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Paying for the Green Grid

Subsidies might not be the best solution for interconnecting renewables.

Fortnightly Magazine - April 2009

of limited general benefit. Explaining this policy with respect to new interstate natural gas pipeline facilities, FERC has commented that sending project developers and users a price signal reflecting the unsubsidized cost of facilities discourages overbuilding and levels the playing field for competitors. 7

Under the quite reasonable assumption that all utilities soon will be required to comply with a federal RES and some form of carbon-control regime, utilities will have an unprecedented incentive to search out new options for GHG-emission reductions. Without a doubt, many utilities will make plans to build new transmission facilities in order to access remotely located renewable resources, while project developers will have reason to invest in such facilities in order to access newly motivated markets. Particularly in states in which RES requirements already are in place, a good deal of this work already is under way.

Adding cost socialization for new transmission facilities into this mix will tilt the balance among the many options for satisfying new RES and carbon-control requirements substantially toward reliance on remote renewable resources through cost-subsidization. With the cost of new transmission for remotely-located renewable resources rolled into system-wide rates by statutory fiat, any investment in other options, even if they were more economical when considered on a fair basis, will be disadvantaged.

Cost socialization also is inequitable when considered with respect either to utilities that themselves already have invested heavily in transmission to access renewable resources (as is true of many utilities in California struggling to meet already stringent RES requirements), and as it relates to utilities (particularly those in the Southeastern United States) for whom wind resources simply aren’t a realistic option, no matter how heavily the transmission grid is subsidized. For these utilities, the best hope of mitigating substantial RES and carbon-control requirements lies in developing efficiencies in the production and use of electricity, and in the development of local biomass resources. It does the environment no good to call upon these utilities to subsidize a transmission grid to which they have no realistic hope of accessing.

Transmission Access Subsidies

AWEA, SEIA and EFC suggest that without a national funding mechanism, necessary transmission simply will not be built. This seems clearly incorrect, and ignores the unavoidable dynamic that an RES or carbon-control framework will establish. Faced with a direct mandate, or an overwhelming financial incentive, utilities simply must respond, and, where economical, they will build or fund new transmission systems.

Whether the investment compelled by these new requirements will support all of the high-voltage facilities contemplated by AWEA, SEIA and their supporters is an open question. Both the AWEA and SEIA paper, and AEP in their promotional materials, tout the engineering benefits of new 765-kV lines, pointing to the efficiency of the larger lines with respect to the power they convey, the use of rights of way, and lower line losses than smaller-scale facilities. But it makes no sense to judge the economics of these lines in the abstract. If, indeed, it makes economic sense to build them, when considering the available resources and demand while comparing the cost