DG Technology Spotlight: Micro Hydropower

Small-scale and micro hydropower technologies are helping bring distributed electricity generation to remote areas around the world. The impacts on the environment are negligible and the economics are competitive. The worldwide market potential is fairly small in terms of overall megawatts (MWs) but for those locations without power today, a new micro-hydro system can make a tremendous difference in people's lives.

The International Small Hydro Atlas provides a nice definition of the various sizes of hydropower projects:

There is no International consensus on the definition of small hydropower. In Canada 'small' can refer to upper limit capacities of between 20 and 25 MW, in the United States 'small' can mean 30 MW, however, a value of up to 10 MW total capacity is becoming generally accepted. Small hydro can be further subdivided into mini hydro (usually defined as <500 kW) and micro hydro (<100 kW).

Hydropower - capturing and converting energy from flowing water - is currently the largest source of renewable power in the United States. Hydropower facilities generate about 10% of the nation's electricity consumption. The vast majority of the hydropower capacity (92 percent) is generated by large-scale hydro projects even though a vast majority (89 percent) of the hydropower dams would be considered a small-scale hydro project (~under 30 MW), according to the Low Impact Hydro Institute.

Unlike larger scale hydropower, Micro-hydro projects don't require a dam, only a barrier to impound or direct a sufficient and consistent amount of water into a pipe or channel leading to the turbine and generator. This type of hydro project is referred to as "run of the river." Wim Klunne's Micro Hydropower web portal offers dozens of case studies of existing projects.

In the past, dams for electricity were often built seemingly without much thought to the environmental impacts of the projects. Today, proposals for large-scale hydropower projects are controversial affairs. Micro hydro has none of the detrimental impacts that larger hydropower projects can have on the physical environment and on wildlife species.

Improvements in micro-hydropower technology indicate that economical electric production can be generated from heads (overall vertical drop) as little as 10 feet. One company, Nautilus Water Turbine, says that their micro hydro systems can operate efficiently and economically with heads as little as 2 feet.

Many renewable energy laws in the country allow small scale hydro to qualify as "green" electricity. However, the Low Impact Hydropower Institute (LIHI) points out that even small dams with small hydropower generators can be harmful to the environment and to river species. They've developed a certification program for hydropower projects that have minimized their overall impacts. Many of their certified projects have been smaller, run-of-the-river type power plants. LIHI has certified 16 projects across the United States and some utilities have indicated that they will seek certification of many more in the future as renewable energy green-tag markets mature.

In order to be certified by the Institute, a hydropower facility must meet criteria in the following eight areas: river flows; water quality; fish passage and protection; watershed protection; threatened and endangered species protection; cultural resource protection; recreation; facilities recommended for removal.

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Minnesota Seeks 20 Percent Biofuels Requirement

Already a renewable fuels policy leader, the state of Minnesota is considering adopting a stricter mandate for biofuels content in the state's gasoline supplies. Governor Pawlenty announced his support for a 20 percent ethanol content and a handful of bills have been introduced at the legislature to implement the goal.

At this writing there were six bills introduced addressing the mandate. Several bills would allow the 20 percent ethanol mandate to take effect by January 2010 or earlier if at least 50% of new vehicles sold in the state have warranties covering the higher ethanol blends.

One bill [HF 216] has a broader focus and would establish that "it is the goal of the state of Minnesota that at least 20 percent of the liquid fuel sold in the state is derived from renewable sources by December 31, 2015." Diesel fuels in addition to gasoline would be covered under this proposal.

Minnesota has 14 ethanol plants with production capacity of about 400 million gallons. Three plants are under construction that would add about 150 million gallons of production. To meet the requirement of 20 percent blend with in-state suppliers by 2010, Minnesota would need about 575 million gallons of ethanol production.

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Energy Efficiency in California - A Matter of Community Control

The California Public Utilities Commission (CPUC) is scheduled to vote tomorrow (1/27/05) on who will control about $400 million in state energy efficiency funds [see CPUC proceeding R0108028] Community aggregation advocate groups including Local Power and Women's Energy Matters are demanding that the CPUC let community choice aggregators (CCAs) control and administer their own efficiency programs rather than give all the money and control to the investor-owned utilities.

Paul Fenn, director of Local Power, writes "This decision on Energy Efficiency Administrative Structure will have a profound impact on CCAs by denying their legal right to administer Energy Efficiency funds and handing control of all programs to utilities. If the utilities gain control over all programs in this decision, they may be able to lock out CCAs until 2010."

Community Aggregation in California's restructured electric system was allowed under AB 117, a law signed in 2002. In general, community choice, or aggregation, creates community-based pools of electricity users large enough to command leverage on the market. These pools are armed with sufficient legal authority and financial flexibility to demand contracts from energy suppliers that satisfy local economic and environmental goals. In short, it places authority in the hands of those who will feel the impact of their decisions, making investment in efficiency and renewable electricity more likely.

In 2002-2003 a portion of the fund dedicated toward energy efficiency in California were distributed to non-utility organizations. Women's Energy Matters points to the results contained in two studies, the only comparative analysis of the impact of the non-utility programs vs. the utility programs, as the justification for letting community aggregators control their energy efficiency programs and funding. The CPUC had an outside contracter do an analysis of the effectiveness of the utilities' energy efficiency programs

The Myth of IOU Cost-Effectiveness I (August 8, 2003) completed by SESCO Inc., analyzed the cost-effectiveness of the 2002-2003 efficiency programs. Nearly all non-utility residential programs were more cost-effective than utility programs, many by large margins. On the other hand, most of the utility-sponsored residential programs were found to be not cost-effective. In non-residential efficiency programs, utility porgrams and non-utility programs ended up just about even. SESCO issued a second report, Myth of IOU Cost-Effectiveness II (May 8, 2004) that provides an expanded and updated analysis of the programs.

As of December 2004, Local Power estimated that 48 cities and counties representing over 17% of statewide investor-owned electric utility customer demand are pursuing community choice aggregation.

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Portland Investigates City Ownership of Renewable Energy Projects

Hundreds of communities around the country have committed financial resources to reduce greenhouse gas emissions through energy efficiency improvements and through purchases of renewable fueled electricity from their local utilities. A new trend appears to be emerging as part of these efforts - some communities are investigating direct ownership of energy projects and recent actions in Portland, Oregon illustrate this nicely.

In 2001, Portland adopted a Local Action Plan on Global Warming and the Portland Office of Sustainable Development (OSD) began examining options to meet 100 percent of its electricity needs from renewable energy sources. At their November 3, 2004 meeting, the Portland City Council accepted a $25,000 matching grant from the Bullitt Foundation to fund an outside consultant, Global Energy Concepts, to help analyze ownership options including direct municipal investment in a wind generation facility. Unlike some other cities which have implemented renewable power purchases, Portland does not have its own municipal electric utility. Instead, the city is currently a retail power customer of Portland General Electric and Pacific Power & Light. The city hopes that the wind power can begin delivering electricity by early 2007, contribute to a dramatic reduction in greenhouse gases and provide a stable long term price for the city's electricity.

The OSD gave an update on the project at the December 15, 2004 city council meeting. A Request for Information (RFI) was released on December 8, 2004 with responses due by February 2, 2005. The RFI is quite detailed and interested people can download a copy after a simple registration with the OSD at this web site: Portland Bureau of Purchases [first time users will need to click the Bid Opportunities link > then select the link for First-Time User Registration and follow instructions]. Once the responses to the RFI are examined, the OSD plans to issue a formal Request for Proposals by early March 2005.

Portland's Expectations and Goal of 100 percent electricity from new renewable energy projects located in Oregon by 2010

Working Group Recommends Update To Interconnection Standards in California

The California Energy Commission (CEC) began an investigation in April 2004 via a diverse working group to explore a variety of issues associated with the deployment of distributed generation (DG) including interconnection rules - formally referred to as Rule 21. Implementation of California's standardized interconnection rules issued in 2000 have been an important priority for California because it eliminated a significant barrier to the safe and cost-effective deployment of DG in the State.

According to the tracking web page of Rule 21, since the interconnection standards were adopted, 336 DG projects have been interconnected totalling 456.5 MW of capacity [statistics are for PG&E, San Diego Gas & Electric and South California Edison only]. Net metered projects for the three major investor owned utilities have grown each year since January 2001 for a total of 596 projects totalling 25.1 MW. The net metered projects have also been boosted with generous state tax incentives and rebate programs.

A group of people from all segments of DG, referred to as the Rule 21 Working Group, came together to develop the initial DG interconnection rules for California. The group now meets to address any complex issues that arise and to improve the interconnection process. The Energy Commission oversees and supports the Working Group's activities and contracted technical support is funded by the CEC's Public Interest Energy Research program. To date, approximately $1.2 million of public funding has been used to support the Rule 21 effort.

The latest working group report focuses on five key interconnection issue areas:

Distributed Generation State Legislative Update

Many state legislators around the country have returned to their respective capitol buildings for another year of debate. We've run across a few interesting proposals involving distributed generation. A Connecticut proposal would provide an increased rate of return for distribution utilities to build distributed generation projects rather than new transmission lines. In Maine, lawmakers have introduced a bill to make cogeneration the primary energy efficiency strategy and to promote distributed generation by all consumers. The state of Washington is considering expanding net metering and standardizing interconnection procedures for projects under 20 MW.

Connecticut
That proposed House bill 5569 would amend CT statutes to allow certain electric distribution companies to build, finance or operate distributed energy resources up to 25 MW. The proposal would also allow the distributed generation investment by such a company to earn a return through their rate base at an after-tax rate of at least one percent but not more than five percent higher than the company's authorized return. The purpose of this bill is to encourage distributed generation as an alternative to electric transmission projects in the southwest portion of the state and other areas of the state to provide for reliable, secure source of energy.

Maine
The concept in House bill 236 is to create a manufacturing energy
policy. The goals include reducing the cost of energy and of utility service for Maine consumers, endorsing cogeneration as the State's primary energy efficiency strategy, promoting distributed generation by all consumers, protecting minimum interconnection standards for generating units and other provisions.

Washington
House bill 1011 was introduced in January and would expand net metering in Washington from 25 kW to 100 kW [for solar, wind, or hydro power]. The bill also requires a standardized interconnection procedure for projects under 20 MW. Three procedural paths for processing applications for interconnection are proposed in the bill: (1) a simplified process for certified inverter based facilities of 10 kW or less; (2) an expedited process for certified generating facilities that have power rating of two MW or less; and (3) a standard process for other generators of 20 MW or less. Under the simplified path, the cost of the application to the customer may not exceed $25.

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Groups Demand Broader Access to Energy Decisionmaking

An effort spearheaded by the Institute for Local Self-Reliance resulted in a coalition of groups petitioning the MN Public Utilities Commission requesting that they establish the rules and technological infrastructure to allow citizens to easily monitor and participate in energy decisionmaking. This is an example of Democratic Energy in action. Minnesota isn't the only state behind the curve either. A quick survey of other state regulatory agencies that oversee energy issues indicates that groups in many states may want to replicate the petition filed in Minnesota.

Getting easy access to information is a critical first step if citizens are truly going to be able to help change the rules to favor a decentralized and responsible energy system. Current structures and procedures in place around the country make it extremely difficult, time-consuming and costly for citizens and small organizations to get involved in regulatory processes.

The procedures and operation of dockets online at the California Energy Commission (CEC) may be a model example that Minnesota and other states could strive to emulate [e.g. see http://www.energy.ca.gov/2005_energypolicy/index.html]. E-mail submissions are encouraged, documents and background materials are archived, meetings are web-cast, etc.. One idiosyncratic aspect in California is the fact that the accessibility is much less robust at CEC's sister agency, the CA Public Utilities Commission.

Below you will find the text of the original petition from December 2004 [download pdf version here].

The response to the petition from the DOC and PUC was not what we were hoping for (see copy of letter below). While their response appears to indicate that they are very interested in the idea of providing broader public accessibility to energy decisionmaking they don't appear to be willing to put the idea on the fast track toward implementation. We're continuing the dialogue in hopes that the timelines will speed up.

To: MN Department of Commerce and MN Public Utilities Commission

WHEREAS, the Minnesota Department of Commerce (DOC) and the Minnesota Public Utilities Commission (PUC) make decisions that significantly affect the quality and structure of our energy, communication, transportation and financial systems;

WHEREAS, state policy is to maximize the ability of households and businesses to participate in decisions affecting their livelihoods and quality of life;

WHEREAS, the current paper-based public comment systems used by the DOC and the PUC are outdated, very labor intensive and costly, especially for individuals and small organizations;

WHEREAS, the postage, copying, mailing and distribution-related costs to the public for active energy and telecommunications related dockets could well be in excess of $500,000 per year;

WHEREAS, technology adopted by the Minnesota Environmental Quality Board allows citizens to comment and retrieve information on proceedings before the EQB directly from the EQB web site;

WHEREAS, the technology exists and is used in other parts of the country to allow for electronic retrieval and filing of documents;

WHEREAS, a survey conducted by the PUC found broad support for an electronic filing and retrieval system;

WHEREAS, the state of Wisconsin’s Public Service Commission will, as of January 1, 2005, fully offer its citizens the option of electronic filing for all proceedings;

WHEREAS, the State of North Dakota’s Public Service Commission already allows comments on matters before the Commission to be submitted electronically;

WHEREAS, the Minnesota Public Utilities Commission and the Minnesota Department of Commerce have for many years declared their intent to establish an electronic filing system "soon";

THEREFORE BE IT RESOLVED, the groups listed below and on behalf of their respective citizen members (if applicable) formally request the following actions:

1. By the end of January 2005, the DOC and PUC implement procedures for receiving comments and filings in electronic formats.

2. By the end of January 2005, the DOC and PUC implement physical changes on their web site to accommodate electronic filing and distribution of comments on proceedings in electronic formats.

3. By the end of January 2005, the PUC establish on its web site an archive for each docket. At a minimum, the archive should contain electronic copies of the case control file sheet, service list, timelines, filings by parties, information requests, comments, orders, staff briefing papers and other relevant information.

Submitted by:

John Bailey
Institute for Local Self-Reliance

J. Drake Hamilton
Minnesotans for an Energy-Efficient Economy

Mark Lindquist
Minnesota Project

Carl Nelson
Green Institute

Jim Kleinschmit
Institute for Agriculture and Trade Policy

Richard J. Savelkoul
O'Neill Grills & O'Neill, PLLP

Bruce Anderson
RENew Northfield

Kristen Eide-Tollefson
CURE - Communities United for Responsible Energy

George Crocker
North American Water Office

December 27, 2004

Dear Mr. Bailey,

Thank you for your December 16 letter and petition concerning greater electronic access to dockets filed with the Minnesota Public Utilities Commission (PUC). Your comments are very timely and we're pleased to give you a report on progress to date, as well as a timeline for work to be completed in 2005.

As you know, we have been moving toward e-enablement for several years. In 2001, the PUC launched a web site which was intended to create a bridge between a paper intensive environment and an entirely electronic filing, storage and retrieval system. That effort mad document issued by the PUC available electronically: orders, notices, briefing papers, case control (log) sheets. Moreover, a PUC calendar archive dating back to August 2001 is maintained, including clickable links that drill down to the document level. While we continue to be pleased with the functionality of the web site, we do know that this was only a beginning.

You may also remember that the PUC conducted an e-filing pilot on Docket 01-961 (Transmission Need filing), with a view of getting a sense of the look, feel and functionality of a totally electronic process. While the pilot was well received by all participants (including most of the signatories to your petition), it also confirmed that the methodology we were compelled to use for it was much too labor intensive for application system-wide. This is because of the extremely large number of documents filed with the PUC each year. Entities with relatively fewer and less voluminous filings can use this approach, as the Environmental Quality Board has successfully done. However, it is not a sustainable approach for the PUC.

Our quest for an approach that will be sustainable and offer the functionality our stakeholders have indicated they desire has led us to develop a system based on a FileNet enterprise content management solution. We have implemented this system internally and are still trying to refine it. The next major step in this endeavor was most recently taken with the hiring of a web development consultant who will begin work on January 12. One of the second quarter (2005) deliverables for this phase of the project includes the web delivery, from a simple but powerful search utility, of all documents filed in PUC dockets. After work begins, we will post regular updates on our progress at http://www.puc.state.mn.us/news_events/index.htm In addition, when this phase is near completion, we will publish timelines for the next phase in the project, i.e., electronic filing. This will require not only technology modifications but also amendment of the Commission's Rules of Practice and Procedure (Minnesota Rules, Chapter 7829).

We look forward to improving the service to all our stakeholders with a more effective web presence in 2005. As always, we will appreciate your feedback as the project advances.

Burl W. Haar
Executive Secretary
MN Public Utilities Commission
121 7th Pl. East, Suite 350
St. Paul, MN 55101-2147

Edward A Garvey
Deputy Commissioner for Energy and Telecommunications
MN Department of Commerce
85 7th Pl. East, Suite 500
St. Paul, MN 55101

cc:
Governor Tim Pawlenty
Commissioner Glenn Wilson

Mandate It and They Will Come: Minnesota's Biodiesel Law

Since enactment of the nation's first state mandate for nearly all diesel fuel sold in the state to contain a small percentage of biodiesel, there was always some uncertainty whether or not production facilities would be built to meet the goal in the law. Language in the law would have allowed the mandate to never take effect unless the in-state production reached 8,000,000 gallons per year. With the opening of one plant in December and two more under construction, the mandate is expected to come into force at the end of June 2005.

To meet the mandate's minimum requirements, approximately 16 million gallons of biodiesel will be required each year. If all of the facilities under construction reach their full capacities, about 63 million gallons of biodiesel production capacity will be in place in Minnesota by Fall 2005. Interestingly, when the biodiesel mandate was originally proposed it would have required diesel sold in Minnesota to contain 5 percent biodiesel, an amount that could easily be met by the new in-state production.

There have been several news reports on the opening of the new biodiesel plant (see MPR story ) so we here at Democratic Energy thought we would just try to clarify and fill in some information that wasn't covered.

The Farmers Union Marketing and Processing Association, a 75-year old cooperative, has built the state's first plant in Redwood Falls, MN. The plant began operations in December 2004 and is starting up using soybean oil as the feedstock and is planning on switching to use two-thirds animal fats around mid-April 2005 . The plant will scale up its operations to full production of nearly 3 million gallons per year. The plant will have six new employes at the plant along with a few other support positions.

Some of the biodiesel is being used onsite in a five percent blend in 5 diesel electric generators [they also have 3 natural-gas fired generators] that are used for back up power needs. Total capacity of the diesel units is 5.2 MW - 42,175 gallons of diesel fuel was used in 2004. The on-site generation is enough to fully power the facilities but with an attractive interruptible power rate from their utility, the generators are only used sporadically.

The fuel from the new plant is being actively marketed [~$2.15 per gallon before tax credit] and interested buyers should visit their Northland Choice Biodiesel web site or send e-mail to Chuck Neece.

The two other plants under development in Minnesota are the SoyMor project in Albert Lea and the Minnesota Soybean Processors (MnSP) plant in Brewster. Both of these plants will convert soybean oil into biodiesel.

The $25 million SoyMor plant [web site] is organized as a limited-liability company (LLC). The Soy-Mor cooperative - owned by about 500 farmers - is the largest member of the LLC. Each farmer had to pay a minimum of $5,500 to join the cooperative. Other investors can buy into the LLC for a minimum $50,000 investment. The facility will have an annual production capacity of 30 million gallons [currently permitted for 25 million gallons] and is expected to begin operations by July 1, 2005.

The Minnesota Soybean Processors (MnSP) project [web site] had its construction timeline delayed but they reported in November 2004 that the company is expected to complete construction and begin production by September 2005. The facility will have a production capacity of 30 million gallons [currently permitted for 25 million gallons]. MnSP is a large soybean cooperative with around 2,300 farmer members.

The MN Dept. of Agriculture believes that recent enactment of federal tax incentives for biodiesel will result in no net increast in the cost of diesel fuel in the state as a result of the biodiesel requirements.

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Wind Power: To Own Or Not To Own

One of the world's fastest growing energy technologies is wind power. Landowners on windy sites face a choice - to lease their land to wind developers or to own the turbines themselves. Leasing land provides a landowner with a relatively risk free venture with a steady stream of income. Owning a wind energy project involves more risk but offers landowners significantly more potential revenue. A recent report compares the financial impact on landowners of various local ownership structures.

In November 2004, Mark Bolinger and Ryan Wiser [Ernest Olando Lawrence Berkeley National Laboratory], released a report titlled "A Comparative Analysis of Business Structures Suitable for Farmer-Owned Wind Power Projects in the United States." According to the authors, landowners around the country that are leasing their land to a wind developer typically receive $2,000 - $10,000 per year for each turbine [for turbines that are typically >1MW]. The wide range in payments are in part due to some landowners receiving a flat payment per turbine while others receive a payment based on the amount of energy a turbine produces.

The authors compare 4 ownership possibilities for a hypothetical 1.5 MW wind project. The key to financial viability of each of the first 3 ownership models is to structure the project so as to maximize the utilization of all available tax and production incentives. The success of the 4th method, the on-site ownership model, is primarily dependent on the site's characteristics. The four types discussed are as follows:

Multiple Local Owner
Projects under this structure are organized as limited liability company (LLC). One or more farmers provide equity for the project by purchasing shares. The remaining costs are financed via loans or grants. Power is sold to local utility and the investors split the income and tax benefits proportionately, according to their individual level of investment.

Minnesota-style Flip Structure
Projects under this structure are organized as limited liability company (LLC). A single farmer/landowner partners with a corporate entity that is able to take advantage of all or most of the Federal production tax credit. Initially the landowner contributes as little as 1 percent of the equity for the project and the corporate partner contributes 99 percent. During the first 10 years of the project the corporate partner gets 99 percent of the cash flow and tax benefits. In year 11 (or possibly later if necessary) the ownership "flips" to 99 percent landowner/farmer and 1 percent corporate partner. Now the local partner owns a debt free wind project and receives 99 percent of the cash flow for the remaining life of the project.

Wisconsin-style Flip Structure
Projects under this structure are organized as limited liability company (LLC). Multiple farmers/landowners partners pool enough capital through sale of shares to cover 20 percent of the project cost. Then they loan this money to a corporate investor interested in taking advantage of the tax credits. The investor contributes another 30 percent of the cost and borrows the remaining 50 percent from a financial institution. The investor now owns 100 percent of the project with a debt/equity ratio of 70 percent/30 percent. For 10 years, the corporate entity pays down the debt, is able to take advantage of all or most of the Federal production tax credit and the landowners/farmers are paid only the interest portion of their initial loan. In year 11 the corporate investor drops out of the project and keeps the principal from the original loan from the farmers as a buyout. The ownership "flips" to 100 percent landowners/farmers who now own a debt free wind project and receives 100 percent of the cash flow for the remaining life of the project.

On-site Projects
Projects under this structure are organized to provide power to the farm rather than selling power to the local utility. The project is built and interconnected to the utlility system and power from the wind project offsets electricity that would otherwise have been purchased from the utility. The value of the electricity produced by the wind turbine is much higher (retail rate rather than wholesale) than in the other ownership models but on-site projects can't take advantage of the Federal tax credits and they will also be subject to stand-by charges and demand charges from the local utility.

The authors conclude that all four ownership structures can be viable options for wind projects depending on the local situation.

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