Wind Energy for Municipal Utilities
In the face of new and emerging market conditions, municipal utilities across the country find themselves at a crossroads. Load requirements are expected to continue increasing, while in many cases, existing supply contracts will end within the next few years. Further, customers throughout municipal utility service territories express consistently high levels of interest in renewable energy alternatives. In most cases, the preferred renewable technologies are solar and wind.
Benefits to Municipal Utilities and Their Customers
More utilities are recognizing that wind power provides significant benefits to the utility and its customers. First, customers want renewables. Customer interest in renewables has been established repeatedly in customer surveys across the country. Second, wind power provides price stability benefits. Price risk mitigation is important to a utility’s financial stability and is highly desired by risk-averse customers. Third, renewables provide significant local, regional, and national environmental benefits. Finally, wind contributes substantially to local economic development, a benefit that will be of great importance to all municipalities.
Municipal Utilities’ Concerns with Using Wind Power
Municipal utilities have traditionally expressed three major concerns with incorporating wind power into their resource mix.
- “Wind power is more expensive than available fossil fuel options.” Several factors have emerged to address this concern. First, the cost of wind power has dropped dramatically in recent years and, in some locations, wind is equal to the low-priced fossil fuel alternative on a levelized cost basis. Second, the lack of price volatility for wind generation reduces the costs of hedging fossil fuel price risk. Finally, in light of customer preferences, wind power can play a significant role in supplying value and satisfying customer needs.
- “Because wind power is intermittent, the costs of transmission and ancillary services are increased.” This important issue is currently under intensive study. A variety of groups, most notably the Utility Variable-Generation Integration Group, are engaged in detailed studies assessing the impacts of wind generation on utility operations. Results suggest that the costs of incorporating wind generation into utility resource portfolios are much less than traditionally believed.
- “Our utility is not familiar with wind technologies.” For municipal utilities that are concerned about their lack of extensive experience operating wind generation technologies, power purchase agreements are a viable financial and practical option. In addition, many municipal utilities are coming to the conclusion that wind power will be a significant component of their future resource portfolios and are making the decision to learn about this technology now.