The Beatrice City Council approved a power purchase agreement with Cottonwood Wind Project, LLC during its meeting Monday.
The contract is for 25 years and the wind project would be constructed by NextEra Energy, of Webster County. Under the agreement, Beatrice will acquire 16.1 megawatts of wind energy at a fixed price of $15.85 per megawatt hour.
As part of the plan to transition from the Nebraska Public Power District to AEP Energy starting in 2019, the city has been looking at diversifying their power suppliers to mix in with the energy they’ll be buying from AEP, said city administrator Tobias Tempelmeyer.
Another reason, Tempelmeyer said, is that wind is a form of renewable energy, which tends to be cheaper. A few years ago, the council looked at another wind project, but turned it down because it wasn’t economically viable, but this one comes with the benefit of scale. More turbines mean more savings, he said.
“It's going to vary year to year, but the price we're going to pay Cottonwood does not vary,” he said. “That's a fixed number. What will vary is what we do with the energy. There are some times that we will sell the energy back into the market and Beatrice will not use it. There are other times when we will use the energy.”
As the city leaves NPPD, Tempelmeyer said, they still have a contract with the provider that limits how much energy the city can take from outside suppliers. The initial plan for working with Cottonwood will be to sell the energy price back into the marked.
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Reselling the energy will require the city to work with what’s known as a market participant, someone who specializes transactions in the wholesale energy market. The city has been in talks with AEP and Cottonwood over who will be market participant, though after 2019, AEP will provide Beatrice’s market participant. No new staff members will be hired by the city to do the job.
The contract with Cottonwood is about building capacity, Tempelmeyer said, as well as making a noticeable savings appear on customer electric bills. Assuming the city can buy capacity from AEP at $20 per megawatt— though Tempelmeyer said he assumes the city can get it cheaper — in addition to the $15.85 per megawatt hour from Cottonwood, that would still be well under the current NPPD price of about $64 per megawatt hour.
On top of that, the city could sell back what it doesn’t use, typically at a higher price than what it paid for the power.
“If you looked at what the market has done lately and you want to be conservative, we've looked at about $18.50, somewhere in that ballpark, per megawatt hour,” Tempelmeyer said. “So if you buy it for $15 and some change and you sell it for $18 and some change, you're making about $3 per megawatt hour is what we're projecting.”
Tempelmeyer said the city projected that expenses for the plan will be about $1.2 million a year.
The power purchase agreement was approved by the council unanimously 7-0 with council member Ted Fairbanks absent from the meeting.