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Market forces beginning to change renewables landscape

by Bill Knowles

WALSENBURG- With a recent ruling by an Administrative Law Judge recommending that the Southern Colorado Transmission project move forward, one might think Xcel Energy would be flying high, and they are to a degree.  However Xcel and Tri-State, the utilities which have committed to building the transmission line, are facing decreasing rates for a kilowatt of wind or solar generated energy. By the end of the summer, market cost for a megawatt of wind energy had begun to fall.

    Xcel Energy then began to reconsider the costs associated with putting wind and solar mega-watts into their transmission lines.  “Right now the cost of a megawatt of wind energy is 25 percent to 30 percent lower than it was when we first opened the RFPs [request for power purchase project proposals].  Xcel Energy feels it needs to get the best cost on energy for our customers,”  Mark Stutz, the senior media representative for Xcel Energy told the Huerfano World Journal.  “We can’t bring on a resource at whatever costs to the customers.  We have to get as reasonable a price as possible.”

    As a result, managers at E.ON Climate and Renewables in eastern Huerfano County are facing a nightmarish situation where they will have to re-bid on a power purchase agreement they felt Xcel had awarded them.  Negotiations concerning the agreement collapsed last month.  Now, E.ON  has a $400 million 200 megawatt (MW) wind farm project in limbo.

    Patrick Woodson, the chief development officer at E.ON, told the World Journal they weren’t really sure what happened.  “We were negotiating with Xcel Energy and had one year to get the power purchase agreement finalized.  It seemed they stalled for time and then said they are going to issue a new Request for Project (RFP).”

    Managers at E.ON knew they were facing an accelerating timetable on the project and offered to change the point of contact.  The point of contact is where power generated by E.ON enters the transmission lines owned by Xcel Energy.  E.ON was offering to change the physical location of the point of contact as well as pay the costs of such a move out of E.ON’s pockets.

    “E.ON got the bid and then equipment prices began to fall,” Woodson said.  “Up until then all savings had been reflected.”  Then, market cost for a megawatt of wind energy also began to fall. 

    Xcel Energy’s latest move prompted a letter on county letterhead, from the Huerfano County Board of County Commissioners requesting an explanation from Xcel Energy on why the negotiations with E.ON had broken down.  The county has been in support of the transmission line pro-ject but stated in the letter that support for the project was in jeopardy unless Xcel Energy responded to the letter.

    Another factor which may be affecting Xcel’s recent decision  is a solidifying public resistance to the transmission line project. Resistance has been growing throughout the region with some industry insiders saying it is a result of big money buying good public relations, hiring expensive legal talent and reaching out to nurture local groups who are opposed to the project.

    “There has been one and only one issue facing this project,” Stutz said.  “It is a 171,400 acre ranch.  “This ranch has a very good P.R. firm working for them and other groups were not in opposition to the project until these P.R. people were hired.” However during the public hearing in 2009, groups from Majors Ranch and La Veta also voiced opposition to the project to Administrative Law Judge Mana L. Jennings-Fader, the same judge who recommended the project move forward in a ruling last month.

    There is also resistance to industrial-scale solar energy projects in the San Luis Valley which are depending on the proposed transmission line to move energy out of the valley.  Colorado Energy News reported last month that in Saguache County, Tessera Solar is proposing to build a 1,525-acre 145 Megawatt (MW) field of 5,670 dish Stirling SunCatchers on rangelands in southern Colorado’s high-elevation San Luis Valley.   This facility will create a headwater of energy that will culminate in a flow of 8,000 megawatts north to Denver via the proposed Southern Colorado Transmission project, in part to support the estimated growth in northern Colorado over the next two decades.

    The San Luis Valley Renewable Communities Alliance (SLVRCA) has filed an open records request for documents related to Tessera’s permit application.  The SLVRCA hopes to find weaknesses in the Tessera HB 1041 application.

    Tessera’s proposed solar array would be almost 20 times larger then the Valley’s newest solar plant. The SunEdison rated at 8.2 MW is located just north of Alamosa and was completed in 2007.  The Tessera project alone will input around 2,000 megawatts, a quarter of the 8,000 megawatts the proposed transmission lines are designed to carry.

    At present, Xcel Energy and Tri-State Generation are still relying on the coal-fired generation system at the Comanche 3 plant in Pueblo along with working wind farms in Brush, Hadin and Grand Junction.   There are state mandates which require a certain mix of renewable energy by 2020 in the loads the companies carry.  The Southern Colorado Transmission Line project was proposed to help increase the mix of renewables the utilities delivered to consumers.  However, market forces and public resistance seem to be working against both the utilities and the development of local renewable energy projects.