New rules may help small energy projects sell to the grid

New rules could make it possible to develop more renewable energy in Alaska, by making it easier for independent projects to sell their power to the grid.

Mike Craft has been trying to expand his wind farm near Delta Junction since 2010. In his view, the project is a win-win.

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“[I want to] create some jobs for my kids and friends and family and neighbors,” Craft said. “I want to bring down the cost of power, and I want to do something about this air in Fairbanks.”

But the local utility, the Golden Valley Electric Association, wouldn’t buy his power. They said it was too expensive — even though it was potentially cheaper than some of their existing sources.

“I can compete with diesel,” Craft said. “I can compete with natural gas. I can compete with — coal’s pretty tough. Coal’s a bargain, no doubt about it. If you don’t mind the consequences of burning it, it’s a bargain.”

But, Craft argued, he shouldn’t have to compete with the cheapest part of a utility’s portfolio. He should only have to beat the price of whatever power his project would displace. In 2013, he filed a petition with the Regulatory Commission of Alaska (RCA), which oversees electric utilities.

This month, after two years of hearings, the commission issued new rules — and Craft got his way. Under the old system, a wind farm or hydro project had to beat the “average” cost of a utility’s power — that included everything, from cheap coal to relatively expensive diesel.

Under the new rules if, say, a wind project can produce electricity more cheaply than diesel, the utility has to buy that less expensive power. That brings Alaska into line with rules in the rest of the U.S. And Craft calls it a game changer.

“Basically, the door’s open,” he said. “And independent power producers, entrepreneurs, developers, or just a guy that has a house, when he wants to put a wind turbine on his house — Alaska’s open for business now.”

Ethan Schutt, of the Cook Inlet Region Inc., or CIRI, has a more measured response.

“It definitely could help a little,” Schutt said. “And sometimes just a little is all it takes to get something from concept to construction.”

CIRI developed the Fire Island Wind Project in Cook Inlet. With 11 turbines, it can produce up to 17 megawatts for Chugach Electric, one of the main utilities in South Central.

But CIRI scrapped a project to double the number of turbines when they couldn’t find a buyer for the new  power. Schutt said one big issue is integration. Sources like wind and solar are variable — when the wind isn’t blowing, no electricity is produced.

That means it’s more complicated to integrate them into the grid than a traditional natural gas or coal plant.

Utilities charge fees to cover that — and in the past, Schutt said, it wasn’t clear how they came up with those costs.

“In the absence of regulatory guidance, each utility was able to address those issues in its own, self-serving way,” he said.

The new rules include a set of criteria that utilities must use in making those decisions.

That doesn’t mean the Fire Island expansion is coming back. For CIRI, there’s still another major hurdle: transmission costs. If they want to sell to, for instance, Golden Valley in Fairbanks, right now they have to pay every other utility along the way.

That can double the price of their electricity. The new rules don’t solve that problem.

But for Mike Craft, in Delta Junction – he says it’s full steam ahead.

“I’m excited. I feel like I have my life back in a sense, and I have my state back,” Craft said. “I’m going to finish building this wind farm.”