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The next big challenge -- Removing transmission barriers

Energy market regulators need to make faster progress on overhauling transmission policies that are holding back the development of significant amounts of wind power, says the American Wind Energy Association (AWEA). While new rules being contemplated by the Federal Energy Regulatory Commission (FERC) go a long way to creating a more wind-friendly transmission system in the United States (Windpower Monthly, September 2002), the challenge now lies in implementing them. "The real issue is time," says AWEA's Jim Caldwell. "Finalising the details and getting these reforms in place will be a difficult and lengthy process."

Many of the most important reforms are contained in FERC's proposed Standard Market Design (SMD), which attempts to homogenise the structure and operation of competitive wholesale power markets across the US and make them more efficient. But widespread opposition to the plan, particularly from critics who say its one-size-fits-all approach ignores regional differences and the role of state regulators, has forced the commission to suggest it may not meet its January 2004 implementation target and may opt to phase in the changes regionally rather than impose them nationally.

In a 20-page report analysing the impact of transmission policy on wind development, AWEA stresses the need to minimise any delays. "Most, if not all, of the regulatory policy refinements contemplated under SMD are consistent with policies advocated by AWEA," the paper points out. Among SMD's key proposals are refined scheduling mechanisms that accommodate intermittent resources and transmission pricing that allows remote wind facilities competitive access to the grid.

"Most of the rates in use across the country were not designed with non-traditional resources like wind in mind and they impose discriminatory penalties that can be huge, as much as doubling the wholesale cost of wind generated electricity," says AWEA. SMD, it says, "will treat wind energy fairly, but there remain many layers of details to iron out for it to work successfully."

Solving congestion

In addition to fair access to the grid, SMD also tackles the pervasive problem of congestion, brought about by, among other things, a decade of under investing in the nation's transmission infrastructure. Wind projects are especially vulnerable to congestion, says AWEA, because they tend to be located in remote locations and to be new market entrants without a "grandfathered" right to available capacity.

FERC's plan, which allows users to bid for firm transmission rights and trade them on a secondary market, will mean a fairer allocation of congested capacity, but it won't solve all wind's problems, says AWEA. The intermittent nature of the resource puts wind at a disadvantage when bidding for space on a transmission line that it may or may not be able to use. A scheme that would allow wind producers to bid close to real-time delivery would help, says AWEA. Ultimately, its preferred solution is the creation of more capacity through transmission upgrades.

How those upgrades will be planned, permitted and paid for are key issues that will require more industry attention, it adds. "Certainly, the pace of wind energy development will be drastically slowed -- especially in the nation's heartland of the Midwest and interior West -- if the process is not fixed and fails to include high-wind scenarios that benefit consumers and increase system reliability."

Building on wind's "remarkable progress" over the past two years in bringing its transmission concerns to the attention of federal regulators, the white paper adds, the industry needs to turn its attention to growing concerns over the high cost and uncertainties surrounding interconnection. "Wind development has been substantially inhibited and delayed by discriminatory interconnection policies and discriminatory administration of the interconnection process by self-interested utilities," it says. While other technologies face similar problems, "because wind projects are smaller and quicker, their tolerance for many of the problems is not as great as for larger, longer lead-time projects."

FERC is tackling the issue through proposed rules separate from SMD and has already put forth a plan to streamline procedures for small generators, says AWEA. "The next six months are critical to cement these reforms into FERC standard practice."

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