Which Way is the Wind Blowing? Getting Wind Generation to Grid

by Laurel W. Glassman and Jennifer L. Maul, White & Case LLP

While agreement exists on needing additional transmission to bring wind energy to the grid to meet renewable portfolio standards (RPSs), the way to go about it has been debated.

The regional transmission organizations (RTOs), independent system operators (ISOs) and the Electric Reliability Council of Texas (ERCOT) have developed plans to encourage transmission development to serve renewable resources. Meanwhile, the Federal Energy Regulatory Commission (FERC) recently issued a notice of proposed rulemaking that if adopted would change the transmission cost allocation landscape and make it likelier that more transmission projects will move forward to construction.

The following are initiatives underway and issues confronting renewables transmission development.

ERCOT

Furthest advanced in renewable resources grid integration, Texas has designated five competitive renewable energy zones (CREZs) that will provide transmission to wind-rich areas, in some circumstances before wind generation has been developed there. These CREZ transmission costs will be spread across all load-serving entities in ERCOT.

The CREZ transmission plan calls for more than 2,000 miles of new transmission lines–as well as upgrades to several hundred miles of existing transmission lines–to transport renewable power from remote areas to population centers by the end of 2013. After initial false starts, the Public Utility Commission of Texas (PUCT) selected entities that will construct, operate and maintain the CREZ transmission plan’s priority and priority-dependent facilities and improvements and subsequent facilities and improvements. This transmission expansion effort appears to place Texas on the path to meet its renewable energy goals.

California Independent System Operator (CAISO)

California has one of the most ambitious RPSs in the U.S. CAISO has proposed a revised transmission planning process, introducing a new category of policy-driven transmission facilities to be included as part of a comprehensive transmission plan for the CAISO balancing authority area. FERC conditionally accepted the proposal, which was the subject of an Aug. 24 technical conference and could become effective soon.

CAISO also developed the Location Constrained Resource Interconnection Policy to finance transmission construction to connect remote, renewable energy resources to population load centers. FERC-approved, this plan initially rolls in the costs of interconnection facilities for location-constrained resources such as wind to all CAISO system users. Then each generator that subsequently interconnects to the transmission line pays its pro rata share of the going-forward line costs.

Independent System Operator-New England (ISO-NE)

Although New England is not wind-rich because of topography, the New England States Committee on Electricity, relying on a renewable scenario development analysis conducted by ISO-NE, released the “New England Governors’ Renewable Energy Blueprint.”

The document evaluates the region’s potential for greater renewable resource development with a focus on large-scale onshore and offshore wind. The blueprint concluded the most cost-effective avenue would be to expand near offshore wind resources because this expansion could be accomplished with lower-voltage, lower-cost transmission interconnections that would lead directly into the region’s heavy load centers along the coast. New England states also have formed a Renewable Procurement Work Group to focus on coordinating procurement efforts throughout the region. In federal and interconnectionwide efforts, however, New England states expressed concern that a massive transmission buildup partially funded by ISO-NE ratepayers would be used to bring generation into the region from the Midwest, potentially stifling New England’s renewable resources development.

New York Independent System Operator (NYISO)

NYISO generally follows a beneficiary-pays approach to transmission expansion and upgrades. It has opposed spreading transmission development costs across its entire control area, and, as evidenced by its “Strategic Plan 2010- 2014,” has not made transmission development to fully access renewable resources a priority. Because renewable resources tend to be in the state’s northern and western regions far from load centers downstate, building new transmission to access these remote resources poses a challenge because the New York Public Service Commission has increased the state’s RPS target to 30 percent by 2015. In its “Power Trends 2010: New York’s Emerging Energy Crossroads” report, NYISO appears to have recognized the challenge’s magnitude, but it remains unclear how the challenge will be met.

Pennsylvania, New Jersey, Maryland Interconnection (PJM)

PJM renewable energy demand, according to state RPS programs, is expected to increase from 26 million MWh in 2009 to 200 million MWh in 2025. In its 2009 “Regional Transmission Expansion Plan,” PJM recognized that renewable resources (especially wind-powered generation far removed from load centers) would have a significant impact on its transmission expansion decisions. Although PJM has addressed integrating these renewable resources and has participated in the “Joint Coordinated System Planning Study” to analyze transmission expansion in the Eastern and Midwestern regions of the country, it is looking to FERC guidance on cost allocation questions. Recently, uncertainties arising from a court case and a subsequent remand to FERC involving PJM’s proposed cost allocation methodology risk dampening the construction of PJM transmission facilities that are necessary to access renewable resources.

Midwest Independent System Operator (MISO)

The Midwest region contains more wind resources than any other region in the country. But because most of these wind resources are far from load centers, there is an ongoing debate over transmission cost responsibility under MISO’s regional expansion and criteria benefits (RECB) standards. In July after extensive stakeholder input, MISO submitted a proposal to FERC to establish a new category of transmission projects, multi-value projects, for projects that enable the reliable and economic delivery of energy in support of energy policy mandates (e.g., state RPS programs) and address multiple reliability or economic issues or both that affect multiple transmission zones.

The costs for multi-value projects would be socialized widely and spread across the entire MISO footprint. FERC’s decision on the proposal is pending. MISO also has been proactive in including renewable resources in its transmission planning. For example, the “Regional Generation Outlet Study” was initiated to address state RPS requirements MISO members and stakeholders faced and to develop a robust transmission plan that would reliably and economically interconnect renewable resources throughout the Midwest. The MISO footprint is also home to CapX2020, a joint transmission planning initiative among 11 transmission-owning utilities that aims to upgrade the transmission infrastructure of that region, including facilitating access to renewable resources. If MISO stakeholders can reach an acceptable agreement concerning cost allocation for transmission expansion to access renewable resources, MISO will be poised to see explosive renewable resources growth being integrated into its grid.

Southwest Power Pool (SPP)

The SPP footprint has more than 4,000 MW of wind projects in service or under construction and more than 37,000 MW of proposed wind projects or that are under study. SPP’s Wind Integration Task Force has released a wind integration study analyzing wind penetration scenarios and recommending substantial transmission expansion in the footprint, including more than 2,000 miles of 345 kV lines and 250 miles of 230 kV lines. SPP recently revised its Integrated Transmission Plan (ITP) to determine transmission needs over 20 years, 10 years and in the near term and to focus more on high-voltage facilities.

In conjunction with the ITP, SPP has developed a new highway/byway cost allocation methodology for transmission projects that represents a shift from a reliability-based, localized approach toward a more regional focus that relies on high-voltage transmission lines–changes that are seen as beneficial to renewable energy developers. FERC has accepted both proposals, but rehearing is still pending. With these new efforts to accommodate wind energy in its planning processes and cost allocation mechanisms, SPP has placed itself in a strong position to fully develop the vast wind resources contained in its footprint.

Interconnectionwide Efforts

In addition to the transmission planning efforts undertaken by the individual RTOs, ISOs and ERCOT, numerous additional planning initiatives are occurring at an interconnectionwide level. One example is the Western Renewable Energy Zones (WREZ) initiative. The WREZ project provides a forum for states and stakeholders across the region to develop a comprehensive, coherent plan to encourage the renewable resources integration into the electric grid throughout the Western Interconnection.

Another example is the Eastern Interconnection Planning Collaborative, which is developing a collaborative interconnectionwide planning process to build upon regionally developed transmission expansion plans, including plans to access renewable resources.

FERC

FERC on June 17 issued a highly anticipated notice of proposed rulemaking (NOPR) designed to cut through much of the noise on transmission planning on an intraregional and interregional basis. The NOPR, if adopted as a final rule, theoretically should make it easier to develop transmission projects to integrate renewable resources into the grid by requiring transmission planning processes to account for transmission needs driven by public policy requirements (e.g., RPSs) and to include cost allocation methodologies that meet specific principles (including the achievement of public policy requirements and the requirement that costs be allocated to transmission project beneficiaries roughly on the basis of the benefits received). Cost allocation methodologies must be transparent, and if no agreement can be reached on a methodology by the public utility transmission provider (including each RTO and ISO), FERC would establish the methodology. In addition, interregional and intraregional transmission areas would be subject to much more substantial coordination requirements with respect to transmission planning efforts. Further, incumbent and nonincumbent transmission developers would be placed on a more level playing field in the regional transmission planning process.

As most states face increasing renewable resources mandates, more transmission is needed to connect renewable resources, especially wind generation, in locations remote from population load centers. The main impediment to this development regionally has been the perennially contentious cost allocation question. Now, however, FERC’s NOPR might finally break the logjam by forcing transmission providers, in transmission planning processes that must meaningfully include customers and other stakeholders, to come up with cost allocation methodologies that meet FERC’s enunciated principles. While the RTOs and ISOs still will take the lead in transmission planning, FERC’s NOPR if it becomes a final rule could open more rapid development of the transmission capacity projected to be necessary to integrate mandated renewables into the grid.

Authors

Laurel W. Glassman is counsel to White & Case LLP. She practices in the firm’s energy, infrastructure and project finance group with an emphasis on regulatory matters and transactions. Reach her at 202-626-3594 or lglassman@white case.com.

Jennifer L. Maul is an associate in the energy, infrastructure and project finance group at White & Case LLP. Reach her at 202-729-2419 or jmaul@whitecase.com.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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