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Solar power bill might have cost ratepayers $54 million or more

PROVIDENCE – How much money could Rhode Islanders have been on the hook for if Gov. Dan McKee had not vetoed a bill that shifted some of the costs of solar and wind projects from developers to electric ratepayers?

An estimate in the near term is $54.7 million, according to emails released by state regulators in response to a records request from The Journal. And numbers of a similar magnitude could have recurred in the longer term if the current pace of renewable energy development were to continue, according to utility National Grid.

Cynthia Wilson-Frias, a lawyer for the state Public Utilities Commission, came up with the $54-million figure after totaling the costs of transmission upgrades for six renewable energy projects that currently have agreements with National Grid to connect to the regional power system.

“This amount doesn’t cover all projects in the queue for which studies have not been completed,” she wrote in an email to McKee’s office, citing one possible impact of the legislation, “and also doesn’t project whether there would be additional large projects as a result of the removal of a significant price signal.”

She sent the email on July 1 after Victoria Scott, policy adviser to the governor, asked for potential costs of the bill. Five days later, McKee vetoed the measure, saying it would transfer tens of millions in costs to connect renewable energy projects to the energy grid.

“Thus, the profit margins of the developers would be enhanced at the expense of ratepayers,” McKee wrote in his veto message.

It can be expensive to connect solar to grid

The bill aimed to put an end to a longstanding source of contention that has only grown more heated in the past year or two between developers primarily of solar farms and National Grid, which owns the electric wires and poles in Rhode Island.

The developers install what are known as “distributed generation” projects, facilities of anywhere from about 500 kilowatts in capacity to 50 megawatts that are much bigger than a household system but much smaller than a utility-scale power plant. They say that, by definition, their projects mainly use the local distribution lines to supply power to homes and businesses in close proximity to where they generate it.

But National Grid charges some of the projects for upgrades to the transmission system, the high-voltage lines that carry power over long distances, often across state lines. Some renewable energy developers argue that those costs, which can include ongoing operations and maintenance fees, are unfair because their projects don’t put stress on those lines, and that the charges amount to an impediment to their industry. Delineating between the two, however, is difficult because they’re part of one overall electric system.

Infrastructure costs can be high because large solar farms need lots of space to install their ground-mounted panels. In a densely populated state such as Rhode Island, the biggest blocks of undeveloped land are in rural areas far from cities and towns. But with lower electric demand, those areas also tend to have less energy infrastructure that, according to National Grid, require big investments to safely and reliably deliver the influx of new power.

So National Grid is charging a 50-megawatt solar farm under development in North Kingstown $18 million for transmission upgrades to an electrical substation in Wickford. And for a 38.4-megawatt solar farm in North Smithfield, the utility assessed transmission improvements of $14 million.

The $54-million figure cited by Wilson-Frias, which includes those two projects, may represent the tip of the iceberg when it comes to transmission upgrades for renewables in Rhode Island. National Grid said it estimates “conservative costs” of $30 million annually in the next several years.

“Potentially even as high as $60m if several major projects are developed in one year,” the company stated in an email.

Bill could have increased costs for ratepayers

The interconnection issue has been the subject of multiple cases before the Public Utilities Commission and previous legislation in the General Assembly, but it has never been fully resolved.

At the urging of Cranston-based Green Development, one of the largest renewable energy developers in Rhode Island and the company behind the North Smithfield solar farm, state Rep. Edward Cardillo and Sen. Frank Ciccone introduced the bill this past session.

It aimed to require a detailed breakdown of connection costs before a project went into construction and an audit afterward to ensure National Grid calculated the fees correctly. Although it didn’t rule out costs for transmission upgrades, it sought to make it harder for National Grid to assess them.

The bill won passage in the last two weeks of the session, getting through the Senate the day before the Assembly adjourned on July 1. The only people to submit written comments when it initially came through the House were lobbyists for Green Development, in favor of the bill, and National Grid, in opposition.

The Public Utilities Commission held off on commenting because it was considering issues related to a state Supreme Court case that overlapped with those addressed in the legislation. In that case, the Episcopal Diocese of Rhode Island appealed a commission decision affirming National Grid’s right to charge an operations-and-maintenance fee for transmission infrastructure related to a solar farm in Chepachet.

The court remanded the case to the commission after new evidence was filed by the Diocese. On June 10, the commission affirmed its previous decision and the matter went back to the Supreme Court.

After the vote, commission chairman Ron Gerwatowski wrote a memo raising concerns about the bill. He sent it to House Speaker K. Joseph Shekarchi on June 14, more than a week before the floor vote in the House.

In the memo, Gerwatowski brought up specific problems with the bill’s language. For example, the legislation prohibited the assessment of transmission costs for interconnections unless “any such specific charges are authorized by order of [Independent System Operator New England].”

Gerwatowski pointed out, however, that ISO-NE, the entity that manages the regional power grid, does not issue orders like those described in the bill. In regard to transmission issues, the agency with jurisdiction is the Federal Energy Regulatory Commission.

As it was written, “… the ‘unless clause’ could never be operational, leaving all transmission costs on ratepayers,” Gerwatowski wrote.

He continued:

“If the result of this law is that project developers do not have any cost responsibility for transmission upgrades, they will have no price signals to care about the locations they choose and no financial incentive to find more optimal sites,” he wrote. “They will be in an economic position where they can locate projects at the locations that work best for their own project economics, knowing that the general ratepayer population will carry all the transmission cost upgrades, no matter how high that might be.”

Neither the House nor the Senate made any amendments to the bill in response to Gerwatowski’s concerns. His memo was sent subsequently to the governor’s office.

State a leader in solar power development

Green Development argues that the costs associated with connecting renewable energy projects to the power grid are standing in the way of the state’s climate goals.

Those goals include an executive order signed last year by then-Governor Gina Raimondo that aims for Rhode Island to get all of its electricity from renewable sources by 2030. Her administration described it as the most aggressive renewable energy target in the nation.

McKee built on that and other initiatives when in April he signed into law the Act on Climate, which puts in place mandatory emissions-reduction targets for the state that will require big investments in clean energy.

But Hannah Morini, director of business development for Green Development, said in an interview that the state is nowhere close to being on track to meet the 2030 goal for renewable energy.

Despite her assertion, renewable energy development is taking place at a rapid clip in Rhode Island, fueled by state incentive programs that pay above-market prices for solar and wind power. Those premium rates are funded by electricity consumers under state law because renewable energy is seen to benefit society with cleaner air and a lower impact on the climate.

About 374 megawatts of solar power have been installed in Rhode Island with another 775 megawatts in line for connection. The state ranks 29th in the nation for total capacity, according to the Solar Energy Industries Association.

But Rhode Island’s ranking rises to 12th on a per-capita basis or when dividing solar power by total electricity, according to the website CleanTechnica. And when measuring solar capacity per square mile, Rhode Island ranks third (if the District of Columbia is included), according to National Grid and confirmed by a Journal analysis.

“Transmission costs are not presently an impediment to the state’s renewable energy sector,” McKee wrote in his veto message. “Rhode Island has one of the highest levels of solar saturation in the country. Even with the potential that projects may have to absorb the costs of transmission upgrades, renewable projects are still moving forward at a fast pace.”

[rest of article available at source]