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October 18, 2007 – Vol.12 No.30 California Independent System Operator Corporation (California ISO) Approves Grid Connect Financing Mechanism for Renewables. Changes to its federal tariff will make it feasible for smaller green power developers to hook up to the transmission system and gain entry into the competitive market for energy in the state. Changes must be approved formally by the Federal Energy Regulatory Commission (FERC). According to California ISO, renewable resources such as wind, solar and geothermal are often located in remote areas removed from the wholesale transmission grid. These “location-constrained generating resources” will help California meet its Renewable Portfolio Standard, yet their development is often hampered by a lack of adequate transmission capacity. It can be difficult to find financing for transmission projects to reach generation that has not been built yet — hence the chicken or egg dilemma. Which should come first, generation or the transmission capacity needed to get the power to the grid? Currently, new power plant owners are responsible for the upfront cost of building transmission trunk lines to the grid and the costs can be prohibitive for smaller renewable power developers. Under the process approved today, the appropriate Participating Transmission Owner (PTO) would build the “trunk lines” out to the renewable-rich areas, initially recovering its costs through the FERC-approved Transmission Revenue Requirement (TRR). As individual generation projects are built and connected to the grid, each generator would pay its pro-rata share of the annual TRR payments. This financing arrangement would continue until the entire capacity of the project is subscribed at which time the remaining revenue requirement for the end-state transmission facility is completely supported by the project developers. “This plan removes a major obstacle blocking the development of renewable resources,” said ISO President and CEO Yakout Mansour. “This new hybrid financing method is a creative way to help alternative energy suppliers connect to the grid. It is all a part of leveling the playing field for green power generators and guaranteeing their nondiscriminatory grid access. They still pay their fair share, but the costs are spread and appropriately based on when the green power comes on line.” The California ISO is a not-for-profit public benefit corporation charged with managing the flow of electricity along California’s open-market wholesale power grid.
Links: California ISO Note: A similar ruling is being finalized in Texas
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