Wind development gets huge boost with cost allocation decision

As the wind industry has rapidly grown over the last few years, one of the primary challenges has been transporting our new, low-cost electricity across the country.

Our nation’s aging and outdated transmission infrastructure–the structural backbone of our electricity grid–has greatly needed upgrading and expansion, but making that happen depends on fairly allocating the costs.

A 7th Circuit Court decision last week provided much needed clarity to that important cost allocation quest. The court, in upholding a Federal Energy Regulatory Commission (FERC) ruling, stated that FERC can broadly spread costs of backbone transmission projects known as “multi-value projects” to utilities across the MISO transmission region–an area which covers 15 states across the Midwest and part of Canada. These costs can be allocated based on the benefits received from the lines, rather than physical proximity to them.

The court also stated that FERC may use “crude” attempts to match costs and benefits, as long as it has an “articulable and plausible reason to believe that the benefits are at least roughly commensurate,” adding that FERC can even “presume that the new transmission lines benefit the entire network.”

This important decision was the culmination of years of behind-the-scenes work by our industry engaging with the federal rulemaking processes to ensure that power from the windiest regions in our country can be reliably delivered to Americans' homes.

Opining on the benefits of wind power, well-respected 7th Circuit Justice Richard Posner noted, "The use of wind power in lieu of power generated by burning fossil fuels reduces both the nation's dependence on foreign oil and emissions of carbon dioxide."

Posner added, "And its cost is falling as technology improves. No one can know how fast wind power will grow. But the best guess is that it will grow fast and confer substantial benefits […] by replacing […] power plants that burn oil or coal, with western wind power."

Judge Posner did go on to add further commentary about the constitutionality of in-state preferences for renewable energy purchases, but those comments were not binding on the case and future courts will not have to follow them.

AWEA Senior VP of Public Policy Rob Gramlich said of the ruling, “This is a great decision for all who want transmission infrastructure development in the country, whether for reliability, to reduce costs to consumers, or to integrate renewable energy. The court affirmed FERC’s ability to get infrastructure paid for, which is the main barrier to its development, by ensuring that those who benefit pay their fair share.” 

Photo Credit: Power Line by Eddie Fouse

Related articles:

Buffalo Dunes Wind Project: A lesson in export, affordability, and transmission, April 23, 2013
Western governors' report highlights utility integration reform needs, August 2, 2012
Montana-Washington transmission upgrade would be 'bargain' for Montana, June 26, 2012
WINDPOWER 2012 Update: Transmission for wind in western U.S.: Lower cost, lower variability, June 5, 2012
FERC approves Rock Island Clean Line request to start service-agreement negotiations, June 1, 2012
New study: Wind power can save Midwestern consumers between $3 billion and $9.5 billion annually by 2020, May 23, 2012
Renewable Northwest Project responds to new BPA wind curtailment, May 1, 2012
Fact check: Silverstein off base on transmission for wind, March 22, 2012
Transmission planning … z-z-z … but, it's important, September 1, 2011


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