I just found a nifty part of the Midwest Independent System Operator’s web site called the Renewable Energy Gateway that shows just about everything somebody in my business needs to know about wind, hydro and biomass generation in the Upper Midwest. There are statistics about installed capacity, graphs with 24-hour output and color-coded maps that show state renewable energy mandates and goals. You’ll even see how wind capacity increased seven-fold in a mere three years after the addition of MidAmerican Energy in September. What you won’t find is direct reference to an ongoing transmission controversy that’s threatening to upset the whole apple cart. There are reference materials, for sure, but they only hint at the larger issues that are being played out before federal regulators right now.

 

At bottom are a couple simple questions: who pays for all the transmission needed to connect thousands of megawatts of new generation, mainly wind, and how much? The Federal Energy Regulatory Commission recently waded into the issue and said, for now, the new wind plants do. All of it.

 

The order is in effect from July 10, 2009, to July 15, 2010. FERC said MISO filed “a reasonable interim approach” as it seeks to change current formulas. A stakeholder process will determine the cost allocations after July. The American Wind Energy Association recently filed motions with FERC asking to rescind the order and also to request a rehearing. The wind industry says the increased costs will make projects more expensive and difficult to finance. The current setup with is a 50-50 split between generators and transmission operators under most circumstances.

 

Rob Gramlich, AWEA’s senior vice president for public policy, said a marked slowdown in project development is already occurring. And those projects now at the head of the transmission queue are at risk of getting socked by the interim order, which could increase project costs 10 to 20 percent. Complicating matters was the threatened withdrawal from MISO, the area from Ohio to eastern Montana and including most of the Upper Midwest, by Otter Tail Power and Montana-Dakota Utilities Company at the end of the year absent some transmission costs relief. Gramlich says FERC bowed to political pressure instead of following legal precedents.

 

The controversy has been brewing for some time. After a meeting to discuss integration challenges over the summer, John Bear, president and CEO of the Midwest ISO said, “It is clear that traditional means of funding new transmission is outdated and we need to consider responsible, regional cost-allocation measures.” MISO maintained that customers in areas in its footprint without much wind resources would be paying for little benefit. There are 12.7 megawatts requesting interconnection for every 1 megawatt of load in the Otter Tail service area and 4.7 megawatts for every 1 megawatt for Montana-Dakota. AWEA maintains that overall system reliability would be served by transmission cost-sharing.

 

There’s another long-term policy issue that points out that often all these moving parts seem to be going in opposite directions. “Another problem is that the benefits are both local and regional, especially in the states that have renewable portfolio standards, where these delays will put the further behind their requirements,” Gramlich said. And with these states about one-third of the way to the overall MISO area goal, any loss of development momentum threatens that.

So what happens next? FERC could act on the appeals this month. In any case, renewable developers and utilities nationally will be hanging on every thread. And at least in the MISO footprint, somebody, if not everybody, could be unhappy with the final result.