Comments on: Texas wind power: It isn’t about the RPS

By: Eric Schubert

Eric Schubert — Wed, 19 May 2010 16:18:00 +0000

Mike,

In certain jurisdictions, generation developers are responsible for transmission network upgrades related to the dispatch of the new plant. A coal or nuke plant that has a 80 percent or greater capacity factor has an easier time paying off that upgrade than a wind resource with a 30-35 percent capacity factor.

By: Michael Giberson

Michael Giberson — Wed, 19 May 2010 03:45:51 +0000

Eric, I believe that postage stamp transmission cost allocation has helped wholesale competition in ERCOT work smoothly, but I don’t follow the “wind has benefited disproportionately” part of your statement. How does capacity factor fit into the story? Now if you said, “because distant-from-load wind generators demand more in the way of transmission service”, that seems sensible.

High natural gas prices naturally gave non-natural gas generators a push, and among the non-natural gas technologies – coal, nuke, and wind – wind is quickest to build. I wonder how long natural gas prices will stay in the $4-$5 range, and if that will be too low to lead to additional wind power as the CREZ lines are built.

By: Michael Giberson

Michael Giberson — Wed, 19 May 2010 03:32:18 +0000

Admittedly interstate transmission planning is screwed up due to the mismatch between regulation and efficient markets: state regulators ~~control~~ oversee transmission siting decisions yet most wholesale power markets span multiple states, or at least would if economic value rather than regulatory turf wars controlled.

I hadn’t thought of a link between a national RPS and a larger role for FERC in driving interstate transmission. Frankly, the idea of a larger role for FERC in transmission would likely drive some politicians into opposing a national RPS. Or, as a “compromise,” a national RPS that specifically denies FERC any greater interstate siting responsibility. Seems like a train wreck waiting to happen.

Maybe, after the train wreck, someone would conclude it would be good if train tracks actually connected smoothly across state lines …

By: Tom

Tom — Wed, 19 May 2010 02:24:52 +0000

One way in which a national RPS would differ from a state RPS is that it would make it easier for FERC to justify interstate transmission for renewable energy. In TX, the RPS may be an also-ran because of the pioneering work with the CREZ transmission project, as you point out. A national RPS would be a ggod first step towards national CREZs.

By: Eric Schubert

Eric Schubert — Tue, 18 May 2010 16:42:46 +0000

Mike,

I see two other key elements that aided wind development in ERCOT.

First, transmission cost allocation, in the form of postage stamp, has been critical in encouraging new generation generally, as the cost of new transmission upgrades are socialized among loads. Wind has benefited disproportionately among generators because of the lower capacity factors of wind farms.

Second, natural gas prices above $6 per MMBTU made investment in wind farms appear to be in the money to developers.