US: FERC renewables plan causes concern

Wind energy lobby group fears that FERC’s plan to create level playing field for renewables could ‘exacerbate discrimination’ within the sector. Pauline McCallion reports

The American Wind Energy Association (AWEA) has voiced concerns about a notice of proposed rulemaking (NOPR) published by the Federal Energy Regulatory Commission (FERC) on November 18, 2010 that aims to encourage greater use of variable energy resources (VERs) on the US transmission grid.

After issuing a Notice of Inquiry on January 21, 2010 to determine the need for reforms to help integrate VERs into the US power grid, FERC has proposed a limited set of reforms, which it says aim to address undue discrimination and unjust and unreasonable rates.

The proposals include a requirement for transmission providers to offer shorter scheduling intervals of 15 minutes, rather than the current hourly scheduling procedure used in many regions. FERC also aims to encourage greater use of power production forecasting through transmission providers' use of meteorological and operational data provided by generating facilities with VERs. But it is the third prong of the Commission's proposal, which details the allocation of integration costs, that has caused AWEA to speak out.

"The number-one concern we have is that the proposed rule-making assigns very specific integration costs to wind generators, but does not properly assign the very large integration costs that many conventional generators impose on the power system through forced outages," says Michael Goggin, manager of transmission policy at AWEA.

A new category of reserves services are needed to address the uncertainty associated with VERs, according to the proposal. But while it says such costs can be based on causation, the costs of maintaining the round-the-clock contingency reserves deployed by grid operators when a large conventional power plant suddenly goes offline are 'socialised'. This socialised cost can run to billions of dollars per year, according to Goggin.

"We pay for those conventional reserves, even though we don't ever use them," he continues. "We just ask that FERC either socialises all costs or assigns them to the cost user, rather than doing what appears to have been suggested in the NOPR, where some costs are assigned specifically to [VERs] and other users' costs are assigned to everyone, including [VERs] – it essentially doubles up what we have to pay."

In a comment made at the time the proposal was published, FERC Commissioner John Norris says: "Our intent with this proposal is to give transmission providers a mechanism to fairly assess the costs of reserves they hold to manage variable energy resources. Transmission operators must hold these reserves in order to maintain system balance between load and generation."

He adds that implementing the intra-hour scheduling and forecasting elements of the plan would enable transmission providers to more accurately schedule and commit resources, reducing the amount of reserves needed and ensuring just and reasonable rates. Providers will also have to prove any charges made to VERs to fund these reserves are just and reasonable under section 205 of the Federal Power Act.

The Wind Association also believes FERC's proposal "overstates the costs of renewable energy integration [which in total are a few per cent of the total integration costs of fossil and nuclear] because renewable resource variability is not properly netted against all other sources of variability, overstating the true impact on the system", the organisation's senior vice-president of public policy, Rob Gramlich, said in an email. He argues that FERC's proposal segregates wind plants into a separate category from other grid users, providing a smaller pool in which variability can be aggregated and netted out.

Both Goggin and Gramlich have been quick to praise the other parts of the proposal relating to scheduling and forecasting, as well as FERC's overall aim of reducing discrimination faced by newcomers to the grid, such as wind and solar power. However, Gramlich wrote: "...we are gravely concerned that the proposal, as currently drafted, will exacerbate that discrimination."

Goggin says AWEA will file comments on the matter during the 60-day comment period, including specific details of how these issues should be addressed. "We think the overall intention here is very good and there are a number of very positive steps, such as the move to 15-minute scheduling and the greater use of forecasting, that will benefit everyone on the grid. We're just concerned that there were mistakes made that could actually increase discrimination against wind generators."

But the statement released by Norris says: "Some may perceive the proposal to assess reserve costs to variable resources as a new barrier. I respectfully disagree. In the long run I believe that if the costs of integrating variable resources are fairly allocated, we can get on with the business of fully developing our nation's potential for renewable resources. I view today's proposed rule-making as the next step to help us get there."

Overall, Susan Court, former director of enforcement at FERC, now a partner at law firm Hogan Lovells, believes the proposal goes some way towards removing barriers to VER integration. She says: "Clearly FERC's intention is to facilitate the integration of VERs, I think it definitely goes in that direction. The Commission has issued this NOPR under its overarching statutory responsibility to ensure the service on interstate transmission lines is just and reasonable and non-discriminatory."