July 8, 2014
Texas

Study will assess shifting transmission costs to wind generators

Study will assess shifting transmission costs to wind generators; Study to examine whether they should pay a share of expenses to move electricity | By Ryan Holeywell | Houston Chronicle | July 8, 2014 | www.houstonchronicle.com

The Public Utility Commission of Texas is poised to study whether wind power generators should pick up some transmission costs now borne mostly by consumers statewide.

Texas is the nation’s wind power leader, and PUC Chair Donna Nelson argues it’s time to consider whether those generators are paying their fair share. But wind industry officials say any change to the status quo threatens the future of an industry that has flourished in recent years.

“If that’s the goal of Texas – to go from the No. 1 state in the country in terms of … being able to generate wind energy, to the back of the pack, she’s doing exactly the right stuff,” said Steven DeWolf, principal and founder of Dallas-based wind power developer Wind Tex Energy.

The debate comes on the heels of the recent completion of a $7 billion transmission line project designed to connect rural wind power generators in West Texas and the Panhandle to urban centers in the central and eastern portion of Texas.

Also coloring the discussion is a national argument over a federal wind generation tax credit that the industry says it needs to make renewable power competitive. Opponents of the credit contend it amounts to corporate welfare and that the wind sector should rise or fall based on the free market.

Nelson has criticized the credit as unnecessary, given the maturity of the wind industry, and argues that it distorts the state’s power market.

Earlier this year, the Electric Reliability Council of Texas, which operates most of the state’s grid, reported that the Panhandle is experiencing more interest from wind generators than planners expected, potentially straining the new transmission lines.

The Reliability Council, which the Utility Commission oversees, found that upgrades to accommodate the load could cost $675 million.

The question – which Nelson raised in a May memo and at commission meetings since then – is whether power consumers statewide should bear the costs of such upgrades, as historically has been the case, or whether the bill should go to wind power generators that profit from the new capacity.

“I would like to explore the costs of system upgrades, the costs to maintain and operate the current system, and the allocation of those costs specifically related to renewable resources,” Nelson wrote in May.

The study could form a foundation for revisions to previously settled decisions about cost responsibility and may affect the underlying economics of renewable power generation in Texas, the law firm Husch Blackwell said in a brief last month.

In the power market Texas lawmakers established in the late 1990s, generators typically compete to sell their power to retailers, which in turn compete for consumers’ business. The companies that transmit power and distribute it to end users remain regulated monopolies.

The transmission companies build lines with permission from the Public Utility Commission, the state’s power and telecommunications regulator, and then pass those costs along to consumers through rates the regulator approves.

Michael Goggin, director of research at the American Wind Energy Association, said that is the best way to fund transmission lines, because they’re part of a broader system that benefits stakeholders across the state.

Changing the system now would put wind generators at a competitive disadvantage, he argued, and would be bad policy.

“When the state has added coal generation, customers paid for that, and when new gas plants come online, there’s always a transmission cost for that as well,” Goggin said. “This is just the policy Texas has had. We’re just continuing the way things have always been done, and it works well.”

But Nelson noted the rapid growth of Texas wind generation and said the new transmission lines were built largely to accommodate wind power.

She’s asked the commission staff to analyze the issue and make proposals before the state Legislature convenes next year.

“My goal is to get it done as quickly as we can,” Nelson said in an interview with the Houston Chronicle.

Her call for a study of transmission costs comes as ERCOT evaluates its own set of tools for managing the grid, which were developed before the state’s wind generation started to boom.

Nearly 10 percent of power generation in the ERCOT grid came from wind generators last year, according to the American Wind Energy Association, and 7,000 megawatts of new capacity are under construction. One megawatt is enough power for about 500 Texas houses under normal conditions.

Texas already leads the country with 12,355 megawatts of installed wind capacity, according to the association.

Nelson argues that renewable generators’ “unique characteristics and often-remote locations” also pose special challenges to the grid.

She noted that part of ERCOT’s task is to avoid power disruptions by ensuring that supply and demand are aligned.

Unlike coal, natural gas and nuclear power, wind is variable and requires more resources to manage.

Nelson argues that it’s worth considering whether wind generators should take on some of those costs.

Among the goals of the study would be to determine the amount and nature of the costs, Nelson said.