by Seth Handy
Wind Energy Development (WED) originally planned to construct a 1.5 megawatt wind turbine located at 210 Piggy Lane in Coventry, Rhode Island (“COV1”). WED applied to sell the electricity from COV1 to National Grid (NGrid) under the Distributed Generation Standard Contract Act (R.I. Gen. Laws §39-26.2-1 – the Act). NGrid claimed ineligibility because COV1 was larger than the 1.5 megawatt (MW) class category established for wind turbines when combined with an adjacent WED turbine (COV2) that was not included in the DG Contract proposal. After administrative litigation, the Rhode Island Public Utilities Commission (PUC) ordered NGrid to enter a DG Contract with WED for COV1.
In that Contract, NGrid committed to pay a price of $148 per MWh for the electricity. The price was set by a regulatory body at an amount sufficient to fund the anticipated cost of developing a 1.5 megawatt wind turbine plus a reasonable rate of return on investment. The pricing model assumed a total interconnection cost of $100 per kilowatt for a 1.5 megawatt turbine. The Contract required WED to pay a non-refundable Performance Guarantee Deposit of $46,905, as required by the Act. COV1 was required to operate within eighteen months of execution of the Contract, or else the Contract would terminate and WED would forfeit its the Performance Guarantee Deposit to NGrid.
NGrid sent WED an Interconnection Feasibility Study for COV1 that estimated an interconnection cost of $270,502, or approximately $180 per kilowatt. On January 15, 2014, WED filed a petition with the PUC contending that NGrid was passing through to WED an interconnection tax from which NGrid was exempt under IRS rules and overcharging WED for the cost of interconnection by overestimating costs that were never trued up to its actual expenditures (see PUC Docket 4483). On April 17, 2014, NGrid sent WED a joint Interconnection Impact Study for COV1 and COV2 requiring prepayment of $1,126,540 to interconnect, or approximately $375 per kilowatt, almost four times the interconnection cost projected for the DG Contract price and twice the price provided in the original Feasibility Study. $907,000 of the proposed interconnection cost was for “System Modifications to the Company Electric Power System” including “engineering, design, construction and testing for revenue metering, feeder modifications, reclosers, disconnect switches, and remote station modifications.” This is despite RI law that provides that ratepayers, and not interconnecting customers, will be held responsible for system modifications that benefit NGrid’s customers generally, like NGrid’s proposed replacement of expired poles in Coventry. Only $22,400 of the required interconnection cost was actually for “Interconnecting Customer Interconnection Facilities” including “engineering review and acceptance, and compliance verification of the ICIFs including all required drawings and equipment spec reviews, relay settings, and construction.” $197,140 of the required interconnection cost was for the interconnection tax WED disputed.
The Impact Study estimated a schedule of eighteen to twenty-four months to interconnect COV1 and COV2. That effectively terminated the DG Contract for COV1 and would force WED to forfeit its $47,000 deposit. WED asked Defendant to extend the production deadline or terminate the contract and refund the deposit, but Defendant refused to do either. That impass resulted in more administrative litigation that was ultimately resolved in WED’s favor.
WED then paid an additional $65,000 to jointly study the interconnection of ten turbines on two circuits in Coventry, in an effort to make use of all the capacity produced by the system improvements being required of WED. On December 18, 2014, NGrid issued its joint impact study for all ten turbines. The impact study used load data and power ramp rates from a Goldwind turbine despite the plan to use Vensys turbines in Coventry. Based on inaccurate load characteristics for the wrong make of turbine, NGrid determined that no more than three turbines could be interconnected to the 12.47kV distribution system at Coventry substation 54, rejecting interconnection of three of the four turbines proposed at Coventry substation 54. This contradicted NGrid’s conclusion in the impact study for COV1 and COV2 that the required system upgrades would produce sufficient capacity to interconnect all WED’s proposed turbines to that circuit.
The new Impact Study required prepayment of an estimated cost of $5,166,918 to interconnect three turbines to Coventry substation 54 (despite approval of only one turbine for interconnection there) and $7,592,626 to interconnect four turbines at Coventry substation 63. That total of $12,759,544 to interconnect ten turbines was $850 per kilowatt, over 8 times the cost estimated for the DG contract pricing model and almost 5 times NGrid’s initial estimate per turbine. Of that total, $12,718,344 was for “system improvements,” including installation of reconductor and line extensions and substation upgrade work. Only $41,200 was quoted as the cost of the customer’s interconnection facilities. NGrid proposed to pass through a total tax of $2,320,780 for the proposed interconnections, despite the claimed exemption. The new impact study did not estimate the schedule for completion of the interconnection work, leaving WED at risk of contract termination and lost performance guaranty deposits.
WED filed another petition with the PUC to contest NGrid’s administration of these interconnections. After yet more negotiation, NGrid agreed to allow WED to interconnect all ten turbines, allowed WED to install its own underground conduit and reduced the estimated cost of its interconnection work to $4.1 million for the ten turbines just before the PUC heard the Petition. The Commission did not see fit to further constrain NGrid’s administrative discretion over interconnection, failing to respond to most of the substance of WED’s arguments.
Interconnecting customers that do no participate in wholesale markets (e.g., public entity net metering customers) have been forced to comply with extremely burdensome requirements administered by the regional grid operator (the Independent System Operator, aka “ISO”) that are only meant to apply to large projects participating in wholesale markets. The Coventry project spent an absurd amount of time and money complying with ISO’s Operating Procedure 14 (OP-14 – a regulatory process designed for large power plants) after National Grid raised this compliance concern with ISO, even though none of the Coventry turbines exceeded ISO’s size threshold or intended to enter the wholesale market.
This was the context in which WED has worked for legislation restricting NGrid’s control over interconnection. NGrid’s economic interests in gas, distribution and transmission run counter to the State’s interest in growing and interconnecting renewable energy. Although commonly refered to a s a “public utility,” National Grid is a private company that is principally accountable to its shareholders. NGrid cannot be expected to administer interconnection properly or fairly without the introduction of proper legal controls. Indeed, why would a company with a vested interest in the alternatives be asked to administer interconnection of renewable energy? These interconnection issues do not only impact WED. WED has definitely invested great energy and resources to correct them, but the proposed corrections are especially important to the many developers that do not have the resources or the will to stand up against obstructive administration of interconnection. WED’s nine wind turbines in Coventry began generating electricity last year despite these challenges and to the great benefit of West Warwick (they own three), the Narragansett Bay Commission (they own three) and our great State of Rhode Island. However, many projects just fail when faced with such obstacles and expense to interconnection.
This is an original article that was adapted for publication by EcoRI.