AWEA: Maintaining favorable transmission cost allocation policies ‘will be critical’

Creating stable policies for wind energy helps to further transmission development for wind as it allows transmission planners to have more certainty about the amount of wind energy that will be built and what new transmission infrastructure will be required, according to Michael Goggin, senior electric industry analyst with the American Wind Energy Association (AWEA). 

“[M]aintaining favorable transmission cost allocation policies and working with states, and in some cases federal entities, to make sure that needed transmission lines move expeditiously through the siting process will be critical,” Goggin told TransmissionHub on May 24.

AWEA has filed comments on numerous regional compliance filings that have been submitted to FERC as part of Order 1000, which requires regions to make positive changes to transmission planning and cost allocation policies, he said.

AWEA will also submit comments on the interregional Order 1000 transmission planning and cost allocation filings in the near future. Furthermore, AWEA is exploring ways to make the interconnection queue process work efficiently and fairly for wind projects attempting to connect to the grid, he added.

“In part due to the ongoing transmission expansion that has been driven by adoption of workable transmission cost allocation policies in many critical regions, transmission is no longer the wind industry’s biggest barrier,” Goggin said. “The lack of stable policies for wind energy has emerged as the biggest barrier. While many other energy sources enjoy permanent tax incentives, some of which have been in place for almost a century, wind energy’s production tax credit [(PTC)] is typically only extended for one or two years at a time. Correcting that by securing a long-term extension of the wind energy production tax credit is the wind industry’s number one goal.”

The American Taxpayer Relief Act, passed by Congress on Jan. 1, and signed into law by President Barack Obama on Jan. 2, includes an extension of the PTC for projects that start construction before Jan. 1, 2014; an extension of the investment tax creditfor projects that start construction before Jan. 1, 2014; and an extension of bonus depreciation for projects that are placed in service before Jan. 1, 2014.

Goggin said that the competitive renewable energy zone (CREZ) lines in Texas, which are due to enter service by the end of the year, will allow that state to nearly double its wind energy use.

The transmission lines will virtually eliminate existing wind energy curtailment, which haveoccurred because of a lack of transmission capacity from western Texas to the rest of the state, as well as allowing many gigawatts of new wind energy development to occur, he added.

The multi-value projects in theMidcontinent ISO (MISO)and the priority projects in the Southwest Power Pool (SPP), made possible by those regions adopting more favorable transmission cost allocation policies, will also drive numerous gigawatts of new wind energy development over this decade, he said.

Merchant transmission projects are also poised to facilitate many gigawatts of new wind energy development by the end of this decade, Goggin said.       

Less wind energy expected to be built in 2013 

“[T]oday, really, the number one priority is the policy uncertainty,” Peter Kelley, vice president for public affairs for AWEA, told TransmissionHub on May 23.

In 2012, “we increased the amount of wind energy in this country by 28% in one year,” he said.

This year, a small fraction of that will get built. “[W]e don’t forecast … but I can tell you it’ll be nowhere close to that just because of this [policy] uncertainty,” he said.

Wind energy’s competitors, including oil, gas, coal, hydro and nuclear have stable policies in place, he said.

“What is missing here is a stable business environment and predictability as to the rules so that you can sign deals,” he said. “You can’t sign a deal if you don’t know what the rules are going to be and so, as a result, you can only sign deals for projects that are going to start construction this year.”
He added, “We have previously said that we don’t need this tax policy forever, but it is the policy that’s working.”

The default energy policy for the country is the tax code, which has all kinds of advantages built in, including accelerated depreciation. Policies that benefit oil and gas, for instance, include master limited partnerships, Kelley added.

Yet, the wind industry is “continually living in uncertainty as to whether [the PTC] will be extended,” he said. “So, [Congress] can pass a long-term policy either as part of tax reform or as part of an energy bill,” among other things.

Federal policy creates the market and state policies determine where it gets built so it is important to have good state policies, he said.

“[T]he states with a commitment to renewable energy are the ones that are seeing the construction activity and getting the local tax revenues and then the lease payments to their farmers and ranchers,” he said.

An example of this is Iowa, which has a good wind resource, available land in farms and ranches and strong state leadership, he said, noting that republican Gov. Terry Branstad signed the first state renewable portfolio standard (RPS) in the 1980s and has been a champion of renewable energy since.

Iowa now generates 24.5% of its electricity from wind and is the leading state in the country in that regard, Kelley said.

In its “U.S. Wind Industry Annual Market Report for 2012,” released on April 11, AWEA said that if completed, 19 near-term transmission projects identified spanning the Plains states, Upper Midwest, Interior West and California could carry about 69,580 MW of additional wind power capacity, which would more than double the currently installed base of wind power projects in the United States.

Kelley said transmission is a way to get the lowest-cost energy to consumers and it is important to get those projects built.

“This year, the wind projects are not being built in the same numbers as they could be, or as they have been recently,” he added. “[Y]ou need all the elements – you need good wind resource, you need the transmission lines to carry the power to the consumers, but in between there, you need to build more wind turbines to create the electricity in the first place. We’re not building in the number of wind turbines we could be in this country because of uncertainty over the policies.”

The good news, he said, is that multiple efforts to weaken some states’ policies by opponents this year, such as in Kansas, have failed. Kansas has a pretty conservative Legislature and is led by a conservative republican, Gov. Sam Brownback, “but he is a big supporter of wind power and the state has seen $3bn last year alone in investment in new wind farms,” he said.

That investment has made a big difference in the state’s economy, created manufacturing plants and put people back to work.

“[T]hat’s the good news: at the state level, support remains strong because people can see firsthand the benefits,” Kelley added. “At the federal level, we’re still … stuck in a do-nothing Congress and looking for a vehicle” that is nowhere in sight.

‘No doubt’ about offshore wind’s role in the U.S.

On offshore wind energy, Kelley said “there’s no doubt about” it being part of the country’senergy future.

“It’s already making a big contribution overseas, and the day will come when it’s making a big contribution here,” he said.

While there are no offshore wind energy projects generating electricity in the U.S. now, some of those projects are moving toward construction. “This could be the year that we finally break ground on one of the projects, whether it’s Cape Wind or one of the other projects up and down the East Coast,” he said.

According to AWEA, there are 13 offshore wind energy projects in various stages of development spanning 10 states off the East and West coasts, as well as off the coasts of Texas and the Great Lakes.
Those projects represent more than 5,100 MW of offshore development with turbine sizes ranging from 3 MW to 6 MW, and include Cape Wind Associates’ Cape Wind project off of the coast of Massachusetts, Fishermen’s Energy’s project off the coast of New Jersey, Deepwater Wind’s projects off the coast of Rhode Island, and the Lake Erie Energy Development Corporation’s (LEEDCo)’s Icebreaker project in Cleveland Bay, off the coast of Ohio.

Cape Wind is owned by Energy Management.

Optimism for wind energy

Kelley said that while there will be less wind energy added in the U.S. this year than there was last year, “it’s still ahead of schedule to get to 20% of the power grid [being renewable energy] by the year 2030, which is the goal set during the Bush administration,” as notedbya U.S. Department of Energy report.

“It will take further commitment by the investors, they need to see the signal from the policies and then the developers can sign the deals,” he said.

A couple of things that are encouraging this year include that utilities are seeing lower-priced wind power and “are going for it even above and beyond what the state renewable [portfolio] standards require,” he said.

Wind power today is 33% cheaper than it was three years ago, he noted, adding, “[U]tilities are trying to lock that in on these long-term contracts of 20 [or] 25 years.”

For instance, Xcel Energy (NYSE:XEL) is buying more wind power in Colorado than required to by the state’s RPS.

That kind of activity is driving wind energy demand, he said.

Also encouraging is that large industrial ratepayerslike Wal-Mart, Microsoft, Sprint and Apple are committing to buying clean energy.

Kelley added, “[A]s these big industrial ratepayers try to fulfill on these commitments they’ve made to their consumers, that’s also driving more demand for wind energy.”

About Corina Rivera-Linares 3286 Articles
Corina Rivera-Linares was TransmissionHub’s chief editor until August 2021, as well as part of the team that established TransmissionHub in 2011. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial from 2005 to 2011. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines.