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Deal Friction

Why the green grid might do better without open access.

Fortnightly Magazine - April 2011

Last month, on the Ides of March, the staff of the Federal Energy Regulatory Commission held a technical conference under the somewhat fuzzy rubric, “Priority Access to New Participant-Funded Transmission.” But by the time each panel participant was heard from, and the meeting wound up, it was clear the topic should have read, “So FERC’s Policy of Transmission Open Access Is Maybe Bad for Green Power—Now What?”

In theory at least, wind, solar, and even geothermal project developers ought to be friends with open access. FERC Order 2003, for example, confers on gen plants of all stripes the right to request interconnection service from incumbent transmission providers to hook up to the integrated grid network. And this right is nothing to scoff at, given the remote locations of many renewable energy projects.

Yet, as was noted at the conference, a developer may have good reason to decline interconnection service from an incumbent utility transmission provider and elect instead to finance and build its own lead line to connect to the grid, especially for projects built in stages. The American Wind Energy Association and the Solar Energy Industries Association brought that point home back in 2009, in defending the Milford Wind Corridor project for wanting to do just that:

And so in a number of cases recently decided or yet pending, wind and other green project owners have asked FERC to rule that a gen developer who builds its own tie line to the grid can reserve available surplus line capacity for the gen units the developer plans to add to the project in future years. But in this effort, the developers haven’t quite succeeded. Rather, FERC generally has ruled that before those future project additions come on line, third-party gen plant developers who didn’t participate on the original project can come on the scene later and request and receive transmission service from the owner of the lead line at the embedded average project cost. That’s because, at least in the eyes of the Federal Power Act and FERC precedent, once the lead line is built, the owner in effect has become an incumbent transmission provider in his own right. Absent an explicit waiver granted by the commission, the original developer must take on the open-access obligations imposed generally on transmission providers by Orders 888 and 890, such as filing an open-access transmission tariff (OATT), complying with transmission provider standards of conduct, maintaining of an OASIS notice board to offer grid services, and expanding the line to honor good faith requests for service from third-party latecomers when available transmission capacity (ATC) isn’t sufficient to support the requested service.

NERC might even require the gen tie owner to register as a transmission provider in the reliability compliance registry, putting a wind project developer at risk for compliance with reliability standards, even though the gen tie line would function only as a very long extension cord, with no real functional integration into

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