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