Bonneville Power Administration
John Hairston is CEO of the Bonneville Power Administration.
Public Utilities Fortnightly's Paul Kjellander talked with two leaders on all issues pertaining to hydropower and what its future looks like. Bonneville Power Administration CEO John Hairston and Idaho Power CEO Lisa Grow have much to say on this important subject. Paul offers commentary too.
PUF's Paul Kjellander: Give your perspective on the historic value and reliance on hydropower for Bonneville Power Administration and what this has done as a resource to help facilitate lifestyles in the Pacific Northwest.
John Hairston: BPA was created in 1937 as part of the New Deal. This was a plan by then President Franklin Roosevelt to promote economic recovery and pull America out of the Great Depression, a very important focus.
Bonneville Dam had just been built and BPA was established to sell hydropower and build transmission lines needed to deliver it to provide rural electrification. The hydropower system is vitally important in being that economic engine.
It creates prosperity for the region and has done that ever since. The first federal dam was built in 1937 — the Bonneville Dam — and now we've got thirty-one federal hydro projects on the system.
Bonneville Power Administration CEO John Hairston at Bonneville Dam.
They all provide some aspect of economic prosperity, which was the vision originated with Roosevelt around rural electrification. These projects create electricity, and that's important, but they are multipurpose. They provide protection from floods, and flood control is important.
They've created opportunities for recreation, which links to prosperity. Then there's navigation. Those are important elements these dams bring to the region.
All of that said, they do present some environmental challenges. We are focused on mitigating that exposure and its impacts. Through that, we've created good partnerships with tribes, states, and other entities in addressing those challenges.
PUF: There seems to be some changing winds and more struggles for those who operate hydro. How do you see the role of hydro changing and how do you try to preserve its value?
Bonneville Dam construction in 1936.
John Hairston: Holistically, the federal hydropower system is the biggest source of clean energy in the region. Those thirty-one dams are critical to the clean energy transition.
Our fuel mix is eighty-three percent hydro, fourteen percent nuclear, and then we have either acquisitions of wind or going out into the market. But hydropower is the workhorse of our system and it's going to be a catalyst.
Our maximum capacity on systems is about twenty-two thousand megawatts. On an average basis, we generate about eighty-three hundred megawatts, and the most important piece of this is the capacity. We can peak at around sixteen thousand megawatts.
Regarding the challenges of the clean energy economy with wind and solar generation quickly moving into the northwest, with supplies around eight thousand megawatts now, there is more variability in the system with more variable renewable resources coming online.
Bonneville Dam in 1948.
Hydropower's role as a balancing resource is going to be more important than ever. Hydropower is reliable, flexible, and clean, which makes it a perfect companion to intermittent renewable energy resources.
There's been a lot of focus on batteries and other storage, but hydropower is going to be key. It's the fact that when the wind stops blowing and sun stops shining, hydropower generation can be called on quickly to ramp up or down to balance any unexpected shifts with variable resource output.
In other parts of the nation, the balancing services often come from nonrenewable or carbon-producing thermal generation like natural gas or coal. So, the hydro system is critical in terms of how it is a companion with durable resources and it's green.
It is the strongest source of load-shaping capability for introducing wind and solar that we've got. The intermittent renewable wind generation in our service territory is mostly located in the Columbia River Gorge. It's a fertile area for wind generation.
It's a natural partnership for us to leverage the system. As more generation comes on the system, I see a future where the hydro system is moving slowly away from just the baseload generation but becoming more of a capacity tool. That engine to allow us to shape wind and other renewable resources.
PUF: You're alluding to the value of hydro changing, but maybe in a way that should place more value on that as a resource?
John Hairston: Yes. The value is going to be inherent in the resource and it's going to grow. Wind farms are usually concentrated in a single area.
If you have some downturn, it intensifies the magnitude of the peaks in values in power generation that operators are going to have to fill instantaneously. The attributes of the hydro system are going to be increasingly valuable as more variable resources come on board.
PUF: There are those who would like to see some hydro facilities removed. As you try to preserve hydro and have that increased value to the system, how do you fend off attacks on the hydro system?
John Hairston: That question can be somewhat politically charged. There are environmental challenges that the system presents to fish and wildlife, and we are meeting our requirements and doing more to mitigate the impact of the projects on fish and wildlife.
We have a common interest, a mutual interest with a number of constituencies to see improvements in the number of fish in the river and make sure we mitigate the impact on fish and wildlife.
A prime example of the importance of the hydro system was evident this past January when we experienced one of the most intense cold snaps the region has seen in several years. There were record low temperatures across the Pacific Northwest with below freezing temperatures for four days.
Power demand reached record levels at that time when water in the basin continues to be relatively low. This is a dry year. But even under those challenging conditions, the federal power system met the needs of our utility customers during the height of a storm.
Hydropower accounted for over ninety-five percent of the loads served by our balancing authority. That flexibility in the system allowed us to ramp up generation during the day as demand for electricity climbed.
But the flexibility in the system also allowed us to ramp down at night when power prices were lower. We purchased power and held back water, saving it to maximize power generation and meet the peak demand for the following day and we saved water for fish in the spring and summer.
The attributes of the system helped us keep the lights on during the duration of this cold snap. This is evident any time we experience a cold snap or what we're seeing now, more heat waves in the region.
The value and uses of the hydropower system are that it's vitally important to reliability. It helps us manage the system in a way where we're able to keep the lights on safely and reliably.
PUF: You have to deal with more extreme weather events. How much more difficult has it become to forecast and plan in any given season for the hydro system? It must be increasingly complex.
John Hairston: Oh, it is. We have to figure out how we're managing the system for multiple purposes because we are producing power but also have to work with the U.S. Army Corp of Engineers and Bureau of Reclamation on navigation, irrigation, and recreation.
On top of all that are the important elements of producing flows that help protect salmon species. During cold snaps or heat waves, those issues don't go away.
Those requirements still place the responsibility on us of saving water in the system, say above Grand Coulee Dam at times for spring fish operations when that's called upon. We also must maintain minimum flows in the river to protect other types of species.
Anything that's Endangered Species Act listed; we have to factor in how we operate the system. That's an added complexity. We get creative in how we manage all the different projects.
The Lower Snake River dams are equally important in helping us manage that because those projects can produce more than two thousand megawatts of peaking capability over several days.
We use the entire system to meet all those purposes. But it is extremely challenging as an operator to have to factor all that in and be able to produce the most efficient and effective outcome that we can for our customers on the power side.
PUF: All those things have a cost as you try to maintain customer affordability. How do you avoid becoming the piggy bank for the region while maintaining the same low-cost hydro that helped energize the region initially and drive economic development?
John Hairston: That's tough. That's the billion-dollar question. We have to manage or balance how we're producing power through the system, but also balancing that with our environmental efforts.
There are so many demands placed on the Columbia River System with hydropower just one of them. As part of our mission, we are responsible for mitigating the effects of dams on fish and wildlife. We're very mindful of that.
When we go into rate cases, we're transparent about our budgets. We have this process called the Integrated Program Review, IPR, where we share what we're intending to spend in various aspects of our business.
That transparency and conversation with our customers and constituents are important in managing our costs, understanding where those areas of focus need to be, and how we execute our mission. The results have been good.
That partnership, that transparency, over the last six years has resulted in essentially flat rates. We lowered rates in 2020 and we've maintained that through the last few years and into the next rate period.
We've also been able to effectively lower rates further by returning dollars through our reserves' distribution clause. Our financial plan and our strategic plan work hand in hand with our ability to keep costs down, and how we deleverage the business. Also, how we create more headroom for capital investment.
All those in combination; cost management, capital investment, the long-term perspective on how we're going to manage the business, partnership, and transparency with our customers. It yielded good results and has allowed us to be able to withstand some of the challenges.
We've seen over the past two years, low water in the system and increasing cost of purchase power in the market. We're going to continue to strive to provide stabilized low-cost power to our customers.
But the reality is in the past two years inflation has risen quite a bit, and what we're trying to do strategically is going to cost money. That partnership, that transparency, is going to be called upon to make some tough decisions as we move forward.
Because with variable resources coming in, renewable portfolio requirements in states being placed on our customers, and the need for diversity based on climate change, we can't handle these issues anymore regionally. We must work together extra-regionally to address reliability.
That's going to require deliverability and investments in transmission. There are items on the horizon that are going to cost a bit more money but are prudent investments in the long term for reliability and stability of the system.
I'd be remiss not to point to the work we've done with our resource adequacy program, which is extra-regionally and extraordinary in a sense, in that it's pulled together several utilities with the same mindset. It's about reliability in the region or extra-regionally, the entire Western Interconnection.
It allows us to now figure out who needs to make the investments to meet the requirements for a stabilized system. All those are going to be coming at us, but I'm encouraged and optimistic about our ability to manage those costs and continue to provide great benefits to the region at a low cost.
PUF: Look ten years ahead. What needs to happen in that timeline to be the successful utility, to be the successful provider of resources by then?
John Hairston: Deliverability is going to be key. The hydropower system is an amazing engine, but it's only been amazing due to our ability to deliver electrons to where needed.
We're going to have to continually invest in transmission so we can maximize the value of the hydro system. The hydro system can be extremely valuable in creating diversity in areas where there is more stable, low cost, solar and wind.
Particularly in the southwest, there's a lot of solar being developed, and from a diurnal perspective, there's a lot of diversity. It's being able to leverage that diversity, tapping into markets that have plentiful low-cost power when maybe we are short.
Or being able to market our surplus when those areas are short. Expanding that is going to be key for reliability and maintaining low costs in our region.
My hope is for equitable, robust market development. We're already beginning to move into the development of a day-ahead market, which is going to be an important element for the Pacific Northwest and Western Interconnect.
I also see more planning being done around transmission. We just stood up the Western Transmission Expansion Coalition, WestTEC.
We worked with the Western Power Pool to get that stood up. My vision for that was to move beyond the traditional, ten-year study time frame to more of a twenty-year time frame planning horizon.
It's also to look more broadly, not just within the northwest, but let's look at the entire Western Interconnect and see what the most important investments are we can make, so we can continually gain more value out of the hydro system.
Let's face it, we're not going to be building any more dams. But there's an opportunity to tap into that incredible resource and utilize it in a more expansive manner to facilitate that transition to carbon free energy.
We've got a couple of good wind and solar sources we're taking advantage of. How do we utilize the system from a capacity perspective to leverage that?
When I look out ten years, my hope is we are doing more around transmission and deliverability to allow us to grow and utilize the attributes of the system in a more expansive manner. I see us, probably via market development, evolution, and resource adequacy planning, to have a more cohesive working relationship among all utilities in the west.
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