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New Pieces in the Energy
Puzzle
As the technology
for producing renewable energy marches forward, the
next challenge will be getting that power to the
people who need it. And that requires navigating
through a maze of regulation. Here’s why some are
calling for improvements to the nation’s
transmission infrastructure and an energy policy
that promotes the development of a wide range of
fuel sources.
By Darrell Delamaide
Deep underneath the Salton
Sea in California’s Imperial Valley lies a giant
lake of hot water that could become a growing source
of renewable energy. When this magma-heated water is
piped to the surface, its steam can be used to power
turbines that generate electricity. Geothermal
projects like this are no longer just a pipe dream.
The Energy Policy Act of 2005 made geothermal
projects eligible for a production tax credit,
spurring construction of several Salton Sea
generating stations. The stations are just one part
of an ambitious plan to develop the Imperial
Valley’s potential in wind, solar and geothermal
energy, which some estimates put as high as 40,000
megawatts. These renewable resources could be a boon
to consumers in both California and neighboring
Arizona.
Renewable energy poses
special challenges, however, because generation
plants must be located where the wind blows, sun
shines, steam rises or water flows. Unlike natural
gas or oil-fired generation facilities, fuel cannot
simply be transported by pipeline to a generation
facility sited strategically near major market
centers or electric transmission lines.
Fortunately, the Imperial
Irrigation District already has transmission
facilities in the Salton Sea area, and plans are
under way to expand its system to transmit even more
renewable energy in the future. Not all areas of the
country are so well situated, however, and
challenges exist to building new transmission
infrastructure fast enough to keep up with demand.
Transmission Holds the
Key
“Transmission is key to
getting renewable energy to market and getting it to
consumers,” says
Debbie Swanstrom, a Patton Boggs
partner who guides clients through regulatory
processes in energy projects. But in many cases,
“transmission is even harder to get built than new
power plants in terms of licensing permits and
rights of way,” says Patton Boggs partner
Jay
Fortin, who helps arrange the financing of energy
projects. “It takes longer to plan transmission than
it does a new plant.”
With the Federal Energy
Regulatory Commission offering rate
incentives—including higher rates of return to
investors in new transmission projects—many existing
utilities are seeking to build more lines and new,
independent companies are entering the transmission
market, notes Swanstrom. But not all transmission
projects get approved.
Careful homework is needed
to lay the foundation or approval of an application
before it is filed.
Last year, the Arizona
Corporation Commission denied an application by
Southern California Edison Company to build a new
line in Arizona that would transmit energy to
California. Meanwhile, in California, an application
by San Diego Gas and Electric Company to build a
$1.3 billion transmission line faced stiff
opposition because the route would run through a
state park and valuable agricultural land. This led
the staff of the California Public Utility
Commission to develop an alternative, more
environmentally friendly route.
Two “national interest
electric transmission corridors” were designated
recently by the U.S. Department of Energy to
facilitate the construction of new transmission
facilities. In these corridors, FERC can step in and
permit transmission projects, in certain
circumstances, when a state commission fails to do
so. Southern California Edison has signaled it would
apply for FERC approval of its line through Arizona.
A Creaky Apparatus
It would be easy to assume
that the biggest hurdle renewable energy faces is
technological. But another important factor, some
experts say, is a creaky regulatory apparatus that
struggles to keep pace with innovation and change,
particularly when it comes to connecting these new
sources to the grid. Renewable energy, in short, is
subject to some of same old fashioned obstacles as
those faced by traditional fuels.
 For
instance, wind and solar generators are known as
“intermittent” producers because production depends
on whether the wind is blowing or the sun is
shining. But until recently, FERC did little to
encourage or require those maintaining the grid to
receive intermittent power, notes
Carolyn McIntosh,
a Patton Boggs partner in Denver who specializes in
complex environmental litigation. “It was only in
the last two or three years that FERC issued
guidelines to regulate how intermittent power
providers come onto the grid,” she says. Even the
most basic step in bringing power online, the
interconnection to the transmission grid, takes some
patience.
“In some regions of the
country where large transmission systems are
operated by, for example, the Midwest Independent
System Operator or the California Independent System
Operator, there are long queues that generators must
wait in to get connected,” Swanstrom says. For a
faster hookup, Swanstrom often advises energy
developers to look to smaller transmission systems
run by individual utilities, especially governmental
utilities and electric cooperatives.
FERC is now taking action to
encourage renewable energy and energy efficiency,
Swanstrom says. For example, it recently created the
Energy Innovations Sector to coordinate FERC policy
in these areas. The agency also is encouraging
reforms to the queuing process for connecting new
generators to the transmission grid, particularly in
large, regional transmission organizations.
Blowing Hard in Texas
“Just how well this works
depends on where you are in the U.S.,” says Doug
Carter, vice president of business development at
Invenergy LLC, an independent producer that has
mounted a number of wind energy projects. He cites
Texas as an example of where things have come
together well. Texas has a vast, windswept plain on
its western side that is perfect for wind farms. It
has a statewide renewable portfolio standard that
requires renewable energy to be part of the energy
mix by a target date. But perhaps most important,
Texas has a single agency, the Texas Public Utility
Commission, that both operates the electrical grid
and manages the deregulated utility market. The
commission allows Texas to handle grid imbalances
caused by the intermittency of wind energy, as
gas-fired generation plants take up the slack when
the wind dies down. And in Texas, Carter says,
producers can lay off some market risk with a
10-year financial hedge in the wholesale market. In
most other jurisdictions, a prospective producer
must obtain a power purchasing agreement with a
utility to obtain permits and financing.
As a result, Texas has
vaulted to first place in wind energy among the
states, with close to 4,400 MW of installed
capacity, nearly double the 2,400 MW in second-place
California. This has tangible benefits to the local
economy, as wind power spurs rural development.
Property values in Nolan County in west Texas have
doubled in the past few years in the wake of the
wind energy boom, according to a recent report in
The New York Times.
Carter believes that wind
could eventually account for 20 percent to 30
percent of electric power generation in this
country. To that end, he and other wind supporters
advocate a national vision for the country’s
transmission system that is more like the national
highway system than the current patchwork of
independent jurisdictions.
However, some wind projects
are facing opposition on aesthetic grounds. A West
Virginia wind farm was blocked because the tips of
the turbines would be visible from the upscale
Greenbrier resort. And a wind project planned near
Nantucket in Massachusetts was opposed by
influential vacationers. Ironically, other wind
projects are losing out to environmental concerns.
Last year, environmentalists hailed Kansas for being
the first state to quash plans for a coal-fired
plant by citing carbon emissions. But wind farm
developers were not so pleased. The two proposed
coal-fired plants would have spurred the building of
transmission lines from western Kansas to
Denver—lines that wind farms could have also used.
But because wind power alone doesn’t justify the
cost of the lines, plans for new farms are stalled.
The “Arabian Gulf” of
Solar Energy
The other renewable energy
with considerable potential is solar power, even if
it may take some time to realize it. “I think that
very long term the answer will probably be solar,”
Fortin says. “That technology has made huge strides
in recent years, but it still has a long way to go
before it can compete with coal and natural gas.”
The greatest potential for
solar power lies in the Southwest, says McIntosh,
labeling Arizona “the Arabian Gulf of solar.”
Numerous foreign investors, particularly from
Spain—which has been at the forefront of developing
solar power in Europe—have shown interest in
undertaking projects in the United States, she says.
Solar presents less of a
transmission problem than wind, Carter says, because
the generators can be sited closer to demand. Urban
centers are rarely situated on windswept plains, but
many are bathed in year-round sunshine. Also, some
environmentalists believe solar panels are less
intrusive than huge wind turbines.
The most familiar form of
solar energy uses photovoltaic cells to convert the
sun’s energy into electricity. An emerging and
increasingly popular technology, solar thermal
energy, uses mirrors to amplify the sun’s rays to
heat a fluid that generates steam to power a
turbine. Two prototype solar thermal plants were
recently opened south of Las Vegas, and others are
on the drawing boards in California and Arizona. A
German company, Schott AG, recently announced plans
to invest up to $500 million in New Mexico to
manufacture both photovoltaic panels and solar
thermal receivers.
Other forms of renewable
energy are just starting to emerge. Marine power,
for instance, aims to harness the energy in waves or
tides to power turbines. While less intermittent
than wind or sun (hence the phrase “time and tide
wait for no man”), marine power poses tough
technological challenges. Fortune magazine recently
reported that tides have wrecked prototype devices
for tapping tidal energy off the coast of Scotland.
Renewable energy is
beginning to make a measurable contribution to our
energy needs even as it fuels economic development
in places as diverse as Sweetwater, Texas, and El
Centro, California. Nonetheless, it’s clear that
traditional hydrocarbon fuels will supply the bulk
of our energy needs for some time to come.
“Renewable energy is great,” says Swanstrom, “but
it’s just one piece of the big puzzle.” CT
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 The
Next “Alternative” Energy?
With zero carbon
emissions, zero air pollution and high
reliability, the time seems ripe for the
return of nuclear energy. Technology
improvements have allayed fears about safety
and security, and as a result, “I think
Congress and the public are more willing to
see nuclear facilities built again,” says
Patton Boggs partner
Jeff Turner.
But the planning and
construction of nuclear plants can run eight
years or more, twice as long as traditional
power plants. Spiraling costs have slowed or
halted many plans for new facilities. And
radioactive waste disposal still raises
hackles, as evidenced by opposition to a
plan to store waste in Nevada’s Yucca
Mountain ridge.
The two leading
Democratic candidates for president both
oppose the Yucca Mountain facility, while
presumptive Republican nominee Senator John
McCain suggests providing incentives for
localities to store waste. But whatever
happens this November, with climate change
driving the energy conversation in
Washington, Turner believes that nuclear
energy will be part of the solution.
CT |
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