This Wind Emissions Reduction Project consists of electricity generation from wind, a renewable source. The project is interconnected to the Western Area Power Administration-Upper Great Plains East bulk transmission system, which is located within the Midwest Reliability Organization (MRO) region. Through the installation and operation of wind turbines, the project activity results in the reduction of greenhouse gases (GHG) through displacement of carbon dioxide (CO2) emissions from fossil fuel combustion for electricity generation.
Voluntary carbon offset projects must demonstrate additionality, i.e., that the emission reductions resulting from the project are additional to that which would have occurred in the absence of the project activity, or in a “business as usual” scenario.
Specifically for this project, both internal and external analysis clearly shows that base-load facilities capable of achieving an 80% capacity factor, such as coal or natural gas fired power plants, would have been the optimal generation resource for the utility to manage their increasing load growth. Wind power generation is intermittent and non-dispatchable by nature, making it less than ideal for base-load demand. In fact, the utility had been developing both coal and natural gas plants to meet their load growth requirements. They ultimately chose, however, to develop the wind generation resources that displace generation from fossil fuel emitting resources connected to the grid.
Additionally, when comparing the power purchase agreement (PPA) price to the forecasted avoided cost rate, it became apparent that the wind project’s cost far exceeds its value, unless the GHG or environmental commodity revenue is taken into account. Hence, the “green value” of the utilities renewable wind generation was a key consideration for them in moving forward with these relatively more uneconomic projects. The expected revenue / benefit of the environmental attributes have been recognized as a mitigating factor to help address the difference between the project’s value and the project’s cost.
In summary, the utility signed a PPAs at a higher cost than the feasible alternatives, only when taking into account the potential GHG and environmental credit benefits from the generation, even though there were no existing state or federal laws compelling them to do so. The potential carbon offset revenue compensates them for taking such a risk ahead of time and helps mitigate the difference between the cost the utility is bearing for these resources and its true system benefit as a fuel displacer.