Transmission & Resource Adequacy Raise Mojave Costs

By Published On: November 18, 2011

One of the cost drivers of a Pacific Gas & Electric-Abengoa Solar power purchase agreement is a requirement that the solar company provide the utility with resource adequacy payments. But maybe not for long: new transmission or a change in policy could alleviate the costs attributed to assuring resource adequacy assurances. The resource adequacy requirement is because transmission congestion is expected to prevent the plant’s power from being fully deliverable until lines are upgraded or old facilities shuttered. Under the terms of the contract approved Nov. 10, Abengoa has to pay the utility to buy substitute electricity when it cannot fully deliver power from its planned 250 MW Mojave Solar project to PG&E. Before the commission approved the deal, Energy Division director Ed Randolph outlined an alternative. It would have helped minimize this potential cost by requiring Abengoa only to make resource adequacy payments through the remainder of this decade. That would have restricted any necessary payments to six years, since the project is expected to go online in 2014. PG&E would not accept the compromise. Center for Energy Efficiency and Renewable Technologies executive director V. John White called the costs related to resource adequacy “artificial.” He said it’s time for the commission to change the way it views resource adequacy issues related to transmission line availability for new renewable energy projects. He urged the commission to look forward instead of backwards. White explained that old fossil fuel power plants are accounted for in the resource adequacy equation as if they will always be there providing power over existing transmission lines even though they won’t be. Irrespective of the resource adequacy cost issue, the California Public Utilities Commission approved the $1.25 billion power purchase agreement--which is set to run for 25 years--despite a staff warning that it’s cost was too high (Current, Nov. 11, 2011). With approval in hand, Abengoa is ready to begin construction. An industry insider who would not speak for attribution said the issue is that in order to deliver all of its power to PG&E, Abengoa likely needs to see a new transmission line completed. That line is Southern California Edison’s proposed $352 million Coolwater-Lugo project. It is not slated to open until at least 2018 under its current development schedule. The Energy Division advised the CPUC that if the transmission project did not go forward and resource adequacy payments were not capped in 2020, the power purchase agreement between PG&E and Abengoa would adversely affect the solar thermal project’s overall economic viability. The industry insider compared the situation to the chicken and egg problem. There are 2,700 MW of projects planned in the area that could use the Edison line, the source said. Unless one is built and it absorbs the cost of constructing the line, the transmission upgrade is unlikely to be built. This may prevent the other renewable projects from going forward. To get around such dilemmas, Center for Energy Efficiency & Renewable Technologies attorney Sara Steck Myers proposed a unique idea to the CPUC earlier this month. In a separate proceeding on resource adequacy policy--echoing White--she proposed that regulators consider which old generating plants using nearby transmission lines are likely to shut down relatively soon. Myers explained that under today’s resource adequacy policy, “scarce transmission capacity is reserved even for resources that are sure to retire in the near future.” In the case of the Mojave Solar project, the line it’s to tie into is used to carry power from GenOn’s 622 MW Coolwater Generating Station, said Edison spokesperson Gil Alexander. His company operates the line. Coolwater is an old natural gas-fired plant initially built in 1961, with units added in 1978. If that plant shut down during the 25-year lifetime of the Mojave Solar plant it would free up capacity on the existing transmission line, buoying the new solar thermal facility’s ability to fully deliver its power to PG&E. According to the California Energy Commission, the two oldest units at Coolwater are operated only about 2 percent of the time and the two newer units--now more than 30 years old--are operated about 9 and 13 percent of the time. Operation is infrequent due to Coolwater’s age and inefficiency, according to CEC. In contrast, White said Abengoa’s solar thermal plant would operate at a much higher utilization rate that would amount to all day long about two-thirds of the days of the year.

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