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The Blessing and Curse of Low BPA Electric Rates as the Northwest Moves Towards a Clean Energy Future

Posted in Clean Energy, Electric Vehicles, Energy Conservation

BPA Administrator Steve Wright was in Seattle in early November as part of a victory lap prior to his announced retirement next February.  The victory lap is well deserved.  He is the longest-serving administrator of the Bonneville Power Administration, having joined BPA in 1981, coming up the ranks until he was named Acting Administrator in 2000 and Administrator in 2002.  He has faced some remarkable challenges, and has accomplishments he can be justly proud of.

BPA was formed in 1937 to sell the power generated by the Bonneville Dam, and now operates the system of federal dams on the Columbia River that generate about one third of the electricity consumed in the Pacific Northwest.

Wright’s tenure has been challenging because it has coincided with both an increase in awareness and concern about the impacts of the Columbia River dams on salmon populations, and litigation by Native American tribes and others against BPA.  BPA has found itself needing to spend billions of dollars to mitigate the impacts of those dams.  On the other hand, there is some evidence that those efforts are paying dividends, as more adult sockeye salmon passed the Bonneville dam this year than in any year since 1938.  That is an accomplishment he is proud of.

Wright’s tenure has also been challenging because BPA has sought to integrate 4,300 megawatts of wind power into its system.  That has led to an over-supply of power at times.  Although water can be spilled over the dams without generating power, at times spilling too much water harms fish and violates the Clean Water Act.  So, BPA is struggling with what to do with all its wind power when high winds coincide with high water.

Wright is proud, however, of the fact that the Bonneville power dams allow the Pacific Northwest to have the lowest cost electricity in the nation.  Washington’s electric rates average about half of California’s, and about a third of rates in Connecticut.  During Wright’s tenure BPA has signed long-term (20-year) power supply contracts with most of the private power companies in the region, assuring them that their future power will be based on cost – not market.  That means that the region is reasonably immune from the greedy eyes of other parts of the country, which wonder why federal dams can’t share the wealth by raising rates in the Northwest and using the added revenue to reduce electric rates elsewhere.

That low cost hydropower may have been the single largest factor in the economic development of the Pacific Northwest.  During World War II it allowed most of the aluminum in the planes that flew over Germany and the Pacific to be made in the Northwest.  It provided cheap power for Boeing.  It allowed the economical settlement of a region that was previously sparsely populated.

It has also spared the region both the dirty air of historic coal-fired power plants in the East and Midwest, and the billions of dollars that will be required to clean up and convert those plants to cleaner burning fuels.

Today, as the region seeks to move to a clean-energy future, it provides some significant advantages.  For one, electric vehicles make more sense here than anywhere else in the country.  Electric cars don’t use petroleum – but they do need power.  In much of the rest of the country, that power is generated from coal or natural gas.  So while the carbon emissions are not from the tailpipe, there are, nonetheless, emissions.  And, the electricity to power cars is not cheap.  But, while fossil fuel power plants can be “dialed down” to at least some extent as demand for power drops, dams have water spilling over them 24/7.  That means they can generate power during periods of low energy demand, with no carbon emissions and minimal additional cost.  With timers on home charging stations to start charging cars after demand has dropped in the evening, the Pacific Northwest could charge much of its stock of automobiles with the water spilling over dams in the middle of the night that currently is wasted as a power source.  No one is thinking much yet about differential rates to create incentives to charge cars only during low-demand periods, but we’ll get there.

On the other hand, the lowest electric rates in the country has its disadvantages.  Chief among them is that it makes a host of power saving opportunities less cost-effective.  Most industrial facilities waste remarkable amounts of energy, a significant amount of which could be reclaimed with co-generation.  A co-generation plant typically requires significant investment, and whether that investment pays off depends on what the power can be sold for or would cost if the company had to buy it.  In the Northwest, lots of manufacturing facilities have looked at installing co-gen plants; a much smaller number have done so, because it doesn’t pencil here the way it would pencil in other regions.  Commercial buildings also frequently have opportunities for small-scale electric generation – through solar panels on the roof, reclaiming heat lost in the mechanical system, or other innovation.  But again, the incentive to make the investments necessary for these green energy innovations are not as strong here as in parts of the country where avoided costs of buying power are much higher.

Are those disadvantages worth it?  Well of course.  We must count the low-cost power of the federal dams BPA administers as one of the great blessings of this region.

But if the Northwest truly wants to move to a clean-energy future, it needs to recognize that the fact of low-cost electricity comes with a price.  Much as low-cost petroleum for a hundred years drove the automobile industry to focus more on style, size and performance, and less on efficiency, the Northwest’s low cost power, while it will encourage the conversion to electric vehicles, will tend to discourage other forms of clean energy innovation.