Authors
Larry F. Eisenstat is head of the energy practice and Cortney Madea is an energy associate with Dickstein Shapiro LLP. They can be reached at eisenstatl@ dicksteinshapiro.com and madeac@dicksteinshapiro. com, respectively.
Currently, 24 stateshaverenewable opportunities for developing otherwise Texas, on the other hand, has portfolio standards (RPS) which, viable projects. Indeed, several regional adopted a much more comprehensive in general, require retail electricity transmission providers are intent on legislative and regulatory approach. In providers to have a minimum percentage eliminating such obstructions. 2005, the Texas Legislature established of renewable resources in their supply For example, California requires a target of 10,000 MW of installed portfolios. Unfortunately, though, the that 20 percent of the state’s electricity renewable capacity by 2025, and energy from such resources, particularly demand be met from renewable energy directed the Public Utility Commission wind and geothermal projects, is often by 2010. Acknowledging the barrier of Texas (Texas Commission) to ( 1) difficult to deliver due to their remote posed by high interconnection costs, the designate competitive renewable energy locations or relatively small size. Wind California Independent System Operator zones (CREZs) in areas with sufficient speed is not necessarily highest next (CAISO) sought and obtained FERC renewable energy resources and to existing transmission, and upgrades approval to include (or “roll-in”) the costs suitable land area to develop renewable usually aren’t justified by relatively ofthoseinterconnectionfacilitiesrequired resources, and ( 2) develop a plan to small projects. The problem, then, by location-constrained resources in the construct the transmission necessary to is how best to tailor interconnection revenue requirement of the transmission deliver the targeted level of renewable policies to accommodate the entry of owner charged with their construction; resources in each CREZ. The costs such “location-constrained” resources i.e., to charge an interconnecting of these transmission projects will be as are necessary to meet state or regional generator only its pro rata share of the borne by the transmission providers RPS requirements. facilities’ total costs, and to charge system and each renewable project in the
The largest obstacle to customers the costs of any unsubscribed given CREZ will be required to post interconnecting renewable resources portion of these facilities. collateral of 10 percent of its pro rata is the cost of the necessary facilities. Similarly, certain load-serving share of the estimated capital cost of the
Under FERC Order 2003, generators entities (LSEs) in the Midwest transmission improvements. The Texas must initially fund the network upgrades Independent Transmission System Commission has since established the necessary to interconnect to the grid in Operator (MISO) are required to procure CREZs and target capacity levels, and exchange for transmission credits or as much as 25 percent of their electricity anticipates issuing construction permits financial rights. But as FERC recently requirements from renewable resources by summer 2009. acknowledged, “[l]ocation constrained by 2020. As a consequence, MISO is Only time will tell which of these resources present unique challenges developing a mechanism that, rather than approaches best facilitates renewable not faced by other resources and . . . allocating all the transmission upgrade energy development. One way or are not adequately addressed in the costs solely to the first renewable the other, though, if a state requires a Commission’s current interconnection generatorwishingtointerconnect, would given percentage of renewables, the policies.” [California Independent allocate these costs, over time, to all those transmission system must be planned System Operator Corporation, 119 renewable generators connecting to the to ensure that this directive in fact will FERC ¶ 61,061, P 64 (April 19, 2007).] same facilities. Specifically, the upgrade’s be met. Surely the task of developing In particular, the cost responsibility for sponsors(e.g., LSEs, transmissionowners, the policy changes and regulatory rules major new transmission facilities faced etc.) initially would finance the upgrades necessary to accomplish this is no less by first-in-line renewable developers, and renewable generators would pay their imperative than the policy objective that if not outright prohibitive, can lead to share of the annualpaymentsat such time lead to the adoption of an RPS in the continual queue reshuffling and lost as they go commercial. first place.
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