[February 2008]

Montana’s 2005 legislature became the first in the Pacific Northwest to adopt a Renewable Energy Standard.  The law, officially called the “Renewable Power Production and Rural Economic Development Act,” directs the state’s investor-owned utilities (IOUs) to incorporate an increasing amount of renewable energy into their mix of electricity resources, according to the following schedule:

• by 2008 — 5%
• by 2010 — 10%, including 50 megawatts of power from small, locally owned projects
• by 2015 — 15%, including 75 megawatts of power from small, locally owned projects

The state has two IOUs that must comply with these requirements.  NorthWestern Energy (NWE) serves about two-thirds of the state’s electricity customers, while Montana-Dakota Utilities (MDU) serves customers in Miles City and other eastern Montana communities.  MDU sells only about one-tenth as much electricity as NWE, and therefore has a correspondingly smaller requirement under the law (e.g., the 50 MW and 75 MW small project requirements are shared proportionately between the two utilities).  The law also instructed the state’s largest rural electric co-operatives to develop their own standards.

With the arrival of the first compliance year, there is good news to report.  In 2006, NWE contracted to purchase 100% of the output of the 135 megawatt Judith Gap wind farm (see map below).  Since that time, the project has proven enormously successful.  The cost of the power is actually cheaper than the rest of NWE’s portfolio, and in 2007 the plant exceeded its already optimistic performance expectations (as measured by the “capacity factor,” which was an incredibly high 41%).  With this one contract, NWE is already obtaining about 8% of its energy from renewables.  In its most recent power procurement plan (filed with the Public Service Commission last December), the utility indicated its intention to acquire additional wind resources to meet its future benchmarks—including the requirement to support dispersed, locally owned renewable energy projects.  In its plan, the utility also pledged to continue its conservation program (targeted at helping customers implement 100 megawatts worth of cost-effective energy savings over a 20-year period) and to avoid investing in additional coal-fired power until future environmental compliance costs are better known.

MDU is also proceeding on schedule.  According to an article in the Billings Gazette, MDU’s Diamond-Willow wind farm (19.5 megawatts, located in Baker—see map) was expected to be fully operational in February 2008.  An MDU spokesman stated that the wind farm would meet the company’s obligation for the next several years, which appears accurate. The next step will be for MDU to invest in or contract with some smaller projects in order to comply with the community renewable energy standard.

Unfortunately, less progress has been made with Montana’s rural electric co-operatives.  The law states that “each governing body of a co-operative utility that has 5,000 or more customers is responsible for implementing and enforcing a renewable energy standard for that co-operative utility that recognizes the intent of the legislature to encourage new renewable energy production and rural economic development, while taking into consideration the effect of the standard on rates, reliability, and financial resources.” (M.C.A. 69-3-2008)  The following nine co-operatives meet the definition of “5,000 or more customers” as of 2006 (customer figures are from the U.S. Energy Information Administration):

• Flathead Electric Co-op                        63,078
  
• Yellowstone Valley Electric Co-op          15,771
  
• Missoula Electric Co-op                        13,344
• Ravalli County Electric Co-op                  9,346
• Vigilante Electric Co-op                         8,488
• Glacier Electric Co-op                           7,060
• Fergus Electric Co-op                           5,904
• Sun River Electric Co-op                       5,198
• Park Electric Co-op                             5,094

Arguably, another ten or so co-operatives also meet the definition if total number of customers served is considered (e.g., counting multiple people per household, which is the custom of the Montana Electric Co-operatives’ Association).  While some of these co-ops have adopted respectable policies for net-metering and green power products, MEIC knows of no specific renewable energy standard that has been adopted by a Montana co-op to implement this section of law.

It is clear that the voluntary approach for co-ops has not been successful.  (It has been argued that if MDU can meet the law with its 24,000 customers, certainly Flathead Electric with its 63,000 customers should be expected to follow suit.  And why not?  Most of the economic development benefits of these projects take place in rural areas.  It follows that rural utilities should be equal participants.)  As it turns out, expanding the Renewable Energy Standard to cover all utilities, to include all cost-effective conservation, and to increase the levels to “20% by 2020” and then “25% by 2025” was one of the most effective carbon reduction recommendations contained in the Governor’s Climate Change Advisory Committee report.

Taken together, these changes would save an estimated 10.9 million metric tons of carbon dioxide by 2020, and would yield a net savings of about $2.40 for every ton.  The recommendation received unanimous support from the committee.

Montana’s renewable energy standard has proven an effective policy mechanism to help the state tap into its plentiful clean energy resources, as evidenced by projects both operating and proposed (see map on page 12).  Montana boasts the 5th best wind resource in the nation, but still ranks only 16th in terms of installed capacity.  Clearly, much more can, should, and must be done with all of Montana’s eligible renewable resources (wind, solar, geothermal, small hydro, low-emission biomass, etc.) and conservation in order to significantly reduce our dependence on carbon-intensive fossil fuels and to avert the worst impacts of a changing climate.  v