Energy Bill Solves Market Access for Wind Power

The Energy Policy Act of 2005 signed by President Bush contains a number of important provisions for the wind energy industry. While it’s clear by now that the wind power industry will be able to ramp up development thanks to the bill’s extension of the production tax credit (PTC) through 2007, there are other elements of the energy bill that bode well for the future of wind power.

Specifically, the bill requires that utility system reliability rules to be developed for the nation be non-discriminatory, and provides incentives to encourage construction of new and upgraded transmission lines. “By requiring that new national reliability rules be non-discriminatory and by providing incentives to ease transmission bottlenecks, The Energy Policy Act chips away at two important barriers to continued wind energy development in this country,” said American Wind Energy Association (AWEA) Executive Director Randall Swisher. “While they do not replace the need for the production tax credit to spur production of clean, safe, domestic, renewable energy like wind, these long-term reliability and transmission provisions could help level the playing field and brighten the long-term planning horizon for wind power.” Summaries by AWEA of the two major reliability and transmission provisions follow. Electricity Modernization Act of 2005 Sec. 1211: Electric Reliability Standards (Pages 1080-1096) The provision creates an Electric Reliability Organization (ERO) to create and enforce reliability standards subject to the review of the governments of the U.S., Canada, and Mexico. The Federal Energy Regulatory Commission (FERC) will oversee the ERO in the U.S.. The ERO must be independent yet ensure fair stakeholder representation and balanced decision-making. The ERO may file proposed reliability standards with FERC, which will approve them if they are just, reasonable, not unduly discriminatory or preferential, and in the public interest. What it does: This provision is the most significant piece of EPAct 05 for the electric industry. Until now reliability has been voluntary and in the hands of hundreds of different parties, all with strong commercial incentives that do not necessarily coincide with reliable operation. After the Northeast blackout of August 2003, pressure for mandatory standards gave many policy makers a good reason to support the energy bill. AWEA believes the wind industry and the rest of the electric industry will benefit by having mandatory reliability standards. The language in the Act for the first time requires all reliability rules to be non-discriminatory. Discriminatory rules are a clear and present danger: even though modern wind turbines can ride through system faults, contribute reactive power and active voltage control, and otherwise contribute their fair share to overall reliability, AWEA is concerned that the North American Electric Reliability Councils (NERC) comments to FERC in FERCs currently ongoing generator interconnection proceeding create a higher hurdle for wind than other resources. The wind energy industry is currently engaged in discussions with NERC and FERC to resolve this issue, and expects this new law will help AWEA in these proceedings. Transmission Infrastructure Modernization Sec. 1221: Siting of interstate electric transmission facilities (page 1096) This provision directs the U.S. Department of Energy (DOE), in consultation with the affected states, to conduct a study of transmission congestion and issue a report designating national interest electric transmission corridors. This classification is based on the need for reasonably priced electricity, the need to access more supply and diversify energy sources, and effects on energy independence, national defense and homeland security. Within certain limits, FERC may authorize the taking of private property and issue construction permits if a state does not have authority to approve the facilities. For siting on federal land, DOE shall act as the lead agency for coordinating federal authorizations. States may form interstate compacts establishing regional transmission siting agencies. FERC has no siting authority over states that are members of a compact unless the states disagree. What it does: This provision adds significant pressure to relieve interstate transmission bottlenecks, and could allow for the designation of corridors between wind-rich areas and the high voltage transmission system, based on the criteria of energy independence and diverse supplies. This provision does not help, however, with cost allocation, which is typically the more difficult challenge in building the transmission necessary to bring wind power to market from windy areas in the heartland. For more information, see the following link.
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