"The rules of the road for our electricity transmission system today were designed to fit the operating characteristics of conventional power plants," says AWEA's Randy Swisher. "This white paper looks closely at how those practices need to be revamped in order to not penalise a new and different source of electricity like wind."
The paper recommends five changes to current transmission policy, including the basing of penalty costs on actual market values for power not delivered to the system on schedule, rather than on theoretical costs not incurred; charging embedded costs of the system to customers, not generators; avoiding multiple levies when power is transmitted through several transmission systems; allocating capacity fairly among all generators when the system is congested; and removing discriminatory connection requirements. The recommendations closely echo those being discussed by the British wind lobby for its home market (Windpower Monthly, May 2000).
"As the market has evolved, it has exposed two important flaws," says attorney Chris Ellison, author of the report. "One is that it presumes everyone has control of how much they generate and that's no longer true, especially as new resources like wind come on-line. The other is that it always assumes there is a negative impact," associated with getting a delivery forecast wrong.
Space is reserved on transmission lines to help keep the system in balance, he says. If a generator delivers less or more than it has reserved for, it is penalised arbitrarily, regardless of whether or not it helps the system. For example, if 10 MW of generation is scheduled but 11 MW is delivered at the moment the load on the system increases, the generator is not paid for the power. For that reason, AWEA recommends the creation of a "real-time balancing market" that would base price deviations to transmission schedules on their actual market impact. "If it helps, you get paid," Ellison says. "If it doesn't, then the cost should be based on the financial market value, not an arbitrary penalty."
But this depends on which side of the table one is sitting on, argues Ed Weber of the Western Area Power Administration (WAPA). "This is as much a power supply issue as it is a transmission issue. If you expect energy and don't get it, you will want someone to pay more than just the cost of replacement power," Weber says.
Embedded costs, or the local transmission costs, can also discriminate against wind, AWEA says. In the past, Ellison explains, some utilities have charged generators different costs, based on distance and peak capacity required. This discriminates against wind projects that tend to be remote and generate intermittently. Ellison says that ultimately consumers pay one way or the other, so they should be charged directly for embedded costs. That way it will send a cleaner price signal regarding the value of the generation.
WAPA's local customers oppose this concept because they believe it will result in a cost shift from users that wheel power across the transmission system -- but don't have a local load -- to those who serve loads within the WAPA area, Weber says.
In addition, AWEA says multiple levies, or "pancaking," when power is transmitted through several transmission systems discriminates against wind. "Pancaking segments markets and penalises resources like wind that site more remotely and are more likely to have to send power through several systems," says Ellison, adding that the Federal Energy Regulatory Commission (FERC) is "absolutely in our camp on this issue."
Congestion on the system has also been a road block to wind. Historically, says Ellison, access to the grid has been allocated on a first-come-first served basis, and cutting back due to congestion reverses that order. Since wind tends to be a newer generator, it is often curtailed first regardless of its value to the system. This is a real problem in many areas of the country since utility investments in the system have not kept pace with demand. "AWEA recommends a policy where everybody bids for transmission and are curtailed based on their willingness to be curtailed," Ellison says. "This is supportive of where we think FERC is going."
Weber counters that the recommendation is not consistent with FERC policy to honour existing contracts. FERC gives generators with existing contracts the advantage when it comes to contract renewals, he says.
Basic connection requirements can also discriminate against small wind projects. AWEA suggests that small projects not be held to the same procedural and technical requirements as larger projects. Secondly, it recommends that regional transmission organisations (RTOs), which are objective entities in the process of being formed, be put in charge of interconnection issues.
The white paper has been delivered to the FERC. RTO plans are due next month for FERC approval, Ellison says, and AWEA will use the paper to help participate in their formation. Visibility at the state and regional levels is important because that is where decisions are being made, he stresses.
Weber points out that much of what AWEA is asking for will require changes to FERC and local reliability area policies. "There are some very real technical issues we're struggling to address with the new wind industry," says Weber. "We're trying to make it work, but we still have these policy issues to deal with."