The latest dispute over PJM’s bidding rules has raised the level of uncertainty in organized electricity markets. Efforts at reform have created a market structure so jumbled that it can’t produce...
The Queue Quandary
Why developers today are often kept waiting to get projects ok’d to connect to the grid.
queue. Capacity represented by new wind projects with interconnection agreements under study exceeds the entire current peak load for the SWPP footprint.
• PJM: Number of interconnection requests by its biannual study groups has increased 120 percent from 2005 to 2007.
• New York ISO: 400 MW of wind generation in commercial operation; 7,000 MW in wind projects (15-plus times greater) pending in the interconnection queue.
• California ISO: 118 (40,000 MW) of 173 active interconnection requests (57,686 MW total) represent renewable resources, with the renewable portion growing from 5,700 MW as of January 2006, and 11,000 MW as of January 2007. By contrast, CAISO’s all-time peak demand (summer 2006) is 50,270 MW.
The Buffalo Ridge area of southwestern Minnesota, lying within Lincoln, Pipestone, and Murray counties, offers a particularly acute example of the growth of wind projects in regional interconnection queues, and many see such growth as pure speculation.
According to MISO, some 22,000 MW of wind-energy projects for that area remain pending in the regional interconnection queue, proposed for commercial operation by 2014, while the local grid serving the Buffalo Ridge feature is expected to offer only 1,900 MW of exportable outlet capacity as of 2014.
Of course, FERC late last year did grant incentive rate authority to Xcel Energy for some $1 billion in grid system investment planned for the larger Upper Great Plains region. The new investments include the BRIGO project (Buffalo Ridge Incremental Generation Outlet Project, consisting of three new 115-kV lines), plus three separate 345-kV projects designed to import power from the wind-rich Dakotas to Minnesota’s Twin Cities and load centers in eastern Minnesota and western Wisconsin. (See Docket No. ER07-1415, order issued Dec. 21, 2007, 121 FERC ¶61,284) Nevertheless, the Buffalo Ridge situation has prompted some observers (including at least one FERC staff member) to pin the blame for queue delays on a fundamental shortage of transmission capacity. They say that in conducting their system-impact studies, engineers are trying to find ways to pour a quart of water into a one-cup container.
As MISO Vice President and General Counsel Stephen Kozey explained in written comments on the Buffalo Ridge problem, “once those electrons flow past the interconnection facilities, they try to flow with other electrons from other queued generators and the transmission lines simply cannot handle the strain.”
Most observers describe the queue explosion as a “wind problem,” exacerbated perhaps by wind developers racing the clock against the next scheduled legislative renewal of the federal production tax credit. They add that the low-level ante for queue entry ($10,000) and FERC’s policy allowing developers to elect a no-fault, on-demand three-year suspension of a queued project after issuance of an IA creates asymmetric risk, making it too easy to join the queue, and too difficult for grid operators to winnow the backlog. All this leads presumably to a plethora of speculative, “phantom projects.”
Thus, as FERC Commissioner Mark Spitzer observed, “Clearly we have a paradigm that was based upon the combined-cycle gas turbine. The realities [today] are quite different.”
Even wind energy developer Competitive Power Ventures (CPV)