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By Hilary Flynn

 

On July 21, 2011, the Federal Energy Regulatory Commission (FERC) issued a new rule that is expected to help bring more renewable energy projects online. Order No. 1000, “Final Rule on Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities,” contains several requirements that should make it easier to build and pay for transmission lines to solar installations.

 

The rule makes clear that public utility transmission providers must develop regional transmission plans that consider public policy goals established by state or federal laws and regulations (e.g., a renewable portfolio standards or RPS) in the region. Furthermore, it requires the public transmission providers to coordinate their plans with neighboring regional providers.

 

The rule also requires that the public transmission providers participate in planning processes that use cost allocation methods that follow six principles identified in the order. One of the most important cost allocation principles in the new rule is that the costs of new transmission facilities will be the burden of those that will benefit from the additional power, and not the responsibility of a few or those that will not benefit from the power. Moreover, the cost allocation methodology must be transparent, and the burden must be commensurate with the benefits. The order will take effect 60 days after publication in the Federal Register.

 

Utility-scale solar has been plagued by insufficient transmission capacity in the U.S. While the industry has clearly seen transmission issues in Ontario, California utilities have begun to suggest favorable locations for interconnection, suggesting that they are anticipating similar issues. The ruling should enable U.S. utilities to be more flexible in granting interconnection. It is likely that these costs will be passed on to ratepayers; however, such a strategy has backfired in other environmentally friendly markets like Colorado. Nevertheless, this new rule is likely to benefit large-scale developers in the U.S. like First Solar, SunPower, Recurrent, NRG, etc., who have experienced project delays due to gaining permission to interconnect.

 

Hilary Flynn is a is an analyst for Lux Research, which provides strategic advice and on-going intelligence for emerging technologies. For more information, visit the Lux Research site.

 

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