it expects to hit the 20 percent goal. "We have made it a priority to develop or procure renewable energy," Nahai said.

The utility has the support of Mayor Antonio Villaraigosa, who has vowed to make Los Angeles the "cleanest and greenest big city in America."

Iberdrola, Horizon Wind Energy and other wind power developers are scrambling to meet the surge in demand. Their sweep is regional, limited by transmission and network constraints but not by state borders, company officials said.

"We're here to sell all over the Western markets," said Jan Johnson, an Iberdrola spokeswoman. California utilities are "motivated buyers," she said.

Iberdrola is part of the Spanish energy company of the same name. Horizon is owned by EDP (Energias de Portugal).

California and the Northwest have traded electricity for decades. California imports hydropower in the summer; Oregon and Washington take deliveries from California generators in cold winter months.

Wind power is more one-sided: California buys the Northwest's wind, but not the reverse.

Solar power and other renewable energy could flow south to north as technologies progress, said Rachel Shimshak, executive director of Renewable Northwest Project, which promotes use of clean energy.

Shimshak isn't worried about California's clout because, she said, there will be plenty of renewables to go around. Still, Oregon utilities shouldn't ease off as it reaches early goals. "The early bird gets the worm."

http://www.oregonlive.com/environment/index.ssf/2008/08/california_utilities_look_to_o.html