The owner of a Benton County wind farm is suing Duke Energy Indiana Inc., accusing it of breach of contract involving the utility’s deal to buy electricity.
Earl Park-based Benton County Wind Farm LLC filed its suit in federal court in Indianapolis. The suit, which seeks unspecified damages, claims Duke Energy Indiana hasn’t honored its agreement.
Many details of Duke Energy’s alleged contract breach are redacted in the 23-page complaint. But those that aren’t allege the utility’s actions have resulted in the wind farm “frequently” being forced to curtail operations, causing sharp reductions inelectrical output and revenue.
“The fundamental issue is that, due to the high cost of large-scale energy storage, electricity must be used when it is generated, and the level of generation must be matched to the demand or load at the system level, second by second,” said Paul Preckel, professor of agricultural economics at Purdue University.
“If there is a surge in the power output of wind — such that generation from wind and generation from other assets that cannot be economically shut down exceeds the load — then the wholesale price of electricity falls or even becomes negative, and generators must pay to continue to supply power to the system.”
To reduce costs, a utility will then sometimes curtail production from wind turbines.
Preckel said curtailments occur most often between April or May through October across the Carmel-based Midcontinent Independent System Operator Inc., or MISO, regions.
According to the MISO April 2013 Wind Curtailments Update, Indiana trailed only Iowa in the amount of power curtailed from March 2012 to April 2013.
An executive for one of the wind farm’s parent companies, Oakland, Calif.-based Orion Energy Group, declined to say whether the alleged revenue shortcomings have placed the farm in jeopardy.
“If it was not significant, we would not have filed the complaint,” Jim Eisen, Orion’s general counsel, told The Indianapolis Business Journal.
A Duke Energy spokeswoman said only that the company is reviewing the lawsuit.
Orion Energy Group LLC began running the wind farm in 2008 as Indiana’s first commercial-scale operation, with 87 power-generating wind turbines. In 2006, the companies struck a 20-year contract under which Duke Energy would buy 100 megawatts of electricity produced by the wind farm once it went online.
Duke Energy takes the electricity and sells it onto the power grid through MISO.
MISO’s pricing system and a glut of wind energy appear to be at the root of the court case, according to the Indianapolis Business Journal.
Duke Energy has to pay a fixed price — which was redacted from court records — to Benton County Wind Farm, regardless what Duke earns reselling through MISO.
The lawsuit states Duke Energy is excused from its obligation to pay the wind farm only in “narrowly defined” emergencies.
The complaint redacts the specifics of what Duke Energy allegedly did, noting only that the utility “curtail(ed) electrical production by refusing to offer the Wind Farm’s power to MISO at competitive prices and then refusing to compensate (the wind farm) when the Wind Farm is directed by MISO not to produce power.”
A 2012 report by Synapse Energy Economics Inc. in Cambridge, Mass., found that MISO’s transmission grid wasn’t able to handle the power generated by Indiana’s growing wind energy industry.
Preckel said the souring relationship between Benton County Wind Farm and Duke Energy is not unique. The Georgia Community Wind Project, a Vermont-based wind farm, complained to ISO New England for curtailing their power.
Another example is Idaho Power. The company is appealing to the Federal Energy Regulatory Commission to curtail wind when the system load is low.
Source: Lafayette Journal and Courier