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Paying for the Green Grid

Subsidies might not be the best solution for interconnecting renewables.

Fortnightly Magazine - April 2009

Energy Regulatory Commission, 3 in which the 4th Circuit held that a state order directly denying a certificate application did not serve as a predicate for the exercise of federal backstop authority.

Further obstacles to interstate renewable-transmission projects often are presented by Federal agencies such as the Department of the Interior’s Bureau of Land Management, the Forest Service and the Department of Defense, all responsible for administrating federal lands that might be crossed by this green-power superhighway. Particularly in the Western United States, where federal land often is traversed by large-scale transmission projects, the lack of coordination, lengthy processes, and the inability to focus on the benefits of large national renewable goals often hamstrings projects. Here, delegating federal-siting authority to a single agency might be of enormous help.

Finally, coordinated interregional planning might merit further exploring, in order to facilitate the development of multi-state plans responsive to the need to interconnect renewable resources. Here there may be room for improvement, but it’s not clear that existing planning institutions and processes-including those only recently blessed by FERC in Order No. 890—aren’t up to the task. Indeed, the JCSP study process demonstrates that coordination is quite feasible among existing institutions in the development of cross-regional plans. Such coordination, in contrast to an additional layer of bureaucracy, holds the best hope of ensuring that the planning process will continue to be well-informed by existing expertise, and that local concerns to which the planning process must be mindful, continue being addressed. Without a doubt, once the need to respond to an RES and carbon control becomes a priority among utility planners, the focus of these processes will evolve.

Cost Socialization

The proposed socialization of the cost of an interconnection-wide transmission build-out would be an unnecessary and counter-productive step. Under existing FERC policy, where proposed new transmission facilities are integrated with existing facilities and serve to benefit all customers, whether by enhancing reliability or reducing system-wide costs, costs generally are rolled into system-wide rates. 4 On the other hand, where new facilities are designed to provide service from a limited set of new resources, costs are borne directly by project developers and load. In California Independent System Operator ,5 FERC permitted partial rolled-in rate treatment on an interim basis for the unsubscribed portion of transmission facilities designed to access remote renewable resources, but provided for the allocation of these costs to incremental subscribers as the line is used more fully. The interim and partial nature of the rolled-in rate treatment underscores the general regulatory rule that costs appropriately are assessed to cost causers, unless a specific showing is made that all customers will benefit from the investment. In Chinook Power Transmission, LLC, Zephyr Power Transmission, LLC ,6 FERC modified its open-access rules to permit transmission project developers to commit capacity to anchor customers, thereby providing backers the security of financial commitments needed to support the projects. The decision promotes the development of new merchant facilities designed to access remotely- located renewable resources. Again, the order confirms the general rule supporting incremental rate treatment for facilities