Greening the Grid Gets Green Light
Oct 17, 2007 - Business Wire
The California Independent System
Operator Corporation (California ISO) Board of Governors
today approved making changes to its federal tariff
that spell out how a new financing tool will work
to remove barriers for renewable power trying to
access the power grid. If approved formally by the
Federal Energy Regulatory Commission (FERC), the
new financing mechanism will make it feasible for
smaller green power developers to hook up to the
transmission system and gain entry into the competitive
market for energy.
Renewable resources such as wind,
solar and geothermal are often located in remote
areas removed from the wholesale transmission grid.
These "location-constrained generating resources"
will help California meet its Renewable Portfolio
Standard, yet their development is often hampered
by a lack of adequate transmission capacity. It
can be difficult to find financing for transmission
projects to reach generation that has not been built
yet -- hence the chicken or egg dilemma. Which should
come first, generation or the transmission capacity
needed to get the power to the grid?
Under the process approved today,
the appropriate Participating Transmission Owner
(PTO) would build the "trunk lines" out to the renewable-rich
areas, initially recovering its costs through the
FERC-approved Transmission Revenue Requirement (TRR).
As individual generation projects are built and
connected to the grid, each generator would pay
its pro-rata share of the annual TRR payments. This
financing arrangement would continue until the entire
capacity of the project is subscribed at which time
the remaining revenue requirement for the end-state
transmission facility is completely supported by
the project developers.
Currently, new power plant owners
are responsible for the upfront cost of building
transmission trunk lines to the grid and the costs
can be prohibitive for smaller renewable power developers.
"This plan removes a major obstacle
blocking the development of renewable resources,"
said ISO President and CEO Yakout Mansour. "This
new hybrid financing method is a creative way to
help alternative energy suppliers connect to the
grid. It is all a part of leveling the playing field
for green power generators and guaranteeing their
non-discriminatory grid access. They still pay their
fair share, but the costs are spread and appropriately
based on when the green power comes on line."
"This is exactly the type of creative
solution California is known for," said ISO Board
of Governor's Chair Mason Willrich. "FERC approval
of this plan will give California a way to add the
infrastructure we need to get more green power to
the grid. Our tariff proposal is already receiving
national attention and may very well be replicated
in other areas."
Early this year, the California ISO
asked FERC for a Declaratory Order, seeking FERC's
approval-in-concept and additional guidance regarding
this issue. In April 2007, FERC granted the Declaratory
Order and called for the California ISO to conduct
an extensive stakeholder process to gain their input.
The results of that process are incorporated into
the plan the ISO Board approved today and in the
final tariff language that will be filed with FERC
by the end of this month.
The California ISO is a not-for-profit
public benefit corporation charged with managing
the flow of electricity along California's open-market
wholesale power grid. The mission of the California
ISO is to safeguard the reliable delivery of electricity,
and ensure equal access to 25,000 circuit miles
of "electron highway." As the impartial operator
of the wholesale power grid in the state, the California
ISO conducts a small portion of the bulk power markets.
These markets are used to allocate space on the
transmission lines, maintain operating reserves
and match supply with demand in real time.
SOURCE: California ISO