Generating power

During the next decade we will be challenged to meet our customers' projected 15 percent increase in demand for electricity. Ensuring a brighter and more secure energy future requires a balanced approach that is mindful of our customers' need for reliable electricity that is affordable and environmentally responsible. We're achieving that balance with demand-side management and conservation, renewable resources, plant and operating efficiencies, peaking plants, and prudent baseload generation.

Otter Tail Power Company uses an integrated resources plan (IRP) to determine which new resources will meet customer demand for the least cost. Every two or three years the company files its IRP with the regulatory commissions in Minnesota, North Dakota, and South Dakota. In January 2008 we filed our most recent update to our 2006-2020 Resource Plan with the Minnesota Public Utilities Commission. This plan calls for adding the following new resources by 2020.

In 2007 we added 60 megawatts of wind generated electricity to our mix through our ownership of a portion of the Langdon Wind Energy Center and a power purchase from the Center. By the end of 2008 we added 48 megawatts more from the Ashtabula Wind Center, bringing our total megawatts of wind generated electricity to 130 megawatts. We also filed an application with the North Dakota Public Service Commission to own 49 megawatts of the Luverne Wind Farm scheduled for completion in 2009. That would bring our purchased or owned wind power to 179 megawatts, well on the way to the 280 megawatts called for in our IRP.

Wind resources are being selected by the IRP as a least-cost resource at this time largely because of their favorable tax incentives. Wind energy and other renewable energy sources, however, are not able to meet baseload generation needs due to their intermittent nature. Wind generation typically can provide only a 30 percent to 40 percent capacity factor. A baseload facility typically would operate in the range of an 80 percent to 90 percent capacity factor.

Coal and wind energy play two very distinct roles in the electric industry. Wind cannot supplant coal's reliability, and coal cannot match wind's cleanliness. But together, as part of a balanced mix of resources, they bring out each other's best features.