Transcript WINDPOWER 2003 - Whitfield Russell Associates

WINDPOWER 2003
Austin, TX
May 18-21, 2003
Session 4A: Regulatory Issues
Monday May 19, 2003 3:40-5:00 pm
Wind Generation Interconnection to Transmission System
Current and Future Interconnection Procedures and Standards
Sedina Erić
Whitfield Russell Associates
www.wrassoc.com
Participated in Preparation:
Whitfield Russell & Geneva Looker, Whitfield Russell Associates
Scott Hempling, Attorney at Law (www.hemplinglaw.com)
Jeffrey S. Marks, Padoma Wind Power (www.padoma.com)
Special Thanks to Mr. Gary Hardke of the Cannon Power Corporation for his Comments
CURRENT GENERATION INTERCONNECTION
PROCEDURES AND STANDARDS
• Interconnection standards and procedures are not uniform; they vary
from region to region, from utility to utility and from RTO to RTO.
• In general, interconnection procedures require a generator:
 to apply for a queue position;
 to pay for system feasibility, system impact, and facilities studies;
 to sign interconnection and construction agreements;
 to pay for the construction of interconnection facilities, and
network upgrades if required.
• The Federal Energy Regulatory Commission (FERC) governs the
generation interconnection process through its rules and case-bycase orders.
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CURRENT GENERATION INTERCONNECTION
PROCEDURES AND STANDARDS-CONTINUED
• FERC’s authority to issue rules and orders affecting generation
interconnection is derived from various provisions of the Federal
Power Act:
 Section 201- grants FERC jurisdiction over the transmission of
electric energy in interstate commerce
 Sections 205 and 206- require all rates and charges for
transmission (and also wholesale power) to be “just and
reasonable” and not “unduly discriminatory or preferential.”
• FERC has established two distinct services essential to generators
seeking interconnection:
 Interconnection
 Delivery
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RIGHT TO INTERCONNECT
• FERC ruled that a transmission owner must allow any New
Generator to interconnect to the transmission system, whether or
not transmission capacity for delivery is available. This principle is
known as the “minimum interconnection standard.”
• FERC ruled that the interconnection right does not grant a right to
deliver the power from the generator to the load, unless there is
sufficient available transmission capacity to deliver the power to
load. Rather, delivery of the power is based on “as available
capacity.”
• In engineering language, these rules mean that New Generators
must be allowed to interconnect, even at a substation where
existing generation has already been interconnected, and where
outgoing transmission lines do not have enough capacity to deliver
the full output of both existing generators.
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RIGHT TO DELIVER
• The “right to deliver” is the right to have the power output of an
interconnected generator transmitted to a customer’s load. Except
for general standards in pro forma Open Access Transmission Tariff,
there are no uniformed, detailed standards on granting delivery
rights (rights to transmission service), to the interconnected
generator.
• In ISO New England, all generation is interconnected based on
minimum interconnection standards. Delivery rights are then
granted to the generator with the lowest bid. The generator is not
responsible for transmission system upgrades necessitated by the
generator’s request for delivery service. The generator is
responsible only for transmission system upgrades necessitated by
the generator’s interconnection.
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RIGHT TO DELIVER-CONTINUED
•
In PJM’s bid-based system, wind generators can be interconnected based
on minimum interconnection standards called “Energy Resources.” If two
“energy resources” are connected to the same transmission line that has
insufficient capacity, the “energy resource” with the lower bid will be granted
delivery. Recently, PJM announced the decision to grant wind generators a
capacity status as well. As capacity resources, wind generators will have a
right to sell Installed Capacity (ICAP) into the PJM auction market and sell
capacity to Load Serving Entities.
•
In contrast to ISO-NE and PJM, most transmission providers (whether
RTOs or individual transmission-owning utilities) will grant full delivery rights
to a wind generator only if the generator commits to pay for any increases in
transmission capacity necessary to carry the full generation output to load.
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WHO PAYS FOR TRANSMISSION UPGRADES?
•
FERC has a policy that, for transmission systems that have developed
comprehensive congestion management schemes (such as PJM with its
nodal Locational Marginal Prices-LMP), transmission system upgrades,
required for new generation, should be paid by the new generator, even if
the upgrades are network facilities. Recently, PJM started offering
Incremental Available Transfer Capacity Revenue Rights and Incremental
Auction Revenue Rights as a compensation for payment for the network
upgrade.
•
For transmission systems that have not developed comprehensive
congestion management schemes, FERC has ruled that transmission
system upgrades having a proven network function should be initially
financed by the generation developer. When the generator enters service,
these costs should be rolled into transmission rates applicable to all
transmission users. The developer will then receive back the initial payment
through transmission bill credits spread over several years.
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WHAT DOES A NEW GENERATOR RECEIVE FOR
PAYMENT OF TRANSMISSION SYSTEM UPGRADES?
•
In systems with comprehensive congestion management schemes, FERC does not
require transmission providers to grant credit to the generator for network upgrades.
The transmission customer (generator) instead, receives comparable compensation
in the form of price protection from the cost effects of transmission congestion. This
price protection takes the form of Financial Transmission Rights (FTRs), which are
financial instruments used as a hedge against congestion costs. A generator can use
its FTRs during periods of congestion, or sell its FTRs in an auction. Recently, PJM
started offering Incremental Available Transfer Capacity Revenue Rights and
Incremental Auction Revenue Rights as a compensation for payment for the network
upgrade.
•
In systems that do not have comprehensive congestion management schemes, as
mentioned before, FERC requires that a generator receive credits for initial
investments in transmission system upgrades when delivery service begins. With a
payment for network upgrades, required for delivery of the full generation output, a
generator is granted the right to deliver its power as a Capacity Resource.
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WHAT DOES A NEW GENERATOR RECEIVE FOR
PAYMENT OF TRANSMISSION SYSTEM UPGRADES?
-CONTINUED
• An important recent FERC ruling enables some generators that
were previously precluded from receiving credits to receive this
treatment for network upgrades, if their signed Interconnection
Agreements contained provisions authorizing them to file complaints
to seek revisions. These generators signed Interconnection
Agreements that did not provide for such credits and paid for
transmission system upgrades (102 F.E.R.C. P61, 070; FERC
LEXIS 152; Order Partially and Fully Granting Rehearings and
Partially Granting Complaints, January 29, 2003).
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FUTURE INTERCONNECTION STANDARDS
AND PROCEDURES
• FERC issued a Notice of Proposed Rulemaking (NOPR) on
Generation Interconnections that should, when finalized, establish
the same procedures and standards for the entire country.
• FERC issued a NOPR on Standard Market Design (SMD) that may,
when finalized, have a significant impact on generation
interconnection procedures, especially those related to the question:
“Who pays for network upgrades”?
• The proposed SMD uses the PJM market design as a model, which
indicates that at the time FERC proposed the SMD, it anticipated
unified generation interconnection procedures similar to those PJM
currently applies.
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PJM INTERCONNECTION PROCEDURE
•
PJM’s procedure requires all generators to apply in order to be placed in the PJM queue, whether
or not the proposed interconnection is at distribution or transmission system level. The PJM
queue is publicly available through its website, as are the non-confidential portions of the
interconnection studies, and the load flow base cases.
•
PJM grants an “energy resource” status to wind generators, which in most instances, does not
require major network upgrades. Recently, PJM decided to grant capacity status as well.
However, those who chose that status, would be tested using a deliverability test, which means
more network upgrades.
•
Required transmission system upgrades are paid by generators, and are not credited back.
However:
 Payment for upgrades may be reduced to zero if upgrades produce benefits, such as
deferring or eliminating the construction of planned local or network facilities.
 Generators may receive FTRs if upgrades increase system transfer capability, and may use
them to hedge against congestion costs or sell them in the FTR auction. PJM recently
established new products, such as the Incremental Available Transfer Capacity Rights and
the Incremental Auction Revenue Rights. All of these are services which compensate
generator developers for investment in network upgrades.
•
Generators have the option of selecting a company, other than the owner of the transmission
system to which the generator is connecting, to design and construct the interconnection
generation-tie line and transmission upgrades.
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