Including more renewable energy as part of our electric energy
supply mix is a public policy goal most people would agree with in
principle. It makes sense in at least two key ways: First,
renewable energy (such as wind and solar power) tends to be clean
energy, thus promoting a cleaner environment, and second, more
reliance on renewable energy means less reliance on oil-producing
foreign nations, thus improving our national security. While the
public policy goal seems like a good one that has broad support,
making it a reality is challenging and requires putting together
many pieces of a puzzle. Two of the big pieces of that puzzle are
(1) how to get the energy from remotely located resources (such as
wind farms in Northern Maine) to load centers (such as Boston)
where the electricity is consumed, and (2) how to secure financing
for new renewable energy project development.
In New England generally and in Massachusetts in particular,
renewable energy is becoming more of a reality each year as new
federal and state rules affecting electric transmission and
wholesale markets take effect. Below are two examples of such
developments -- one at the national level and one in Massachusetts
-- that will help shape our renewable energy future.
At the national level, the Federal Energy Regulatory Commission
(FERC), the agency that oversees interstate sales and transmission
of electricity, last year issued a landmark order ("Order
1000") governing how the transmission of energy gets planned
and paid for on a regional basis. Prior to Order 1000, transmission
providers generally planned the system only to reliably meet the
needs of customers -- to keep the lights on. Now they must also
consider public policy requirements that drive transmission needs
and evaluate potential solutions in the form of new transmission.
For example, most of the states in New England have requirements
that a certain percentage of the electricity supplied to retail
customers come from qualified renewable energy resources. Wind
power is the primary renewable resource being developed. Most of
the major wind power production is being developed in Northern New
England, especially Northern Maine, because of the favorable wind
conditions, relatively low land costs and lack of population to be
concerned with the presence of wind turbines. Getting that wind
power in Northern New England to population centers such as Boston
requires major transmission upgrades to the existing regional
transmission network. Order 1000 has now opened a way to get that
transmission capacity built.
At the state level, in response to Order 1000, the New England
states put together a proposal (filed with the FERC on October 25,
2012) that would not only allow for the consideration of
transmission needed to meet public policy requirements but also get
that transmission built and paid for. Under the proposal, the New
England states would work collectively to identify public policy
requirements that drive transmission needs, work with the
independent system operator of the regional electricity system to
identify potential scenarios to meet those needs, and then conduct
a competitive solicitation process for qualified transmission
developers to propose and build specific transmission projects to
meet those needs, with the costs of such projects being allocated
according to an agreement among the participating states. The kinds
of projects that are envisioned here are generally major
transmission projects (costing in the range of hundreds of millions
to billions of dollars) that could bring substantial amounts of
renewable energy into participating states. These transmission
projects would likely be coupled with long-term (10-to-20-year)
power purchase agreements between the states -- or the utilities
subject to state jurisdiction -- and the renewable energy
suppliers.
Such long-term energy supply contracts are another piece of the
renewable energy puzzle that must be put in place to make the goal
a reality. In Massachusetts, Governor Patrick recently signed
legislation that will allow for, among other things, distribution
utilities in Massachusetts to enter into additional long-term
renewable energy contracts. The new legislation provides that
between January 1, 2013, and December 31, 2016, all distribution
companies are required twice to solicit proposals from renewable
energy developers through a competitive bidding process and enter
into long-term contracts under certain conditions. The purpose of
such legislation and earlier similar legislation in Massachusetts
is to spur renewable energy development by ensuring a revenue
stream, in the form of long-term power purchase agreements, to
project developers.
Massachusetts regulators and other state officials are becoming
increasingly involved in wholesale power markets and transmission,
which are under federal jurisdiction, as they seek to carry out the
public policy goal of including more renewable energy in our energy
supply mix. By developing rules for getting transmission planned
and paid for to deliver remote renewable energy and for the
financing of renewable energy projects, they are helping put the
pieces of the renewable energy puzzle together in a way that
works.1
Footnotes
1. Day Pitney lawyers have been extensively involved in the Order 1000 compliance efforts, New England transmission matters, wholesale electricity markets and renewable energy project development.
www.daypitney.comThe content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
