Opportunities in Public Power Wind:Lessons Learned from Successful

Development and Marketing Projects

Jill K. CliburnBased on work for the DEED Program

American Public Power Association

and

Wind Powering America Program, US DOE

June, 2006

Public power utilities:A unique market for wind development2000 systems, mostly city-owned

Serving 20 million customers—about 15% of the U.S. utility market

From < 1 thousand to > 1 million customers

Often working through (>60 nationwide) joint action agencies for energy supplies

Among America’s first utility wind programs and green power pioneers

Objectives9 case studies completed in 053 more in 06To support public power wind developmentTo inform potential development and marketing partnersTo spot trends and identify concernsAvailable in print or CD-Rom; summarized in this brochure

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Joint-action agencies and utilities examined

Arkansas River Power

Authority/Lamar

AMP Ohio/Bowling Green

Austin Energy

Platte River Power

Authority/Fort Collins

MEAN/Aspen

Missouri River/ Worthington/

Moorhead

Sacramento Municipal Utility Dist.

(SMUD)

Seattle City Light

Waverly, Iowa

Nebraska Public Power Dist.

Energy Northwest

Forest City Iowa/Community wind

examples

Sample matrix: Project definition

Austin

Energy

AMP Ohio/BG

ARPA/

Lamar

PRPA/

Ft CollinsDirect Ownership X X X

Outside power developer/

marketer

X X X X

Distributed generation system

X X

JAA with remote wind farm

X

Relatively low wind speed X

New Case: Energy Northwest

Nine Canyon Wind Project

• Developed, owned and operated on behalf of local public power subscribers• Marked Energy NW’s return to bond market• 95.9 MW total with planned expansion

• Phase 1: 48.1 MW• Phase 2: 15.6 MW• Phase 3: 32.2 MW (pending)• Also pending: A separate 50 MW project

New Case: Nebraska PPD and Partners

• 60 MW project near Ainsworth

• Excellent siting for resource and transmission

• NPPD and customers take 32 MW; otherpartners include OPPD, JEA, Grand Island

• Drivers included IRP, portfolio diversification, customer support.

• Strong community support. Homecoming battle cry: Blow ‘em away!

• Financed with municipal bonds over 20 years.

Trends

A review of all 12 cases revealed trends inProminent drivers

Project design

Opportunities

Concerns

Prominent Drivers

Project economics have to work, but planners are driven

to make the economics work because of

Customer interest

Risk management (environmental and fuel cost risk)

Commitment to leadership in clean energy

Community/economic development

Regulatory response

Project DesignPreference for direct ownership, even among systems that currently have PPAs

- Affords greatest control of the resource- Protects indigenous wind (community pride)- Satisfaction with PPAs depends on tailored benefits

Some munis and JAAs still use shorter-term or cash financing, but this is changing as projects grow

- Popular financing approaches- CREBs and other options coming in strong

Types of projects under consideration is influenced by the cost and availability of wind equipment

Opportunities

Changing economics influence project trends Larger turbines and larger wind farms encourage development partnerships

Transmission costs discourage some projects; encourage distributed wind, but on a utility (> 8 MW) scale

Project partners may be geographically dispersed

Utilities and community wind advocates finding more common ground, though challenges remain

Cautious optimism about CREBs and other financing options

Financing Opportunities Municipal bonds

CREBs and REPI

Value of REC sales

Taxable partners

Green power subscriptions

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A New Look at “Buy vs. Build”

Source: LBNL

Concern: Subscriptions or Rate-based Wind? Need to reach resource portfolio commitments as high as 20% -- Subscriptions can’t do it

Rate-based wind is perceived as a commendable, city-wide decision

Lower administration costs for rate-based wind

Lower risk when utilities don’t face monthly obligations to customers on contract

Some utilities believe in both green power marketing and rate-based wind, because marketing keeps customers educated and engaged.

Other utilities believe they cannot support both. If regulators require green power options, some systems say this discourages larger rate-based resource acquisitions.

Concern: Understanding RECs

Few munis have worked with RECs (green tags) so far

Customers believe that utilities that own wind generation are

producing green power whether or not they retain the RECs

Need to recognize and encourage utilities that facilitate wind

development through plant investments, while clarifying that

wind generation disembodied from RECs is not “green power.”

Growing opportunities to sell RECs to IOUs or power marketers

“Our customers believe they are getting all the green power from the turbine… We really don’t try to convince them otherwise, even though the RECs are sold throughout the (joint-action agency’s) system.”

- Small utility manager

Concern: Integration issues Diversity of viewpoints and experience

Distributed wind offers benefits, with costs

Integration services offer benefits, with costs

Better forecasting in the works

Most project sponsors say they are driven to solve problems in response to customer interest in wind

Conclusions: What is the outlook for

public power wind? JAAs can partner with local utilities and with each other to leverage large projects

Community wind partners (schools, etc) may work with local utilities

Some JAAs allow local utilities to subscribe. This allows early-adopters to jump-start a region-wide program

Great opportunities for utility-scale distributed wind are dampened by current wind industry conditions

Public power utilities are just beginning to get savvy about financing opportunities: Again, can the industry respond?

Resources from APPA and Wind Powering America

Brochure and case studiesCollaborations with WIGwww.repartners.org Web siteSee also, www.windpoweringamerica.comWebcasts and technical assistance to COUsAnnual Public Power Wind Pioneer Award

Who will be this year’s top Wind Pioneer?