The Transmission Question
Jul 31, 2009 - Kate Rowland - Energybiz insider
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."
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.
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