Canadian renewable energy giant TransAlta says it cannot develop a wind project near Harlowton under terms set this week by Montana’s Public Service Commission.
The developer’s comments come one day after the PSC announced the New Colony Wind Project was “one step closer to breaking ground after receiving the go-ahead from state regulators.”
“These terms would make it extremely difficult, if not impossible, for any new QF projects to be constructed in the State of Montana,” said Stacy Hatch, spokesperson for TransAlta.
“QF” is shorthand for facilities that qualify for special rate and regulatory treatment under federal law promoting alternative energy projects. One of those alternative energy promoting rules prevents utilities from saying “no” to power from renewable energy projects.
The 23-megawatt wind farm proposed for the Martinsdale area was estimated to generate enough power for about 7,000 homes.
But in New Colony’s case, the price a utility must pay for that power is negotiated. The utility doesn’t have to pay more than its marginal cost for producing the power itself. When the developer and the utility disagree on that cost, it’s up to the Public Service Commission to set the rate.
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TransAlta has requested a rate of $43.63 per megawatt hour. The utility, NorthWestern Energy, countered with a price of $13.96 and offered a 25-year contract. The PSC settled the dispute, setting the price at $23.30 per megawatt hour and cutting the contract to 15 years to align the contract with the regulators’ new policy.
TransAlta also will be required to pay a $2 million security deposit for transmission upgrades to NorthWestern's powerline, the PSC decided.
TransAlta is looking to expand its renewable energy business, Hatch said, but not in areas where development is difficult.
“TransAlta is actively expanding its renewable generation fleet and looks to deploy investment capital in jurisdictions that are supportive of the economic development opportunities that renewable projects provide,” Hatch said. “If it could proceed, the New Colony project would lead to significant economic benefits for the Harlowton area.”
PSC spokesman Chris Puyear said if TransAlta can’t make the price set by the PSC work, then the project isn’t ready to compete with other energy sources.
“The Commission’s obligation is to set a rate that is fair to the consumer by ensuring that ratepayers pay no more for renewable power than they otherwise would for electricity generated by the utility or purchased on the open market,” Puyear said.
NorthWestern Customers do pay more than $43.63 per megawatt hour for power generated by the utility. In 2014, the PSC approved NorthWestern’s $900 million purchase of 11 hydroelectric dams that committed consumers to paying more than $60 a megawatt for hydropower over the 30 years. The commitment meant an overall rate increase of $5.4 percent in the near term with an assurance that inflation would eventually push market prices higher than the dam power price over the decades.
Since that deal, market energy prices have fallen and the PSC has steered away from both long contracts and rates set far above market price.