Market Gone with the Wind, Or Whose Line Is It Anyway?

Market Gone with the Wind, Or Whose Line Is It Anyway?

November 01, 2006

What if you built a transmission line in order to get the electricity from your wind farm to market and you expected to be able to use the extra space on the line for your next project? Does that extra space belong to you? This is the central issue in a Federal Energy Regulatory Commission proceeding that pits the need to encourage transmission investment against the requirements of open access to the grid under federal law.

In an application filed at FERC by wind developer Aero Energy LLC, the developer asked FERC to order another wind developer, called Sagebrush, to allow it to move its electricity to the grid over an existing transmission line belonging to Sagebrush. The line was currently used by Sagebrush and a few other wind project owners to transmit electricity from their existing wind farms.

FERC initially ordered Sagebrush to let Aero Energy connect its project to the line, but it required Sagebrush only to provide non-firm transmission service over the line on the strength of Sagebrush’s claim that it had only 3 megawatts of excess capacity. However, after performing a system impact study, it became clear that Sagebrush had up to 120 megawatts of firm capacity available. So Aero asked FERC to revisit its finding and direct Sagebrush to provide firm transmission capacity over the line. Sagebrush responded by claiming that it was entitled to the excess capacity and for FERC to allow others to use it would create a disincentive for private entities to develop, finance and construct new transmission lines at a time when new transmission was desperately needed.

No Hoarding

In an order on rehearing, FERC appeared to side with Aero Energy, but with a catch. The commission found that a transmission owner does not have the right to hoard transmission capacity until it needs it. To do so would overrule FERC’s authority to direct a transmission provider to provide transmission service under sections 211 and 212 of the Federal Power Act. Moreover, the commission financed, there is no reason to believe that ordering transmission access for the excess capacity at compensatory rates will discourage financing for future projects.

The commission directed Sagebrush to provide firm service to Aero Energy up to 120 megawatts, or more if additional studies showed that more was available.

The commission distinguished this case from its holding in an earlier case involving Cross Sound Cable. In the Cross Sound Cable decision, FERC allowed the owners of a merchant transmission line to reassign transmission capacity in one of three ways: through direct reassignment, by posting on the company’s open-access same-time information system, called “OASIS,” or through a default release procedure. The commission approved this approach over the objection of ISO-New England, which claimed that the default procedure would give Cross Sound Cable the opportunity to game the system by withholding capacity. The commission noted that all of Cross Sound Cable’s transmission capacity was purchased by the Long Island Power Authority and that it would be in LIPA’s reasoned that since the project with the transmission line was already built and nterest to sell off unneeded capacity in order to reduce its costs. In addition, the Cross Sound Cable line would be under the control of ISO-New England and would therefore benefit from the ISO-New England market mitigation rules. Thus, unlike the Aero Energy case, there was no withholding of available transmission capacity from the market, and there were safeguards to prevent future withholding.

The Catch

Now here comes the catch. FERC added in its order on rehearing that it was possible that Sagebrush already had specific expansion plans that would require the use of the excess transmission capacity. The commission gave Sagebrush the opportunity to make a filing at FERC to demonstrate that it had pre-existing contractual obligations or other specific plans that would require the use of the available firm transmission rights on the Sagebrush line.

Since the date of that order, Sagebrush submitted to the commission information on a confidential basis and Aero filed a response, and the parties have continued their jawboning with responses to each other’s responses. The commission has not yet spoken. About the only thing that is clear at this point is that Aero Energy will be entitled to firm transmission service at least until the date that Sagebrush completes an expansion of its wind facilities, provided it demonstrates that it had a prior commitment to do so. Whether Aero Energy will get the available capacity it needs to support a long-term power sale will likely depend upon the strength of Sagebrush’s submission of evidence of pre-existing commitments for wind development.

Another related and intriguing question, not yet raised specifically by this case, is whether Sagebrush would have to accommodate Aero Energy or another wind developer in any new transmission capacity that Sagebrush might build if Sagebrush’s expansion plans require an amount of transmission capacity that exceeds the available capacity on the existing transmission line. FERC’s position on sections 211 and 212 of the Federal Power Act would suggest that the answer is yes.

Radar

As part of the National Defense Authorization Act, the Secretary of Defense was required to provide an assessment of the effects of wind turbine blades on military radar installations. A few months ago the Secretary issued his report, and the wind community is waiting to see what the reaction is from Congress. The report has the potential to affect wind farms currently under development and limit future development of otherwise robust wind farm sites.

The issue is whether modern wind turbines can have a significant impact on the operational capabilities of military air defense radar systems. The preliminary answer from the Department of Defense is yes. A review of studies, both in the US and in Europe, revealed that the large size of the new turbines combined with the frequencies produced by the rotating blades can cause radar difficulties in distinguishing the wind turbine from an airplane. The review also indicated that wind farms could degrade certain tracking capabilities because they appear as “clutter” on radar screens.

According to the report, the only proven way to avoid radar issues is to place wind turbines outside of the radar line of sight of fixed-site air defense radars. The report explains that line of sight is dependent upon “the radar unit, the height of the wind turbine and the separation distance between them.” The problem can be mitigated if there are elevated land barriers between the radar and the turbine or if the elevation of the radar is significantly higher than the location of the turbines. Beyond these conditions, there may be other site-specific solutions to the problem.

The report notes that it may be possible to develop radar suppression technologies that would require a modification to the shape of, and materials used in, the turbine construction. But the report goes on to state that, even if the technologies can be developed, those changes could result in greater costs of construction and operating costs over the turbine’s useful life.

At the end of the day, the solution to the problem appears to be political, not technological. If the United States government is committed to a renewable energy future, it will spend the funds necessary to assure that the maximum amount of effective wind turbines will be developed and constructed in a manner that will allow military radar systems to function effectively. At the moment, however, there is no policy.