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Home / Washington Business - July/August 2003 / State of Energy |
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State of Energy |
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Written On: July/August 2003 |
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Written By: By Paul Schlienz |
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Low cost, reliable hydropower built the Northwest we know today. Although the region is turning to new and alternative sources of energy, hydroelectric generation still provides the majority of the Northwest’s electricity.
In his 1947 classic, Inside U.S.A, John Gunther described the impact of hydroelectric dams on the Columbia River:
Columbia power not only made possible the production of the Kaiser shipyards at Vancouver and the Boeing plants at Renton and Seattle; it helped create overnight a new light metals industry in the West, which in turn produced some 30,000 combat planes, one third of the total production of the war; above all, it played an indispensable role in making the atomic bomb. The bomb is, in truth, a kind of apocalyptic, demonic child of the Columbia. The army selected Hanford, Wash., near Pasco, as the site for its great plutonium plant because of the availability of Columbia power in illimitable quantities.
Since Gunther’s travels, the hydroelectric system has greatly expanded. Cheap energy continued to fuel the Northwest’s economic growth until the beginning of the 21st century. Then, with little warning, the Northwest’s charmed relationship with electrical power began turning upside down.
“Washington had the lowest energy costs in the nation and, in some parts of the state, the lowest energy costs in the world,” said AWB’s Kristen Sawin, who has lobbied Washington’s legislature on energy issues for 10 years. “Now, in some situations, our energy costs are among the highest.”
What caused the Northwest’s energy prices to rise is a tangled web of market forces, government policies, natural phenomena and sheer bad luck.
BPA is at Center of Energy Storm
At the center of the Northwest’s energy storm is the Bonneville Power Administration (BPA). Created in 1937 and headquartered in Portland, BPA is a federal agency under the Department of Energy which transmits and markets power from the great Columbia and Snake River dams to utilities and large industrial customers throughout the Northwest. In turn, the utilities sell electricity to consumers. Traditionally, BPA helped keep utility rates low by marketing its power at cost.
The Northwest’s energy crisis, which began in 2000, was blamed on deregulation of electricity in California. While deregulation and some energy trading practices may have triggered the crisis, the fact is demand for electricity continues to outstrip generation and transmission capacity. The net effect was series of large rate increase.
Because California saw tremendous economic and population growth in the 1990s, demand for electricity grew exponentially. Unfortunately, California’s utilities were unable to keep up with the demand because environmental concerns has blocked new power plant construction since the 1980s and old power plants are off-line increasingly for maintenance.
Utilities Struggling to Pay for High Cost Power
If BPA carries through with its planned increase for the fall of 2003, its base power rates would rise by as much as 41 percent. The Northwest’s economy would be in danger of losing approximately $470 million when utilities pass on BPA’s costs to ratepayers.
“BPA and the others are hoping they can recover some of their debt by making wholesale power sales,” said Collins Sprague of Avista, the Spokane utility that serves much of eastern Washington and northern Idaho. “Given that wholesale prices are not as high as BPA hoped they would be, they’re making less money and not paying off as much debt as they hoped. They’re carrying this debt longer than they planned. Potentially, it could grow if they’re not able to recover it.”
Deregulation, which allowed utilities to buy power on the short-term market instead of entering long-term fixed-rate contracts, was a major contributor to the utilities’ costs. Initially, power bought on the spot market was cheap. However, when the crisis hit and prices spiked, utilities were stuck with high rates since they no longer had the protection of long term contracts.
One of the terrible ironies of the Northwest’s energy crisis is that hydroelectric capacity is diminishing at the very time it is needed most. Not only has the Northwest run out of sites for new hydroelectric projects, but many power producing dams are in danger of shutting down.
“All of the hydro power projects in this state will have to be re-licensed within the next 15 years,” according to Sawin. “Mitigation costs and re-licensing costs will factor into whether those dams remain economical.”
Sumas Energy 2 Ready to Go
Sumas Energy 1, a cogeneration plant, has been producing electricity since 1993. Nearby, Sumas Energy 2, a proposed 660 megawatt combined cycle natural gas plant, has been approved by Washington state government, but awaits approval from Canada’s National Energy Board. Barring unforeseen delays, Sumas 2 could go online as early as 2006.
Natural gas fueled plants are among the most promising alternatives as the Northwest seeks to develop new power sources—if the price of gas levels off and new supplies come on line to satisfy skyrocketing demand.
“It’s important that the region develop alternate generation resources,” said Randy Hardy, Seattle City Light chief from 1984 to 1991, and CEO of BPA from 1991 to 1997. “Most of the new generation is in the form of natural gas-fired combustion turbines. That’s the cheapest and also the most reliable alternate power source. You’ve probably had 2500-3000 megawatts of additional resources built in the last three years.”
Located within the populous I-5 corridor, the Sumas 2 is close enough to consumers to avoid the costs involved in constructing long distance transmission lines. An added bonus, in environmentally conscious Washington, is that natural gas is the cleanest fossil fuel.
Alternate power sources are increasing their presence in Washington. Biomass plants, which burn wood waste, are being planned for Aberdeen and Darrington. Power producing windmills dot the landscape near Walla Walla and are being planned near Ellensburg.
“You have a lot of wind resources that people are developing,” observed Hardy. “Wind farms are good niche resources. With the tax credits and other benefits associated with wind, they’re actually quite cost competitive.”
Coal and nuclear energy are also receiving renewed attention in the wake of the Northwest’s energy crisis.
Near Centralia, a 1,404 megawatt coal burning plant has been in operation since 1972. The majority of the plant’s fuel comes from a nearby mine. Indeed, coal’s availability and inexpensiveness make it an attractive alternative energy source.
The Centralia plant has been controversial due to airborne emissions. However, the plant’s owner, TransAlta, has invested $200 million in scrubbers to reduce pollution. The plant is now among the cleanest coal burning facilities in the U.S.
Nuclear Energy Getting Another Look
The abandoned cooling towers at Satsop, visible for miles along U.S. 12, are monuments to a failed vision of a nuclear-powered Northwest. That 1970s dream died when the Washington Public Power Supply System (WPPS), a consortium of public utilities, was forced to abandon construction on four nuclear power plants due to massive cost overruns. Washington ratepayers started paying the bill for WPPS’s projects with a 15 percent rate increase in 1983. Twenty years later, the debt is still being paid.
Nuclear power developed a bad reputation in the Northwest due to the WPPS debacle. Nevertheless, in the wake of the region’s energy crisis, the atom may receive a second chance.
Energy Northwest, formerly WPPS, is studying the possibility of finishing WNP-1, a 70 percent complete plant, at Hanford, which was mothballed in 1982. Next to WNP-1 is Washington’s only operating nuclear power plant, the Columbia Generating Station.
The rising costs of other fuel alternatives have made nuclear generation competitive. Other factors working in nuclear power’s favor include:
• Greater reliability and efficiency of newer nuclear plant designs.
• Smaller, modular-plant designs that could be less expensive to build and safer to operate.
• Lack of air or water pollution.
• Nuclear power’s greatest downsides remain waste disposal and the vulnerability of nuclear plants to terrorist attacks.
Hydro Power Still Dominates
No matter how many alternate energy sources are developed in the Northwest, hydroelectric power is likely to remain a major factor. Wise management of the region’s dams may be able to effectively increase hydroelectric capacity.
“There are no new sites for hydro, but if BPA would rethink some of its fish operational measures, it can effectively get more capability out its dams,” according to Hardy.
As the Northwest attempts to regain its bearing in its new energy environment, pressure is building on BPA to cut expenditures instead of burdening ratepayers and damaging the economy with cost increases.
“Out of Bonneville’s $2.5 billion budget, you probably have $600-800 million a year of direct costs or foregone revenues as a result of Endangered Species Act requirements for saving salmon,” Hardy said. “There’s probably $100 million that could be eliminated without hurting endangered fish.
John Gunther proved himself a prophet when he observed, more than 50 years ago, that, “The [Northwest] has an industrial and social future without parallel in the nation. Reason: public power from the Columbia.”
Hydroelectric power from the Columbia and its tributaries is no longer cheap. Neither can the great dams fully satisfy the Northwest’s power demand in the 21st century. Nevertheless, with careful planning and reasonable public policies, a diversified power system can be built upon the foundation created by the region’s dams.
It is up to the Northwest to seize its destiny.
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