Oregon Nixes Wind Power Component of Utility's Latest IRP

While conceding that an electric utility could be in danger of missing long-range targets for procuring renewable energy under the state's renewable portfolio standard (RPS), the Oregon Public Utility Commission nevertheless has rejected that part of the utility's most recently filed integrated resource plan (IRP) that calls for acquisition of 175 average megawatts (MWa) of wind capacity by 2020. 

The commission explained that RPS requirements notwithstanding, the utility, Portland General Electric Company (PGE), simply had not demonstrated to the commission's satisfaction that the long-term cost savings predicted by the company would outweigh either the long-term risks of the wind power program or the plan's short-term rate impacts. 

As has been standard practice in Oregon for more than 25 years, electric utilities are required to develop and submit a new IRP for commission approval every two years. The planning process entails forecasts by the utility of its anticipated load for the next two to four years followed by identification of resources avail able for meeting that demand. The utility then must employ a cost analysis to ascertain which supply-side versus demand-side resource options would best fulfill those needs. The resulting IRP must take a least-cost approach while still assuring a diversity of generation sources within the utility's portfolio. 

The commission acknowledged that resource planning protocols had been rendered that much more difficult with the institution of the RPS in 2007. The commission noted that Oregon's current RPS, which was updated by the legislature in 2016, sets forth a schedule aimed at each utility achieving a goal of 50% of its overall retail energy sales coming from renewable resources by 2040. However, intermediate targets were also established, with the utilities' present renewable energy obligation sitting at 15%. That portion will rise to 20% by 2020, climb to 27% by 2025, then to 35% by 2030 and 45% by 2035 until it reaches the 50% mark in 2040. 

According to the utility, its 2020 goal of soliciting 175 MWa of new renewable energy, primarily wind, is crucial to it being fully compliant with the state's RPS directives by 2040. It asserted that investing in new wind projects now is a prudent strategy for assuring attainment of the RPS obligations over the long term. Moreover, PGE drew attention to the fact that federal tax incentives, in the form of production tax credits, are being phased out for wind facilities, with the credits scheduled to sunset in their entirety in 2020. 

In addition, the utility argued that its resource plan represented a leastcost, lowest-risk action plan because a number of other components were featured in the IRP. The company propounded that besides the new wind resources, its IRP also was built around increased emphasis on energy efficiency, demand response, conservation voltage reduction measures, further acquisition of standby generation, and consideration of utilityscale energy storage systems. 

Aside from the company's proposal for 175 MWa of additional wind capacity, the commission had little problem with the other elements of the IRP. That is, the commission ruled that it was patently reasonable to work toward meeting forecasted load in part through energy efficiency and other programs that contribute toward reductions in demand. But the commission held that the same could not be said of the renewable energy aspects of the IRP. 

The commission listed several flaws it saw in the proffered IRP. For one, the commission voiced significant reservations about the steep price tag the utility had calculated for the wind generation investments. For another, the commission observed that the record showed that PGE was likely to be in comportment with all incremental RPS goals through at least 2029. A third drawback identified by the commission was the fact that wind energy, as an intermittent resource, is not dispatchable. 

Taking all those factors under advisement, the commission concluded that it was neither necessary nor appropriate to compel current ratepayers to shoulder such an outsize nearterm investment in wind facilities, the capacity of which may or may not be required in the future. Declaring that PGE had shown neither "a physical or a regulatory need for [the] resource" before 2029 at the earliest, the commission found that that part of the IRP should be rejected. 

Expanding on its holding, the commission stated that new energy technologies and innovations are being introduced at a dizzying pace, with associated market structures being transformed in concert. Given such rapidly changing conditions within the energy sector, the commission said it simply did not make sense to commit so much customer-provided capital to projects that actually could end up yielding a negative return by the end of the next decade. 

The commission commented that much of the utility's IRP seemed to have been premised on a future electric industry that operates the same as it does today, with utilities moving away from coal-fired generation and relying more on low-cost natural gasfueled power or renewable energy. However, the commission said, PGE's planned incorporation of so much wind power could backfire on the company, especially since the intermittent nature of wind energy makes it incapable of being dispatched. 

That in turn requires dependence on natural gas-fired units for standby purposes, the commission said. From the commission's perspective, though, the cost-effectiveness of such gas-fired backup generation could be lost a dozen years from now if natural gas prices go up and no longer reflect their present historically low rates. 

The commission stressed that its denial of the wind solicitation component of the utility's IRP should not be taken as an indictment of renewable energy in general, nor was it discounting the role that RPS requirements play in the development of IRPs, it said. Indeed, the commission told the company that it was welcome to return with a revised renewable energy element that was not so frontloaded. 

The commission reiterated that PGE had been unable to demonstrate that the short-term benefits associated with the proposed wind power acquisition were sufficient to justify the significant rate impact on customers and the potentially extensive long-term risks of the plan. Re Portland General Electric Co., LC 66, Order No. 17-386, Oct. 9, 2017 (Ore.P.U.C.).