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Electricity prices threaten wind farm

Madison Gas & Electric says it won't pay nearly three times the going rate for wind farm electricity. That could kill a six-turbine wind farm project planned for Springfield. (Photo by Joe Yovino)

Madison Gas & Electric says it won't pay nearly three times the going rate for wind farm electricity. That could kill a six-turbine wind farm project planned for Springfield. (Photo by Joe Yovino)

By Paul Snyder

Madison Gas & Electric’s reluctance to pay nearly three times the going rate for wind farm electricity could kill an estimated $20 million project planned for Springfield.

Sun Prairie-based Wave Wind LLC wants to build a six-turbine wind farm. But the cost of the project means MG&E would have to pay 8 cents per kilowatt-hour for electricity from the farm, said Dionne Lummus, Wave Wind’s business development coordinator.

MG&E can buy wind power at a market rate of about 2.9 cents per kilowatt-hour, said MG&E spokesman Steve Kraus. Furthermore, he said, renewable electricity represents about 12 percent of MG&E’s generation, putting the utility well ahead of the state’s 10 percent by 2015 goal.

If there is no need and the price is higher than market rates, Kraus said, ratepayers should not have to pay more.

“We have to be responsible to the customer,” he said.

Without an agreement with MG&E, Lummus said, Wave Wind, which does business in 11 other states, likely will pursue a project in New Mexico.

“And if we can’t make (the Springfield project) work,” she said, “you’re going to see small wind farms having trouble getting off the ground in the future.”

Wave Wind could sell the wind farm’s electricity to other utilities, but the project is in MG&E territory, and MG&E could charge fees if another utility steps in. For that reason, Lummus said, Wave Wind likely will not try to sell to other utilities.

Wisconsin utilities searching for renewable electricity sources are more likely to invest in large-scale wind farms or import from out of state, Lummus said. But, she said, that hurts Wisconsin because the state loses jobs and the money from land sales.

Roughly 25 percent of MG&E’s renewable electricity comes from Wisconsin, Kraus said.

“The issue here is the economics of scale,” he said. “When you’re looking at larger projects, the price comes down. And wind resources in northern Iowa and western Minnesota are better than they are in Wisconsin.”

CHECK OUT THE DAILY REPORTER’S WIND FARM PROJECT PROFILE PAGE

Wave Wind has agreements from Springfield landowners to build the project, Lummus said. The project could create up to 100 construction jobs, which she said would be filled by union workers.

Dave Boetcher, president of the International Brotherhood of Electrical Workers Local 159 Madison office, said IBEW wanted to use the project to train apprentices. He said he understands MG&E’s cost and need concerns but said utilities need to show more foresight.

“It makes sense as a business model,” he said. “But it’s terrible for energy policy in this state. When you look at why companies are OK with their energy supply right now, it’s because the economy’s down. When it recovers, they’re going to be right back to where they were.

“You don’t build a generator the day you need it. You do it before, so you’re ready.”

Kraus said MG&E is willing to discuss the project if the asking price is reasonable.

“Anything more than market rate is going to be a burden on customers,” he said. “Why should customers pay more if we can save them that money by not buying the power?”

4 comments

  1. “MG&E can buy wind power at a market rate of about 2.9 cents per kilowatt-hour, said MG&E spokesman Steve Kraus.”

    What a completely misleading statement by MGE. The wind output from the Eco Dane project would be a long-term fixed price contract. Comparing this with current market prices for wind output from an Iowa wind farm is ridiculous. MGE can also buy market coal power for a tiny fraction of the amount it is spending on the new Elm Road coal plant and the amount it is asking to spend to retrofit the 30-year old Columbia coal plant. But market prices and long term contracts are very different, as MGE well knows.

    In addition, all power transmitted out of Iowa (wind and coal) is highly constrained and additional imports will require big investments in transmission lines. The Eco Dane project is adjacent to MGE’s existing transmission lines, saving transmission build and congestion charges. In fact, according to a recent analysis by Black and Veatch that was commissioned by WPPI Energy from Sun Prairie, the high cost of electrical transmission offsets the higher wind output from Iowa and Minnesota wind. Finally, the local economic benefits of renewable energy projects close to home are significant. If MGE doesn’t care about local economic development then they should pull the Economic Development section off of their website. http://www.mge.com/ecodev/business/incubators.htm

  2. A news release issued by Advocates for Renewable Energy, a coalition which includes RENEW Wisconsin:

    For Immediate Release
    April 6, 2010

    For More Information Contact:
    Shaina Kilcoyne: (608) 310-3338

    As the article above chronicles, Wave Wind LLC, a Dane County-based wind services company, is ready to build a six-turbine, 10-megawatt project in western Dane County and sell the electricity to the local utility, Madison Gas & Electric (MGE). All the necessary permits have been issued and the turbines are set to be delivered in June.

    Unfortunately, Wave Wind cannot find a buyer for the project’s output. MGE contends that it does not need new supplies of renewable electricity until after 2020. Moreover, wholesale power prices are at historic lows, and the standard buyback rate available to third-party power producers like Wave Wind is not sufficient to make the project economically viable. As Wave Wind president Tim Laughlin put it, the standard rate “won’t even allow us to put a shovel in the ground.”

    The upshot? Wave Wind will likely install those turbines in another state. Should that happen, most, if not all, of the jobs and business opportunities created by the construction and operation of this facility will follow the turbines to the state in which they are installed. Wisconsin’s loss will be a gain for Iowa or New Mexico.

    This is not an isolated phenomenon, nor is it limited to wind energy. Dairy operations and food processors looking to recover energy from their organic wastes also find it difficult to justify investments in biodigesters, even with Focus on Energy incentives. A policy solution is clearly needed to bridge the difference between the production costs of small-scale renewable energy systems and the cost of operating 40-year-old coal plants that have been fully amortized. Neighboring Minnesota now has nearly 500 megawatts of community wind due to a statute that encourages it. Such projects have a very minor impact on overall electric rates. Within the Clean Energy Jobs Act, Wisconsin has the opportunity to promote small-scale renewable energy projects as well.

    Two provisions in the Clean Energy Jobs Act are tailored to help producers of locally available renewable energy overcome the economic barriers cited above:

    + A 10% in-state renewable energy set-aside by 2025. This provision would more than double the output from existing renewable generating units in Wisconsin.
    + Incentives and other provisions targeted for smaller renewable generating facilities. These provisions would encourage small-scale, community-based renewable projects throughout the state.

    Developing a truly sustainable platform to support Wisconsin’s economic future requires a commitment to local energy sources like wind, organic wastes, wood, solar, and small-scale hydro. Passing the Clean Energy Jobs Act will make it easier to attract and retain the private sector enterprises that drive job growth as well as strengthen rural economies.

    END

  3. Hi your wind project looks great and am very interested in your comments and stats you may already know this but I read somewhere that if you pour a mixture of carbon powder and fine iron fileings mixed with a quick setting resin like car body fillers and fill up the space in the middle of your coils this is supposed to greatly improve the efficiency of the generation.

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