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Chicken-Egg Solution

Solar and wind developers learn to shift project risk to the grid.

Fortnightly Magazine - February 2011

Grid , Public Utilities Fortnightly, Feb. 15, 2001)

And as Google’s Green Business Operations Director Rick Needham noted last October in the “Official Google Blog,” the AWC when built out will be able to interconnect 6,000 MW of offshore wind turbines—enough to serve approximately 1.9 million households. (“The wind cries for transmission,” at googleblog.blogspot.com.)

Trans-Elect and the AWC project companies of course have asked FERC for transmission rate incentives. In direct testimony and affidavits from Brattle Group principals Johannes Pfeifenberger and Samuel Newell, the applicants provide a detailed analysis of how the project will produce more regional benefits and efficiencies than would a series of separate, east-west radial lines running out from the existing PJM grid to individual offshore wind farms. Moreover, Pfeifenberger and Newell show how the AWC project will still produce net benefits, through greater coordination and flexibility throughout the PJM grid, even if the AWC offshore line never actually interconnects with any offshore wind projects. ( See FERC Docket No. EL-13, filed Dec. 20, 2010 .)

In this sense, the AWC grid proposal represents more of a top-down regional transmission solution, just as if it were the product of policy-driven planning of the sort envisioned by FERC’s now pending rulemaking in Docket RM10-23, rather than the reactive sort of proposal as seen in California, where the plan emerges out of FERC’s Order 2003 process for generation interconnections.

This contrast invites discussion both about the purpose of FERC’s Order 679 policy on transmission rate incentives, and whether the commission’s vision of policy-driven regional planning, designed to be responsive to state-imposed renewable energy mandates, can stand up to the attractive safe-harbor guarantees that Southern California Edison is seeking under its very different way of solving the chicken-egg problem.

For example, the commission in the past has been known to bend the rules and grant rate incentives to speed projects along so as not to overstep milestone deadlines and thereby lose stimulus funding or DOE loan guarantees. FERC did so as recently as last October, when it granted transmission rate incentives for Southern California Edison for its Eldorado-Ivanpah transmission line project and its combined Red Bluff substation and Lugo-Pisgah transmission line project, in order not to jeopardize ARRA stimulus funds and load guarantees. (See, Docket EL10-1, Oct. 29, 2010, 133 FERC ¶61,108; Docket EL10-81, Oct. 29, 2010, 133 FERC ¶61,107.)

The commission did so even though the projects had failed to satisfy Order 679, as they had been approved through CAISO’s generation interconnection process, rather than a fully open regional transmission planning process:

“We find that certain of the incentives that SoCal Edison requests for the projects are justified in light of a combination of policy reasons, including the exigencies of the deadlines imposed by the American Recovery and Reinvestment Act .”

Yet now signs are emerging that FERC realizes what’s at stake and might be willing to tighten the process for awarding incentives.

As December came to a close, FERC handed down a pair of companion decisions aimed at making it more difficult for utilities to win transmission rate incentives