Why The PGE-BPA Power Purchase Contract Is A Big Deal
Posted on March 7, 2018 by Bob Jenks
Tags, Energy
Portland General Electric (PGE) and the Bonneville Power Administration (BPA) announced today (March 7) that they have signed an agreement for up to 200MW of capacity from the federal hydro system. Last year in PGE’s Integrated Resource Plan (IRP), CUB pushed PGE to look to hydro capacity contracts as an alternative to building new natural gas plants. PGE and BPA have successfully negotiated just such a contract. CUB believes this an important step forward for the region. It provides a solution to the needs of both PGE and BPA, while simultaneously helping the region move forward in developing a modern, low carbon electric system.
PGE needs to replace the Boardman coal plant, which is scheduled to close in 2020. While renewables can replace much of the energy produced by Boardman, because of its intermittent nature, it could not necessarily meet PGE’s peak summer and winter loads. PGE needed a power source that it could count on after the sun goes down and when the wind is not blowing. In its IRP, PGE proposed building one or two new natural gas generating plants. Natural gas plants, while cleaner than coal, still produce significant carbon emissions. Environmental groups were strongly opposed to PGE’s proposal to build gas plants. Additionally, natural gas plants have useful lives of 30 to 50 years. Because of new technology associated with energy storage, renewables, and the smart electric grid, many experts expect the utility business will change over the next couple of decades and become cleaner and more flexible. CUB opposed PGE’s proposed gas plants because they were not consistent with this future.
BPA had a separate problem. Hydro power varies significantly from year to year, so hydro producers count on selling surplus hydro power in good water years to build reserves that allow them to purchase power in bad water years. But due to increased renewables, particularly solar power from California, demand for surplus hydro power is small and prices are low. Rather than seeing reserves increase, BPA’s reserves have shrunk in recent years.
In 2016, CUB began urging the two entities to work together to solve both problems. By purchasing hydro capacity for a period of five or 10 years, PGE could avoid new investments in fossil fuels as it manages the transition to a low carbon utility. By selling hydro capacity, BPA could create a value-added product that would increase its surplus power revenues.
This solution helps both PGE and BPA manage their systems in a changing world. It uses the federal hydro system to help support the transition to a low carbon future. It increases revenues for BPA, putting downward pressure on rates for BPA customers, while allowing PGE to avoid investing in new gas plants, which saves its customers money.
CUB commends PGE and BPA for working out this agreement. It really is a big deal for the region.
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03/07/18 | 0 Comments | Why The PGE-BPA Power Purchase Contract Is A Big Deal