By SETH HANDY
Wind Energy Development (WED) originally planned to build a 1.5-megawatt wind turbine in Coventry, R.I. The North Kingstown company applied to sell the electricity from this turbine to National Grid under the Distributed Generation (DG) Standard Contract Act. National Grid claimed ineligibility because the Coventry turbine was larger than the 1.5-megawatt category established for wind turbines. It did so by combining the capacity of the turbine with an adjacent WED turbine. The second turbine, however, wasn't included in the contract proposal. After administrative litigation, the state Public Utilities Commission (PUC) ordered National Grid to enter a DG contract for the first turbine.
In that contract, National Grid committed to pay a price of $148 per megawatt-hour 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 deposit of $46,905, as required by the act. The turbine was required to operate within 18 months of execution of the contract or else the contract would terminate and WED would forfeit its deposit to National Grid.
National Grid sent WED an interconnection study for the first wind turbine that estimated an interconnection cost of $270,502, or about $180 per kilowatt. On Jan. 15, 2014, WED filed a petition with the PUC contending that National Grid was passing through to the company an interconnection tax from which National Grid was exempt under IRS rules. National Grid was 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, National Grid sent WED a joint impact study for both turbines requiring prepayment of $1,126,540 to interconnect, or about $375 per kilowatt. The sum is almost four times the interconnection cost projected for the DG contract price and twice the price provided in the original study. The bulk of the proposed interconnection cost, $907,000, 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 reasoning contradicts state law that provides that ratepayers, and not interconnecting customers, will be held responsible for system modifications that benefit National Grid customers generally, such as National Grid's proposed replacement of expired utility 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.”
Thus, $197,140 of the required interconnection cost was for the interconnection tax WED disputed.
The impact study estimated a schedule of 18 to 24 months to interconnect the two turbines. That effectively terminated the DG contract for the first turbine and would force WED to forfeit its $47,000 deposit. WED asked National Grid to extend the production deadline or terminate the contract and refund the deposit, but National Grid refused to do either. That impasse 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 10 turbines on two circuits in Coventry. This was done in an effort to make use of all the capacity produced by the system improvements that were required of WED. On Dec. 18, 2014, National Grid issued its joint impact study for all 10 turbines. The study used load data and power ramp rates from a Goldwind turbine despite plans to use Vensys turbines in Coventry.
Relying on inaccurate load characteristics for the wrong make of turbine, National Grid determined that no more than three turbines could be interconnected to the 12.47-kilovolt distribution system at Coventry substation 54. Thus, National Grid rejected interconnection of three of the four turbines proposed at Coventry substation 54. This contradicted National Grid’s conclusion in the impact study for the two turbines that 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 sum of $12,759,544 to interconnect 10 turbines was $850 per kilowatt, more than eight times the cost estimated for the DG contract pricing model and almost five times National Grid’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. National Grid proposed to pass through a total tax of $2,320,780 for the proposed interconnections, despite the claimed exemption. The new impact study didn't 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 National Grid's administration of these interconnections. After yet more negotiation, National Grid agreed to allow WED to interconnect all 10 turbines; to install its own underground conduit and reduce the estimated cost of its interconnection work to $4.1 million for the 10 turbines, just before the PUC heard the petition.
The PUC didn't see fit to further constrain National Grid administrative discretion over interconnection, failing to respond to most of the substance of WED’s arguments.
Interconnecting customers that don't 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 — 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 National Grid control over interconnection. National Grid’s economic interests in gas, distribution and transmission run counter to the state’s interest in growing and interconnecting renewable energy. Although commonly referred to as a “public utility,” National Grid is a private company that is principally accountable to its shareholders. National Grid can't 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 don't 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 who don't 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 — the town owns three — the Narragansett Bay Commission — it owns three — and the state of Rhode Island.
However, many projects just fail when faced with such obstacles and expense to interconnection.
Seth Handy is an attorney with Handy Law LLC, based in Providence.