Energy policy in the United States calls for the aggressive deployment of renewable generation within this decade. This policy has led to an explosion of renewable resources that operate largely off-peak, off-season and intermittently, and are located in rural areas with limited transmission. Conversely, there has been only limited development of renewable generation which operates largely on-peak, on-season, reliably or near load centers.
By the end of 2009, 35,000 megawatts of on-shore wind was installed in the United States, double that which was installed just two years ago. Barring systemic barriers imposed on renewables development, including transmission constraints, this trend is likely to continue. Based on the interconnection queues of each grid region, industrial wind is the dominant renewable resource representing more than 90% of the proposed generating capacity of all renewable energy projects in the United States.
Last January, the Federal Energy Regulatory Commission (FERC) issued a Notice of Inquiry (Docket No. RM10-11-000 ) seeking public comment on whether to reform any of its rules or procedures to better accomodate variable energy resources (VERs) such as wind, solar or non-storage hydro generating plants.
Windaction.org worked with energy expert, William P. Short III, to submit comments.
We state that the true impact of our current national renewable vision is the massive public cost needed to transform the U.S. power grid to accommodate variable energy resources, despite the fact that these resources are not guaranteed to deliver energy at the very time of day and year when we need it the most.
Current policies that encourage renewable generation at the State and Federal levels reward all renewables equally for placing a megawatt-hour of energy on the grid. There is no adjustment to the federal or state subsidies based on time of day or seasonal demand requirements nor is there a meaningful adjustment for location of the power facility. These policies have created artificial and unsustainable market pressures; thus, compelling system planners to respond with more transmission and the fast-tracking of renewable projects that may be not only not needed but actually of poor quality from a grid reliability perspective.
If renewable subsidies were to discriminate in favor of those renewables that produce close to load and during the time of day and year when the energy is most needed (i.e. capacity rather than energy), we would expect the response in the market to be almost immediate. The need for expansive transmission would drop off. More renewables would be proposed for sites closer to our population centers and that can service our peak demand periods. The market would decide which renewable solutions best met the goal. Rather than seeing 125 megawatts of unpredictable wind built we might get 25 megawatts of baseload biomass; rather than remote-sited solar generation in the Mojave desert requiring 100 to 200 miles of new transmission, we may see a greater effort to build rooftop solar in California's cities. Reliable generation would mean less need for storage, less redundant generation and a better opportunity for replacing fossil fuel generation with renewables rather than merely displacing some fuel.
While public policy regarding renewables has helped the emerging renewables market, it is time these policies were amended to better suit the public's needs. We recommend abandoning ill-defined plans to reinvent our existing electric system so it can better accommodate variable energy renewable sources, and focus on consumer-centric, market-based policies that will move us towards real world, reliable solutions for our renewable generation.
There is still time for interested parties to file comments with the FERC. The deadline for filing has been extended to April 12, 2010.
With little fanfare last week, the ISO-New England[1] released its latest report, New England 2030 Power System Study: Report to the New England Governors, summarizing the economic and environmental impacts of developing significant amounts of renewable sources within the region including substantial inland and offshore wind resources.
According to the report, the New England States Committee on Electricity (NESCOE) and the ISO initiated the study in early 2009 following receipt of a letter from Maine's Governor John Baldacci requesting the ISO's support in advancing a "...regional vision for developing renewable energy." Shortly after, the NESCOE submitted a letter to the ISO on behalf of the governors, asking that the economic study be done. The assumptions used in the study were developed by the States with technical input from the ISO.
Background
All of the New England states, except Vermont, have adopted aggressive renewable portfolio standards (RPS) representing about 11% of demand in 2009 but growing to as much as 23% by the year 2020.
Utilities are under pressure to acquire renewable energy (or credits) from owners of operating renewables facilities in order to comply with the RPS programs. For each missing megawatt hour of renewable energy where the mandated percentages are not met, nearly every RPS in New England imposes a sizable fee[2] that is typically collected by each State's Public Utility Commission (PUC). The cost for either the renewable energy credit, or the compliance fee, is passed on to the ratepayers in the form of higher electricity bills.
The cost of meeting renewable mandates
In order to develop the RPS sources needed to satisfy legislative mandates, most transmission operators intend to build numerous transmission projects either to rural areas in New England or to out-of-region sites, generally into Canada. Several of these projects have already been proposed with more to come. And the state legislatures and PUC's have, thus far, responded favorably to having these costs socialized and paid for by the ratepayers in the region -- not by the renewable generators. Since most of this generation will be intermittent (wind) and largely operate off-peak and off-season, the ISO-NE will also have to procure quick start generation or arrange for sizable storage projects to balance the system. These costs are likely to be socialized as well, and not paid for by the renewable generators.
In a part of the country where only 160 megawatts (MW) of wind is currently installed, all of it onshore, the ISO's report identified a potential for up to 12,000 megawatts -- a 75-fold increase from current wind capacity -- with 7,500 MWs on land and the remaining 4,500 MWs offshore. Most of the onshore development would be sited in rural and remote areas of Maine (4,500 MWs), New Hampshire (1,200 MWs), Massachusetts (1,000 MWs) and Vermont (650 MWs), hundreds of miles from urban areas.
Offshore wind would be distributed in 1500 MW increments off the coasts of Massachusetts, Maine, and Rhode Island. We note that no offshore towers are installed anywhere in the United States at this time, and that Cape Wind, a proposal to erect 130 towers in Nantucket Sound off the coast of Massachusetts represents one of the fiercest wind battles worldwide!
Despite only limited wind generation experience in the region, and no offshore experience, the document assumes an average capacity factor for offshore wind of 40.7% and inland wind factors of 29.3% in Maine and a whopping 35.4% for the rest of New England!
But what caught our attention were the costs and scale for new transmission development outlined by the ISO -- information that should be required reading by every electricity consumer in New England, and every politician.
In order to meet the 12,000 megawatts of wind potential identified in the report, the ISO anticipates 4,320 new miles of transmission with midrange "order of magnitude" costs between $19 and $25 billion (500 kv or 765 kv lines). Even the more modest scenario of 4000 megawatts of on- and offshore wind was estimated to need 3,615 miles of new transmission ranging in cost from $11 to $14 billion.
The ISO states that its intent was to conduct a "what if" analysis that would inform the states of the economic and environmental impacts of various scenarios. "Although this analysis presents a variety of economic results for comparison," it wrote, "[the analysis] was not a least‐cost plan or multi‐year, present‐worth analysis, and it did not include a "feedback loop" that accounted for how consumers or investors would react to the different sets of circumstances presented."
Indeed!
Given the way New Englanders have responded negatively to wind development thus far, it is impossible to imagine a situation where ratepayers would embrace the environmental, economic, and social costs of industrializing their rural areas with turbines and transmission. It's regrettable that the ISO did not take this opportunity to speak frankly to the governors of New England rather than bolster Baldacci's (et.al.) pie-in-the-sky "vision" when it concluded that "New England has significant potential for developing renewable sources of energy ...primarily from inland and offshore wind resources."
In his memo to the ISO last December, Mr. William Short, an energy analyst with decades of experience in renewable energy deployment, warned that "promoters of renewable energy projects are getting their poorly conceived ideas made into statutes and regulations. Those statutes and regulations are leading to higher costs to end users than if sound economic renewable energy policies were implemented." He goes on to recommend an alternative policy approach and then challenges the ISO to "get over the idea that it should only respond when asked by state legislatures or public service commission's" and, instead, become the independent energy policy expert for New England.
Mr. Short, we agree!
[1] The ISO-NE is a non-profit entity tasked with managing the New England grid system and ensuring the day-to-day reliable operation of the region's bulk power generation and transmission system.
[2] The 2009 compliance fee for the region is $60.92 per megawatt hour. Renewable energy credits are trading at around $30 per megawatt hour.
Last month, Judge Stephen Yelenosky of the Texas District Court of Travis County dropped a bombshell when he reversed the order of the Public Utility Commission of Texas ('PUCT') that awarded responsibility for constructing, operating, and maintaining transmission facilities necessary to deliver renewable (wind) energy to the population centers of the State.
Background
In 2005, the Texas Legislature adopted Senate Bill 20 which directed the PUCT to select the most productive wind zones in the State and devise a transmission plan to deliver wind energy from these remote areas to the State's urban centers. Five Competitive Renewable Energy Zones ('CREZ') were identified in West Texas and the Panhandle for the construction of new wind energy generation. In 2008, the PUCT ordered the construction of new transmission to support up to 18,456 megawatts of wind energy capacity at an estimated cost of $4.93 billion, or approximately $4.00 per month per residential customer once construction was completed. The costs were to be reflected as rate increases. In its order of March 2009, the PUCT named thirteen transmission service providers (TSPs) to build the new power lines.
The City of Garland promptly sued the PUCT charging the Commission failed to consider the interests of electric customers and the advantages of municipally-owned utilities when awarding the contracts, including lower costs to electric customers. The City also argued that the PUCT did not make any "fact-specific findings" that substantiated why the thirteen entities were selected over those that were not. Judge Yelenosky agreed and on January 15 ordered the PUCT decision reversed and remanded back.
Where things stand
Judge Yelenosky's order had the effect of stopping the transmission projects authorized under the CREZ process.
The attorney for the City of Garland, Brad Neighbor, issued a press release on the Judge's ruling calling it "a big win for Texas ratepayers". This earned him a public rebuking by the PUCT Commissioners who appeared more concerned about their reputations than the court's order. But the fact is, Neighbor was right.
In a letter explaining his ruling, Judge Yelenosky found that the PUCT did not explicitly considered what’s most cost-effective for electric customers. He further detailed several areas where the PUCT relied on factors that were either legally irrelevant or lacked substantial evidence in the record to justify its decision.
Case in point: the PUCT partially supported its decision to not select the City of Garland or other municipally owned utilities because such entities were not required to pay property taxes and that payment-in-lieu-of-taxes might be infeasible. The Judge found the PUCT offered no explanation to connect this finding with the need to provide beneficial and cost-effective transmission capacity to electric customers. Rather, the record showed mere speculation "that taxing entities and others would be angered by transmission lines that did not come with tax payments." The Judge also found the PUCT's claim that "municipally-owned utilities did not possess the current and expected capabilities" was not based on any relevant factors or evidence in the record.
The PUCT appears to have acted on opinion and/or its own bias in deciding who would share in the $5 billion public pie.
But it gets worse.
In a little noticed hearing of the PUCT last fall, regulators sided with the companies building Texas' renewable-energy transmission network in deciding against seeking federal stimulus funding that could have saved money for the State's electric consumers. The Commissioners concluded that stimulus funds came with strings that would slow construction or negate any financial savings including:
a) the "Buy America" rule on iron, steel, and other US-made goods;
b) federal rules requiring workers be paid "prevailing wages" i.e. wages in line with what laborers earn in similar jobs in the region; and
c) major federal environmental review.
We note that transmission developers making the case against the stimulus funds have a vested financial interest in keeping their costs elevated; lower costs generally reduce the profit that regulated utilities can earn.
At the very least, the PUCT should have required the companies to prove the federal funding wasn't worth it, but we know from this recent court ruling that the Commissioners do not seem to know the difference between opinion and factual evidence. The ratepayers of Texas can only hope the Commissioners will respond constructively to the court ruling and remember who it is they serve.