California regulator suggests plan to pay for transmission of green power

FOLSOM, California, US, January 31, 2007 (Refocus Weekly) The Federal Energy Regulatory Commission has been asked to approve a financing plan that would allow green power to be transmitted from remote locations.

The California Independent System Operator Corporation filed the request with FERC in a precedent-setting move that could have national implications, the state regulator explains. If the payment mechanism is approved, it would be an innovative method to remove financial barriers which hinder development of wind, solar, geothermal and other renewable energy resources.

Fostering the development of green power resources will help state utilities to source 20% of their electricity from renewables by 2010, as required under California’s Renewable Portfolio Standard. Unlike natural gas-fired power plants that can be built close to existing high-voltage facilities, renewable energy facilities often are built in remote areas.

“Wind turbines, large solar power plants and geothermal resources all need to be built close to their natural fuel sources,” says Yakout Mansour of California ISO. “The California ISO is committed to removing barriers to these types of green resources and doing everything we can to help meet the state’s renewable standards and climate change policies in a timely and reliable manner.”

“We don’t have a choice as to where these natural resources are located,” explains Rich Ferguson of the Center for Energy Efficiency & Renewable Technologies. “If we’re going to use these assets to offset less environmentally friendly types of power generation, we need to be able to build the transmission lines that reach those remote locations.”

Currently, transmission lines which connect a new generation facility to the grid are paid by the developer of that project. The cost of extensive ‘network facilities’ is spread among the loads which benefit from the project, and this transmission investment is recovered via the California ISO’s Transmission Access Charge.

The financing methods are not a good solution for remote green power facilities, where an individual developer may not be able to pay the cost of a long-distance high-voltage line needed to deliver power from their project. As more green power is developed in the state, a new type of financing mechanism is needed to facilitate the development of transmission projects that reach remote locations where several companies are developing renewable energy resources, possibly over a period of many years.

The proposal from California ISO calls for the initial costs of multi-user resource trunkline transmission projects to be paid by transmission owners and recouped through the TAC. As generators connect to the new trunkline, they would pay a pro-rated share of the costs based on their generating capacity. The generator payments will reduce the cost recovered through the TAC.

This new method of financing would remove a significant barrier facing developers of renewable resources, while encouraging the efficient sizing of the associated transmission facilities, the regulator explains. Under this method, green power developers would begin paying their fair share for transmission after their facility starts operating, as opposed to shouldering the costs up front.

California ISO is a public benefit corporation charged with managing the transmission of electricity along the state wholesale grid. Its mission is to safeguard the reliable delivery of power and ensure equal access to 25,000 miles of grid.


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