(November 2008)Economic uncertainties are raising doubts over utility returns. Will regulators feel the need to consider broader economic effects when engaging in ratemaking? While...
The Queue Quandary
Why developers today are often kept waiting to get projects ok’d to connect to the grid.
conceded in written comments following the conference that “phantom projects inflate the size of the queue.”
Some participants at the conference bolstered this theory by noting the large number of projects that tend to drop out before earning an interconnection agreement, producing a small success rate of only about 25 to 30 percent in the typical queue.
One developer, LS Power Associates, filed written comments observing that, “while this success rate may be true, this is just the nature of new generation development, in which project cancellations are common.”
Jan Smutny-Jones, the longtime executive director of California’s Independent Energy Producers Association, echoed this argument at the conference, where he declared poetically that “One man’s phantom is another man’s dream.”
Moreover, as Calpine’s Zadlo notes, the choice of fuel should exert no effect on the engineering studies that have proven so problematic for queue management.
“It doesn’t matter,” he noted at the conference, “if it’s nuke, coal, wind, gas.
“Four years ago the queues were filled with gas generators; today it’s renewables. Three or four years from now it’s going to be another generation technology.”
Yet CPV adds, quite rightly, that the queue logjam and FERC’s policies on transmission pricing and cost recovery “are particularly harmful to projects which could be constructed relatively quickly, such as most wind projects, [which] are located far from the existing grid and developed in smaller increments than other types of generation.”
Tag, You’re It
According to James Johnson, Xcel Energy’s assistant general counsel, who filed written comments for the company on January 15, the “straw that breaks the camel’s back” in the interconnection queue is FERC’s policy on costs of required grid network upgrades. Under the pro forma OATT, as Johnson noted, FERC assigns up-front funding responsibility “to the individual generation project [or projects] that push the capacity of a specific transmission facility over its rating.” That policy, as Johnson writes, “encourages developers to enter the queue multiple times … either to take advantage of transmission capacity created by earlier queued projects, or to shift the cost of network upgrades onto another generator.”
In other words, a project developer might well prefer to go “upgrade shopping” and finish in second or third place, rather than first. By losing the race for queue position, the developer might piggyback as a free-rider on the cost contribution to grid development that is required to be offered by other developers proposing similar projects that occupy a higher position in the queue.
Robert Gramlich, policy director for the American Wind Energy Association (AWEA) cites this particular FERC policy — forcing gen project developers to fund the necessary grid improvements — as the “root of much evil” in the interconnection queue.
“It’s a crazy process,” he said. “It would be like planning a highway expansion and putting all the costs on the first car to come up the entrance ramp.”
Many others agree, such as CPUC Counsel Chaset, who explained the problem in more detail at the conference, citing a hypothetical example “Generator A,” in a high queue position, which proposes to build