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Location, Location, Location

Location, Location, Location

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Location, Location, Location

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  1. Location, Location, Location • A wind project needs to be able to get its power output to the electric grid • If there is not available physical access to transmission, that can’t happen • If there is physical access, but the costs of transmission are too high, the project may be uneconomic • Would you build a mall without good highway access?

  2. Transmission Regulatory Scheme • Transmission service is governed by utility tariffs. In many regions, transmission service is provided by an Independent System operator/regional transmission organization (RTO/ISO). • RTO/ISOs do not own the transmission assets, but have operational control over them. • Open-access, non-discriminatory transmission service is provided pursuant to a Tariff on file and approved by FERC.

  3. Transmission Regulatory Scheme Tariffs govern: • Interconnection • Transmission • Ancillary service • Rates • Dispute resolution

  4. Interconnection • The interconnection process has been standardized. Each Transmission Owner or RTO/ISO has tariff provisions governing the process from the filing of an interconnection request to the execution of the Interconnection Agreement. • While the process is standardized, there are limited regional differences that are permitted by FERC. Milstones must be met to remain in the interconnection queue.

  5. Interconnection • The process includes a number of steps, many of which must be followed by deposits. Developer must pay for the costs of all studies. • Interconnection Request - $10,000 • System Reliability Study - $50,000 • Facility Study - $100,000 • Interconnection Agreement - $250,000 if can’t show evidence of site control

  6. Interconnection Costs • Studies tell you: - Costs of attachment facilities (the physical connection)(AFC) - Costs of upgrading the downstream system to accommodate new power injection (System Upgrade Costs)(SUC)

  7. Interconnection Costs • In addition, project must bear its own costs for transmission line between its project site and the point of interconnection (Interconnecting Line Costs)(ILC) • Many sites with good wind resources are quite a distance from the transmission grid • Total interconnection costs can, therefore, be significant

  8. Interconnection Costs • Total interconnection costs = SUC + AC + ILC • Developers of projects often compete to attach to the same constrained transmission lines • System for cost allocation is basically first come, first served • So, earlier entrants may have lower SUC because they can utilize existing available capacity on system, without having to build system upgrades to enable their output to be accommodated

  9. Key Considerations • Developers should enter the interconnection process as early as they are willing to go public with their projects • Developers need to understand interconnection costs • Lenders and investors need to review and verify interconnection rights and costs • Not every site with good wind will be workable from a transmission standpoint