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There will
be no magic involved in adding new renewable energy to the electricity mix.
It will involve long-distance transmission lines -- lines that, in some
instances, have yet to be built.
While the
infusion of federal stimulus funds earmarked for building new transmission
is seen as a boon to the industry, it is not a quick fix. The American
Reinvestment and Recovery Act appropriated $6 billion to the U.S.
Department of Energy's loan guarantee program to provide up to $60 billion
for renewable energy and electric power transmission projects. Building new
lines will still require considerable investment of capital from the
industry, as well.
Both on
federal and state levels, and between them, discussions are taking place
over the thorny issue of what is really needed, who will control it, and
what makes the most sense to ensure that, down the line, the best grid
emerges in a timely fashion.
With
legislation dealing with some transmission issues such as planning, siting and cost allocation pending, as part of a more
comprehensive energy bill, turf wars over the ultimate jurisdiction of the
lines are coming to the forefront. And these aren't petty territory-staking
arguments. Instead, they reach to the very core of the way the country's
transmission grid has been built to date.
Historically,
new transmission lines have taken up to a decade, and sometimes more, to
travel the path from concept and design to fully built and functional.
Building new transmission is a "pretty expensive proposition"
with a lot of regulatory interplay as well as local politics involved,
explained Jeff Dalebroux, a Chicago-based
corporate finance attorney with Dykema and the
co-leader of the firm's infrastructure and project finance area.
"There are federal regulations and state regulations, and those two
don't always work well together."
But with the
urgency inherent in the Obama administration's heavy push get new renewable
generation to market over the shortest time period possible, federal
legislators are looking to cut through any potential holdups. To that end,
some level of control may well be wrested from state regulators by the
Federal Energy Regulatory Commission (FERC) in the case of a slowdown or
dispute in siting of a project deemed a
"high priority national transmission project" included in an
interconnection-wide transmission plan.
This has
state regulators, for one, concerned. In a letter dated May 5 to Senators
Jeff Bingaman and Lisa Murkowski of the U.S. Senate Committee on Energy and
Natural Resources, National Association of Regulatory Utility Commissioners
(NARUC) president Frederick Butler expressed concerns. "NARUC
moderated its long standing opposition to any federal siting
authority, provided any new legislation in this area adopted a 'bottom-up'
approach that recognizes primary siting
jurisdiction by the States, and provided that FERC's 'backstop' authority
be as limited as possible."
Private
Incentives
Butler stressed the need to extend the time limit before FERC
could take control from 12 months to 18 months. "One year is a very
tight timeframe for the review of a transmission siting
application depending upon the scope and size of the project."
But the
option of legislated federal preemption was still a sticking point.
"We continue to have a deep concern with the draft's position on
federal preemption in the instance of a State rejecting an application
within the 12 month review period," he wrote. "This language
would overrule legitimate State agency concerns and the laws with regard to
how a State ruled on a transmission project. The language would then permit
FERC to vacate the decision and preempt a State's lawful decisions and
order. The inclusion of this language in essence requires the State to
approve a project in order to avoid federal preemption."
Cost
allocation is a hot topic, too. At issue is who should bear the costs of
building the new transmission lines. Should it be the company building the
lines? The end-users of the new electricity carried by these lines? The
ratepayers in the states through which the new "transmission interstate
highway" passes on its way? Or a combination of the three?
According
to NARUC, any legislated cost-allocation methodology for new interstate
transmission lines then undertaken by FERC shouldn't "preclude the
assignment of interconnection cost to the general body of ratepayers within
a State when that State's regulatory body determines that such an
allocation is in the public interest."
The Midwest
ISO, for instance, considers both economic value and reliability.
"What we'd like people to do is to focus on the questions they want
answered, rather than the cost," says Clair Moeller, vice president of
transmission asset management for the Midwest ISO. Once those bigger
questions are answered, then cost can be addressed.
The
Southwest Power Pool, in the meantime, has moved forward with a series of
extra high voltage transmission expansion and upgrade projects totaling
more than $700 million. It uses what it is called a "balanced
approach" that considers a reduction in line losses and the enablement
of new wind generation development. Under that approach, the Pool reviewed
the entire group of upgrades, rather than evaluating each project
separately on its own merit.
In the end,
stimulus seed funding through loan guarantees and/or outright grants will
do only a fraction of what is necessary to build the new transmission lines
needed to feed load centers with wind-, solar- and other renewables-based energy from more remote areas of the
nation. The cost to go forth will be huge, say experts. So the stimulus funds
must be allocated in such a way that it encourages private developers to
remain involved.
More
information is available from Energy Central:
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