The immediate outlook for renewables in California, however, is less favorable. Early in 1995, the Federal Energy Regulatory Commission (FERC) ruled that the Biennial Resource Plan Update of the California Public Utilities Commission (CPUC) improperly prevented nonrenewable resources from competing with renewable resources in the bidding for power purchase agreements. The FERC ruling prevents the CPUC from establishing rates for power supplied by QFs above the most broadly defined avoided cost not just an avoided cost based on a preferred group of resources. By forcing California to open the power purchase bidding to all resources, renewable QFs are forced to compete with nonrenewable facilities, such as gas-fired power plants. Because this ruling is highly adverse to renewables and contrary to the State's intention to support renewables, the CPUC is considering measures to support renewables without mandating rates above avoided cost. Currently, the CPUC is considering mandating that utilities that sell at retail in the State obtain 12 percent of their energy from renewable resources. Such a ruling, which would have the effect of mandating the quantity of renewables instead of the price paid for renewables, is designed to circumvent the FERC order rejecting QF rates above avoided cost.(26) This issue is further discussed in the feature article "Renewable Resource Electricity in the Changing Regulatory Environment" in this report.
Currently, Wisconsin is in the process of adopting incentives for wind. It is the only State that offers an incentive payment for electricity generated from renewables. Advance Plan 6, passed in 1992, provides for a payment of 0.75 cents per kilowatthour for qualifying wind power, solar thermal electric, or photovoltaic generation, and 0.25 cents per kilowatthour for all other qualifying renewable generation to shareholders of investor-owned Wisconsin utilities. The incentive payment applies to facilities that receive construction authority by December 31, 1998. It also applies to utility purchases of nonutility renewable power. The Wisconsin Commission recognized that utility ratepayers would ultimately cover the costs of these incentives but accepted the tradeoff in the interests of promoting renewable energy and obtaining the benefits of fuel diversity and emissions reduction.
The Wisconsin payments could be challenged, however, before the Federal Energy Regulatory Commission. In its ruling against the California Public Utility Commission on QF rates above avoided cost, FERC said that while a State could support renewables through broad tax or other mechanisms, it could not use environmental adders on rates. This rejection of the rate-based environmental adder (or externality) approach directly challenges the justification Wisconsin provides for its Advance Plan 6.
Minnesota recently mandated that Northern States Power (NSP) install or contract to purchase 425 megawatts of wind generation capacity and 125 megawatts of "closed loop, farm-grown" biomass capacity by 2002 as part of legislation authorizing the utility to store its spent nuclear fuel in an above-ground, dry cask storage facility. An additional 400 megawatts of wind capacity must be installed by 2002 if the Commission finds that wind is a least-cost resource, subject to Integrated Resource Plan requirements.(28) The mandates are set out in stages and NSP must achieve each stage in order to receive its next increment of nuclear waste storage casks.
NSP intends to install 143 turbines at a site near Lake Benton in southwestern Minnesota. Wind data collected since 1985 show that targeted areas of the State have an annual average wind speed of 16.1 miles per hour. At these speeds the project is expected to deliver wind energy to NSP for about 3 cents per kilowatthour averaged over the 30-year term of the power purchase agreement.(29)
The wind energy from this project will replace more expensive resources on cold winter days. The wind energy closely matches the utility's load during the winter season. CMP has been working to reduce its level of expensive QF purchases, and the price that the utility will pay for wind energy will be considerably lower than the average of its current QF contracts.
The staff of the Maine Public Utility Commission supported the utility proposal, noting that the projects represent a regulatory "insurance policy" because they add valuable diversity to the fuel mix, avoid more expensive fossil fuels, hedge against fuel price increases and more stringent environmental restrictions, and help to assure that future renewables applications will be cost-effective. The staff also noted that, even in the restructured utility industry, these "green" electric sources would have value both for environmentally conscious customers and for those seeking diversity.
In early 1995, a U.S. company announced that it had signed contracts to develop and finance a project called Windplant in West Texas to sell electricity to the Lower Colorado River Authority. It will be the largest wind energy facility in the United States outside California. The company previously announced plans to develop up to 250 megawatts of wind capacity at the site.(32)