Fortnightly Magazine - May 2010
Wind faces a nano-scale threat.
For decades now, wind turbines have been generating electricity more cheaply than most other (non-hydro) renewable energy technologies. In particular, wind has maintained a comfortable lead over solar energy in the price-per-kWh race. That’s destined to change.
Why similar U.S and Canadian risk profiles yield varied rate-making results.
Cost of capital is often a contentious issue in utility ratemaking. This is due, in part, to the inexact nature of the tools available to financial analysts and the considerable room for divergent opinions on key inputs to cost-of-capital estimation. Perhaps for this very reason, and to achieve regulatory efficiency, Canadian regulators widely adopted a formulaic approach to setting return on equity (ROE). However, an unusual degree of rancor has evolved north of the border as allowed ROEs in Canada, once at parity, have fallen near 200-basis points below their U.S. peers.
New England grapples with excess capacity and rock-bottom prices.
“Corrosive.” “Seriously flawed.” On the “brink of market failure.”That’s what critics say about New England’s forward capacity market (FCM), whereby ISO New England conducts auctions to solicit offers from project developers to make electric capacity available three years into the future to meet anticipated regional demand.
Forecasting brings wind energy under control.
Advancements in forecasting have improved the reliability of day-ahead and hour-ahead estimates of wind generation. Wind never will behave like a base-load power plant. But as system operators integrate wind forecasts into their planning and market processes, they’re transforming intermittent wind energy into a variable but reliable resource.
Quantifying the economic benefits of generation alternatives.
Are renewables truly marking the start of a new economy, creating both economic growth and reliable jobs? Answering that question takes a complex analysis, but the numbers suggest green benefits might be smaller than expected.
Constitutional questions about state-mandated renewable tariffs.
Despite state efforts to follow the European model of state-mandated feed-in tariffs to promote renewable power, these actions won’t pass Constitutional muster. The Supremacy Clause makes a formidable legal barrier to states’ FIT policies.
Defining a test period to overcome controversies and inaccuracies.
Test-period and test-year selection continue to generate controversy in rate cases. Examples from Utah provide insight on the difficulties of forecasting and with judging test periods.
Capacity planning for the smart grid.
The one-day-in-10-years criterion for capacity planning is coming under scrutiny. Making the most of the smart grid and demand management requires a less conservative approach. Markets and prices rather than administrative rules will ensure resource adequacy in a more efficient way.