(November 2006)Our annual return on equity (ROE) survey broadly shows a continuing decline in the level of debate over issues specific to restructuring of the electric market. It also...
The Queue Quandary
Why developers today are often kept waiting to get projects ok’d to connect to the grid.
And for regions that have adopted capacity markets that include competitive bidding, the question already has arisen, as FERC chairman Joe Kelliher noted, of “whether a resource chosen through a capacity market auction moves to a higher place in the queue.”
In other words, a project might submit a winning bid in New England’s FCM auction or PJM’s RPM program, and yet might have a queue position so low as to virtually disqualify it from achieving certain milestones on time, as required for auction winners.
ISO New England is working on the problem, having already formed a stakeholder group (the FCM-Generator Interconnection Study Group), which held its sixth meeting on January 8, and which already has adopted a list of twelve principles for coordinating the interconnection queue with the FCM auction.
Nevertheless, the discussion can descend very quickly down a slippery slope. Should FERC ask grid operators or RTOs to make value judgements or choose one fuel over another in granting interconnection agreements for new gen projects? In fact, engineers could refer to numerous objective criteria in making such judgements, such as whether the project has gained financing, site control, purchased-power agreements or any necessary environmental permits. Engineers also could take account of plant capacity factors, heat rates or greenhouse emissions. However, to give a green light to engineers and operators, to serve as both judge and jury on evaluating the merits of new projects, would appear to place FERC’s open-access policy on a direct collision course with state portfolio mandates and planning needs.
At the California ISO, Armando Perez suggested FERC should consider affording greater flexibility to ISOs and RTOs to prioritize projects and studies, but warned that “creation of priorities in the study process must clearly be weighed against open access principles as they have been traditionally implemented.”
Rather than shore up FERC’s current study process with stricter controls on queue management, or by authorizing regional grid operators to pick winners and losers, renewable-energy developers tend to look outside the box. They favor a larger role for corroborative regional transmission planning, to ensure that the needed grid capacity is there before the developers arrive with their project proposals. That makes the study process less complicated. With no big upfront funding surprises for gen developers, this solution presumably would minimize or eliminate the many motives for upgrade shopping, queue manipulation, and phantom filings.
The California Wind Energy Association and other renewable developers largely favor this sort of integrated collaborative planning. In fact, they argue that FERC’s LGIA process “needlessly duplicates” the typical process for regional transmission expansion planning (RTEP) and makes little sense, given that transmission construction carries a lower risk than gen plant development, and makes up a smaller portion of the typical customer’s overall electric bill.
First, the study process does not take into account other system needs stemming from reliability issues and economic opportunities the association says could be addressed simultaneously. And second, as the association explains in its written comments, network transmission facilities are rarely built as a result of the studies. Often, says