Portland General Electric on Tuesday announced plans to acquire the development rights for what would be the largest wind farm in Oregon and one of the largest in the country.
If state regulators approve the agreement, which was reached with Oakland, Calif.-based Orion Energy, PGE could begin the first phase of the $200 million project as early as next summer. The turbines would rise from Sherman County’s Biglow Canyon near the Columbia River Gorge town of Wasco.
All told, PGE envisions owning a 225-turbine project with a 350- megawatt to 450-megawatt capacity. That’s enough electricity to power about 100,000 homes.
The announcement highlights the utility’s embrace of an ambitious investment strategy to reduce its dependence on increasingly expensive wholesale markets and natural gas-fired power plants.
“It will help us diversify away from more volatile fuel sources,” said Jim Lobdell, PGE’s vice president of power operations and resource strategy.
PGE, a publicly traded company previously owned by the bankrupt Enron, is Oregon’s largest utility, with 775,000 customers. It owns enough thermal and hydro-powered plants to generate about half the power it needs for its residential and business accounts. It relies on the wholesale market for the remainder.
Since 2000, wholesale prices have been climbing, pressuring PGE and other market-exposed utilities into capital investment programs.
PGE is building a 400-megawatt natural gas-fired plant costing $285 million near Clatskanie. The plant, capable of powering 300,000 homes, is scheduled to come online next spring.
Wind is a variable resource and doesn’t produce the nonstop electricity flow of natural gas- or coal-fired plants. Adjusted to account for wind’s ups and downs, a megawatt of wind capacity generates enough power to continuously light up about 250 homes. For thermal plants, it’s 750 homes.
More than regulatory hurdles stand between the plan for Biglow Canyon and its execution. Turbines are in short supply and prices are high, given a boom in wind-power development throughout the country.
For the project to pencil out, Lobdell said, “We need the turbine market to turn in our direction.”
In recent years, wind power has become an affordable alternative to more traditional forms of generation. One reason is the soaring cost of natural gas. Another is a federal subsidy in the form of a production tax credit.
The tax credit is due to sunset at the end of 2007. Although businesses and environmental groups are lobbying for an extension, next year’s deadline has helped fuel the development boom — and the run on turbines.
If all goes according to plan, PGE would complete the project’s first phase — 126 megawatts — before the tax credit expires, Lobdell said.
The credit, he said, “is very important to the project’s economics.”
PGE also would receive $12.5 million from the Energy Trust of Oregon, a nonprofit organization that uses a pool of money collected from electricity ratepayers to encourage large-scale renewable projects.
The federal and state aid would bring wind production costs down to about $50 a megawatt hour, a price competitive with natural gas, Lobdell said.
PGE recently asked regulators to approve an 8.9 percent rate increase. The wind project would not require an additional rate boost because equivalent power purchases already have been folded into future cost calculations, Lobdell said.
Bob Jenks, executive director of the Citizens’ Utility Board, which represents residential ratepayers, said he hasn’t yet studied the details of the Biglow Canyon project. But, generally, “PGE ought to be pursuing wind,” he said.
Wind power remains a small part of the overall mix of power generation, accounting for about 1.5 percent of the electricity consumed in the Northwest.
If Biglow Canyon is fully developed, wind power would represent about 5 percent of PGE’s resource portfolio, utility’s officials said.
PGE holds long-term contracts to buy 100 megawatts of wind from two other wind farms in the Columbia River Gorge.
The Biglow Canyon project would the first wind farm that PGE would develop on its own.
PGE would not disclose the price of obtaining development rights from Orion Energy. First-phase construction costs are pegged at between $200 million and $240 million.
The Oregon Public Utility Commission is reviewing the agreement with Orion Energy and is expected to announce its recommendation in the next couple of weeks.
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