Six years after Congress granted FERC “backstop” siting authority for electric transmission projects in the Energy Policy Act of 2005, the regulatory landscape is still evolving as a result of...
Taking Green Private
How merchant funding is remaking the rules for renewables.
for the SunZia line, has been busy courting potential investor-owners, conducting meetings in the Phoenix area and emailing notices to various parties active in transmission and generating planning and development. SunZia reports that by mid-January 2007, SWPG had received at least 16 formal responses indicating interest in participating in the project as owners or investors.
In essence, then, the SunZia case presents FERC with a novel and fascinating issue. If a transmission project developer invites any and all to sign on as investors or owners, is it then OK to turn all grid rights over to the participants, carte blanche , and dispense with rules that otherwise would dictate an open-access allocation of the line’s physical capacity?
The effects of injecting more private merchant money into renewable energy also can be seen at smaller levels. Consider the experience of the small power developer, Clipper Windpower.
Having already proposed the 400-MW Concepcion II wind project for La Rumorosa in Mexico’s Baja California, to produce renewable wind power for export to the U.S. California market, Clipper reported late in 2009 that it had decided regretfully to withdraw the project from the interconnection queue at the California ISO, simply because it felt it no longer could justify the financial risk of having to pledge a $7.5 million letter of credit, as required by CAISO rules.
In point of fact, Clipper had second thoughts about the project when CAISO completed its preliminary Phase I system impact study and notified Clipper that the Baja project would require some $538 million in grid network upgrades to make the renewable capacity deliverable to California markets on a firm basis. Compare that cost—$1,345/kW—with the Lawrence Berkeley Lab’s 2009 study citing a nationwide median cost of $300/kW for transmission net-ups for wind power development. ( See March 2009 Commission Watch column, “ Titans of Transmission .”)
Seeking to lower its risk, Clipper decided to scale back its interconnection request from “full capacity” (qualifying as firm enough for resource adequacy requirements) to “energy only.” By accepting a lower-priority status, Clipper’s project would require less in the way of grid upgrades—only so much as to bolster reliability, with no added investment to guarantee full deliverability, to the tune of only $4.5 million in total—less than one percent of the upgrade cost for a capacity-qualified project.
Yet Clipper’s strategy didn’t help much. The developer faced a CAISO tariff that still would require financial security based on the upgrade costs required for the project as first filed—with full capacity deliverability.
That’s because CAISO’s intent in Phase I of its generation interconnection procedure isn’t designed so much for the convenience of developers, as it is to help CAISO keep control over its project queue. As a regional system operator in charge of interconnecting lines and gen units to its grid system, CAISO wants a tidy process. It wants to assign a fair amount of risk to would-be developers. It wants project applicants to think carefully about potential costs before choosing the more expensive capacity-qualified project status, or otherwise filling the queue will ill-considered