July 1, 2008

Keeping the Lights On

By Mayberry, Anne

RECs face huge challenge as energy demand grows at twice rate of new power generation The growing demand for electric power nationwide, coupled with climate change concerns and increasing energy costs, has increased interest in energy conservation and efficiency programs, and has expanded investment in alternative fuels. Despite these efforts, experts tell us that without additional electric generation, we may see power shortages during the next five to ten years.

Renewable energy comprises about 11 percent of the power sold by rural electric cooperatives, with hydropower accounting for the majority of it. More than 90 percent of cooperatives educate consumers about energy efficiency and conservation, and nearly one- half offer financial incentives for consumer efficiency and conservation efforts. Cooperatives continue to increase their use of alternative fuels and engage in research and development of technologies designed to address concerns about greenhouse gases.

Yet, data indicate this investment in conservation, energy programs and renewable energy projects will not meet future electric- power demand.

NRECA: Renewable alone won't meet need

"Loads are growing. We need more than renewable energy to meet increased demand," explains John Holt, senior manager of generation and fuels in the Energy Policy Department of the National Rural Electric Cooperative Association. A look at one rural electric cooperative's wind program explains the value of renewable fuels and how their use fits into the current situation.

Basin Electric Power Cooperative, a generation and transmission utility based in North Dakota, has developed several alternative energy projects, including a heat recovery project designed to capture waste heat from pipeline compressors to generate over 20 megawatts of electricity. Basin is also invested in wind power and is among the recipients of USDA Rural Development loans to finance production of electric power from wind energy.

"Overall, installed wind generation capacity is approximately 16,800 megawatts (MW) of electricity in the United States, demonstrating the tremendous growth potential of wind energy," says Ron Rebenitsch, Basin's manager of alternative technologies. Currently, Basin has 136 MW of wind capacity in its portfolio and plans to increase that by an additional 300 MW in the near future. Wind energy is growing, not just in the United States, but worldwide. "Because of this growing worldwide demand, most wind turbine manufacturers are sold out through 2010," Rebenitsch says.

Demand outpaces new generation

Electricity use is projected to grow twice as fast as capacity will increase during the next 10 years, according to the North American Electric Reliability Corporation (NERC) - a selfregulatory organization that enforces the reliability of the electric power system in the United States. NERC warns that our ability to manage unplanned events, such as equipment failures and unplanned weather, is becoming increasingly limited.

"Renewable resources are an important part of North American's energy future, but reliably integrating them into the bulk power system has its challenges," the organization says in its most recent Long-Term Reliability Assessment.

Renewable energy, such as wind and solar power, is not considered "baseload power" because it does not provide power 24 hours a day, seven days a week. Holt says this is the downside to most forms of renewable energy.

"It's not dispatchable. On hot summer days, when air conditioners are running full power, there may be no wind," Holt says. "Cloud cover can diminish solar capacity." One of the issues now extensively discussed in the renewable power industry is the accuracy of weather forecasting. "Everyone is emphasizing the need for better forecasting to prepare for drops in power," he says. "This is a key management issue."

Rebenitsch echoes Holt's point about wind not always being where it's needed, when it's needed. On average, Basin's data indicate that its 136 MW of wind power capacity generates at least 16 MW of power 80 percent of the time; it generates 50 MW 47 percent of the time. For example, during peak electric demand in July 2007, the 136 MW of wind produced 61 MW of electric power. However, during July 2006, wind was the source of only 6 MW of electric power during the peak demand period.

Wind's primary value comes from its displacement of fuel, such as coal, diesel or gas," Rebenitsch points out. Utilities typically use wind to displace the highest cost fuel in operation, often natural gas, he notes.

CREBs help co-ops generate green power

Tax credits have played a major role in the development and use of alternative fuels. Although wind project costs are rising, tax credits help keep wind power affordable.

More than half of a wind project's cash-flow is tax related, Holt explains, adding that while many cooperatives have purchased renewable power for years, they did not generate their own renewable energy. "Rural electric cooperatives initially bought green energy from other sources, at slightly higher costs," explains Holt. "Initially, cooperatives could not take advantage of the tax credits that other sectors of the industry were using to offset the costs of renewable investment. But implementation of Clean Renewable Energy Bonds (CREBs), which allow cooperatives to issue zero-interest bonds to fund renewable energy projects, helped level the playing field."

The lack of transmission - the ability to move power from one point to another - plays a role in getting renewable energy to the nation's power grid. Our aging grid needs investment, but, according to NERC, transmission investment lags not just because of the cost to build, but also because transmission projects are falling victim to the "NIMS syndrome - Not in My State!"

Rebenitsch puts transmission costs in perspective: "More than one- half of the cost of the consumer's power supply bill is in the wires." Holt phrases it another way: "It's no good to have that wind coming out of North Dakota if you don't have the transmission to get it out of North Dakota."

The near-term solution, Holt says, is likely to increase use of natural gas. "If this switch to gas does occur, we'll need to import [more of it]." Holt says he's usually an optimist, but with all the constraints now facing electric utilities, including rural electric cooperatives, he expects to see more blinking lights during the next five to ten years.

Basin Electric Cooperative already generates 136 megawatts (MW) of electricity at wind farms such as this, and will be expanding with an additional 300 MW (see related article, page 31). Photos courtesy Basin Electric Cooperative

"It's no good to have that wind coming out of North Dakota if you don't have the transmission North akota."

By Anne Mayberry,

Rural Utilities Programs

USDA Rural Development

Copyright Superintendent of Documents May/Jun 2008

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