By Margaret Ryan, AOL Energy
Wind farm investors face growing losses from “curtailments,” as turbine installations outstrip the capacity of local transmission systems to accommodate the new power.
The issue is a “growing pain” of wind technology, Judah Rose, Senior Vice President, ICF International in McLean, VA, said. Curtailment has become an increasing problem since 2008 as wind capacity nationwide increases from almost nothing 10 years ago to more than 42,000 megawatts now. “It’s occurring even in RTOs (regional transmission organizations) with advanced pricing and management systems,” Rose said.
The Midwest Independent System Operator (MISO) says its curtailments in 2010 amounted to about 8% of wind output, some 824,000 megawatt-hours, up from 292,000 MWh in 2009. The system experienced more curtailments of longer average duration as more wind projects came on line in areas with transmission congestion.
Rose and Kiran Kumaraswamy, a transmission expert with ICF International, told a webinar this week that the situation makes it vital that new projects assess their curtailment risk. Coordination with transmission providers – both traditional utilities and merchant transmission builders – will be increasingly necessary for wind project profitability, they said.
Involuntary curtailments occur when consumer demand is less than the generation available, and grid operators must order some generation disconnected in order to keep the grid stable.
It’s a particular problem for wind, which often doesn’t blow during peak demand periods on hot afternoons, but does blow overnight when power usage is low. In the Midwest, Rose said, peak curtailments have occurred in the spring, when demand is low but wind is typically plentiful.
Curtailments can be particularly costly for wind projects, since their capacity factors are low. Good projects generate just 30-40% of their rated capacity over a year, so being unable to sell output when winds are most productive can hit project revenue hard.
Rose said MISO wind has averaged 3% curtailment over a recent 14-month period, but some locations with particular transmission constraints experienced as much as 20% curtailment.
That means projects are losing not just the revenue from selling those megawatt-hours, but also the production tax credits and renewable energy credits. He said the project owner often bears those losses.
Kumaraswamy said grid operators are trying different pricing systems to better manage the variable wind output, like MISO’s Dispatchable Intermittent Resources (DIR) rule. It creates a new generator category for wind and sets more flexible rules for wind generators bidding into MISO’s forward markets. But it does demand that larger wind operators participate in those markets, and pay penalties if they fail to follow dispatch orders, similar to performance demanded of all other generators.
He said under the DIR system this past summer, MISO saw only 2.8% of wind involuntarily curtailed, compared to 5.8% in summer 2010. However, wind operators are still adapting: they failed to follow dispatch orders 7.1% of hours, compared to 1.5% for all other generators, he said.
Other areas are experiencing differing constraints, Kumaraswamy and Rose said. California has good transmission in-state but heavy congestion at its borders, hindering renewables aimed at contributing to the state’s ambitious renewable goals. Pacific Northwest operators have to prioritize river flows through the region’s giant federal dams, because of endangered species and water quality laws, so they may curtail wind to keep the hydropower dams running, giving the area an average involuntary curtailment of 5.4%.
Rose said the financial community is now “very focused” on the curtailment issue. Risk can be managed with better coordination between project developers and transmission providers, he said, adding that firm transmission rights and low curtailment risk may be “selling points” for new projects.
The ultimate answer is expansion of transmission systems to accommodate the new resources, they noted, but those generally take many years for permitting and building.
Editor’s Note: This news story comes to us as a cross post courtesy of AOL Energy. Author credit for the story goes to Margaret Ryan.