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Nebraska Workshop: Models for Wind Power Development

Ed DeMeo Renewable Energy Consulting Services, Inc.

DOE-NREL Liaison to UWIG and NWCC (EPRI Renewables Programs, 1976 - 1998) November 12, 2002 Lincoln, Nebraska

Objectives and Schedule

Overall Objective: Develop models to spur the development of Nebraska’s wind energy resources, either for in-state consumption or for sale to others

    Native American/Tribal Model Large Public Power District Model Single Rural Electric System Model Multiple Small Municipal System Model 

Objective for Today:Discuss background and initial ideas; obtain input from Nebraska stakeholders

Schedule: Nebraska Wind Development Models Report by 12/31/02 (draft) and 3/31/03 (final)

   Working Group meeting November 12 Draft models distributed to working Group by December 6 Working Group meeting December 12

Items to Address

Financing methods

Statutory issues

Governance issues

Potential federal legislation impacts

Non-customer consumption issues

Cost analysis; closing the gap

Possible problems or barriers

Electric Power in Nebraska

Publicly owned system

  Degree of public control?

Contrast with investor-owned utilities and state PUCs 

Reliable electric power at lowest cost

 How is cost defined?

Primarily coal (from Wyoming)

  About $200 million/year to Wyoming for coal About 6% hydro from WAPA 

No privately owned generation

No access to tax credits

How are needs for new power being addressed?

Personal Perspective

Nebraska: Legacy of electric-power leadership

Job done well historically

Many IOUs in other states have similar history

Public had been content to leave job to electric utilities

Major change initiated in early 1990s

   Public questioning of the power business; heavy PUC input Restructuring movement initiated; jury still out Most IOUs weakened in stature and financially 

Public power least affected so far; Nebraska probably least so

Public power decisions still being made by top management

Weak connection to the public; no PUC, no city council

Citizens need stronger connection to the power sector!

Public Opinions on Renewables in Nebraska

NPPD Customer Poll: strong support for adding renewables to the generation mix

NPPD top management reports that customers not interested in renewables

 Explanation of discrepancy?

Response to green power programs

 Marginal. Why?

How can customer attitudes be accurately determined and have an impact?

Where Does Wind Make Business Sense?

Texas: careful public polling convinced utilities and regulators of customers’ desire for clean energy

  Legislature passed renewables portfolio standard in 1999 2000 MW new renewables by 2009; 900+ MW wind already 

Minnesota: state mandate of wind (825 MW) as condition for nuclear waste storage

Colorado: green priced product (about 30 MW), followed by 152 MW rate-based at direction of PUC as lowest cost option in an all-source bid

Iowa: legislative mandate for 100+ MW of wind

   Total now exceeds mandate Tremendous support in the farming community Currently limited by transmission constraints

Where Does Wind Make Business Sense?

Wyoming: Terrific winds coupled with regulatory support

Pennsylvania: successful restructuring resulting in retail competition for electricity

  Several plants in (about 50 MW); another 100+ MW nearing installation Substantial customer base for green power 

North Dakota: property tax incentives; initiative from legislators reflecting public interest

Kansas: 100+ MW, property tax exemption by state law

 Developers make voluntary payments to communities

How Can Wind Make Business Sense in Nebraska?

Policies that reflect public wishes without being fiscally irresponsible

 These have gotten the ball rolling in most states with wind development 

Allow wind-plant ownership by entities that pay taxes

 Take advantage of Production Tax Credit (1¢/kWh over 30 years)  Legislation required?

Broaden definition of cost of electrical energy

 Include allowance for health costs, diversity, security,etc.

Sell environmental attributes in green-tag markets

 Fledgling markets developing, values around 2¢/kWh today 

Include credit for in-state economic development and revenue retention

Institute a Nebraska Renewable Portfolio Standard (RPS)

Spread transmission costs over all customers

Straw-man Scenario

Add a new combined-cycle power plant

    CC plant has gas (combustion-turbine) and coal (steam-turbine) sections Use of CT waste heat in steam cycle increases overall plant efficiency Requires capital investment in both gas and coal equipment Payments for fuel leave the state 

Alternative approach: Add wind plus CT

        Coal plant investment avoided No coal fuel payments leave the state Capital investment in wind instead; rural economic and tribal benefits No out-of-state fuel payments for wind CT efficiency reduced somewhat; gas still imported CT can compensate to a degree for wind fluctuations CT may already exist in the system Re-dispatch the entire system to optimize with the new mix 

Don’t force the wind plant to fit into a conventional box; analyze the new system as a whole