Dive Brief:

• A renewable energy developer filed with the Montana Public Service Commission (PSC) this month to build 320 MW of wind and 160 MW/640 MWh of battery storage spread over four separate projects in the state.
• Caithness Beaver Creek wants to develop the four 80 MW wind projects and 40 MW/160 MWh batteries as qualifying facilities (QFs) under the Public Utility Regulatory Policy Act (PURPA) after negotiations over capacity payments broke down with Northwestern Energy, Montana's largest utility. PURPA requires utilities to purchase power from independent generators at the utility avoided cost rate.
• Caithness wants its projects to receive energy payments of $31.33/MWh for heavy load hours and $29.5/MWh for light load hours, in addition to capacity payments of $81.45/MWh during on-peak hours and a $0.58/MWh payment for ancillary services. Montana regulators must issue a decision on contract terms by February 2019.

Dive Insight:

The Caithness project filing highlights the growing competitiveness of battery-paired renewable energy with traditional generators, as well as the complex negotiations in determining what to pay the new resources.

Caithness wants its four Beaver Creek wind projects to deliver a firm, dispatchable one-hour electricity product that can meet the peak demand needs on Northwestern's system, which the utility says is capacity-deficient during December, January, February, July and August.

"The battery storage systems will time shift the wind output and provide much needed capacity during Northwestern's peak periods," the Caithness filing with the Montana PSC reads. "Each project will be capable of providing scheduled and dispatchable electricity in forward looking time blocks."

Caithness initially pursued a direct contract with Northwestern for the projects, but turned to PURPA after contract negotiations broke down over the question of capacity payments. All four of the Beaver Creek wind facilities have already been certified as QFs under PURPA — two through self-certification and two through a September 2017 decision from the Federal Energy Regulatory Commission.

"The projects should not be compensated as traditional wind only projects because the primary benefit of the projects is their ability to be used as capacity resources on Northwestern's capacity deficient system," Caithness said in its filing.

Other contract terms in dispute include the energy payments, length of contract and ancillary services payment. Caithness said it was willing to accept a lower energy payment of $28.25/MWh for heavy load hours and $18.46/MWh for light load hours in bilateral negotiations, but does not believe they represent the utility's true avoided cost for setting PURPA rates.

Montana regulators said last week they will review the contract terms and make a final decision on the projects by Feb. 6, 2019. If approved, Caithness says each of the projects would come online in 2020.