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Paying for the Green Grid

Subsidies might not be the best solution for interconnecting renewables.

Fortnightly Magazine - April 2009

Concluding that the transmission infrastructure is inadequate, the American Wind Energy Association (AWEA) and the Solar Energy Industries Association (SEIA) call for a national investment likened to the Eisenhower Administration’s commitment to the interstate highway system, to support renewable development. That call is echoed by the Energy Future Coalition (EFC), the Center for American Progress, the Sierra Club and others, who argue for nationally-directed plans for large-scale private-sector investment to connect vast renewable energy resources to the electric grid. By the date of this publication, these concepts likely will have turned into draft legislation.

While many of the suggestions made by AWEA, SEIA and EFC are sensible and well-intended, their call for the nation-wide allocation (socialization) of costs that may amount to several hundred billion dollars is unnecessary, costly, and likely to thwart the development of economical alternatives for meeting greenhouse gas (GHG) emissions reductions. Assuming, as seems quite likely, that Congress will establish a set of broad environmental goals for the electric industry through implementation of an RES and carbon-control measures, it would be far better to let the industry determine how to most effectively meet those goals by making economic choices among an array of available options. Subsidizing solutions that depend on expensive transmission construction is unnecessary and very well might result in the United States having foreclosed innumerable alternatives to compete with a vast transmission subsidy.

Green-Power Superhighway

The elements of the proposals now being circulated for what AWEA and SEIA call the “green-power superhighway” include: 1) federally-mandated interconnection-level planning; 2) new federal siting authority; and 3) cost recovery from all load on an interconnection-wide basis. They argue that all of these elements must come together in order to accomplish the goal of attaching substantial renewable resources. 1

With respect to planning, AWEA, SEIA and EFC call for legislation establishing interconnection-wide transmission planning overseen by the Federal Energy Regulatory Commission (FERC) with the aim of developing plans for new transmission lines to be built to attach renewable resources. As to siting authority, referencing the now balkanized nature of the state-by-state siting process, they call for uniform federal authority capable of licensing facilities that serve national interests. Finally, with respect to cost allocation, they argue that the cost of the transmission build-out should be spread among all load-serving entities on the basis of their relative load, for ultimate allocation to all customers throughout the nation. AWEA and SEIA contemplate that the backbone of the new grid will consist of high-voltage (765 kV) lines designed to bring (principally) wind resources from remote locations to population centers generally on the nation’s coasts.

While no definitive estimate of the cost of the new superhighway system yet has been advanced, there is some indication of

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