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AWEA applauds FERC’s treatment of wind in wholesale markets

Wind energy should benefit substantially from a ruling issued March 27 by the Federal Energy Regulatory Commission (FERC) providing fair access to utility transmission lines in California, according to the American Wind Energy Association (AWEA).

The Commission order, AWEA said, makes it possible for wind plant owners to ship the electricity they generate to buyers over the transmission system without being subject to heavy non-cost-based penalties because they cannot predict, days or hours in advance, precisely how much transmission capacity they will need.

The Commission issued a strong endorsement of a proposal by the California Independent [Transmission] System Operator (Cal-ISO) to require wind plants instead to pay for forecasts of their transmission needs on an hourly basis, and for schedules based on those forecasts to be used to assign transmission capacity.

“It’s hard to overstate the importance of this to the wind energy industry,” said AWEA Policy Director Jim Caldwell. “We were subject to unfair penalties of up to 100% of the cost of our product under the traditional system, which was a terrible economic burden and a potential show-stopper for future development in California. Instead, FERC has found that wind energy’s transmission needs can be met fairly, without extra costs for either the transmission system or for owners of other types of power plants.”

The penalty system was developed in the past to keep owners of large conventional power plants from “gaming” the transmission system to boost their profits at competitors’ expense. But since wind is an intermittent energy source, AWEA and other wind advocates have argued that wind plants should not be penalized except to the degree that their inability to forecast transmission needs causes actual economic cost to the transmission system owner. In its order, FERC agreed.

“This order benefits customers by addressing a major obstacle to development of new wind and other intermittent generation,” the Commission said, adding, “Encouraging the development of intermittent generation will increase diversity in the resource base, thereby improving system reliability as a whole.”

With respect to the specific proposal developed by Cal-ISO, FERC said, “The Commission commends the Cal-ISO’s efforts to facilitate entry of intermittent resources, and to develop the Intermittent Resource Proposal through extensive collaborative discussions between the Cal-ISO, regulators, utilities, and other market participants. With this proposal, the Cal-ISO provides a fair and effective means of accommodating the scheduling needs of intermittent generation, while avoiding imposing additional costs on other market participants.”

“With this ruling, FERC has demonstrated that it understands the unique situation facing a variable energy source like wind, and that it is willing to find ways to ensure that this new, clean, potentially huge source of electricity is not unfairly barred from the market,” Caldwell said. “We are greatly encouraged by the vision the Commission has shown.”

The Cal-ISO ruling, he added, should help wind’s chances of obtaining similar nondiscriminatory treatment in other major areas of the country, such as the Pacific Northwest and the Midwest, where the penalty issue has yet to be resolved.