Institutional - Wind Energy: Renewable Energy and the Environment - page 223

11

Institutional

The interconnection of wind turbines to utility grids, regulations on installation and operation, and
environmental concerns are the main institutional issues. The National Energy Act of 1978 in the
United States was a response to the energy crisis caused by the oil embargo. The main purpose was
to encourage conservation of energy and the efficient use of energy resources. The Public Utility
Regulatory Policies Act (PURPA) covers small power producers and qualifying facilities (indepen-
dent power producers), which are up to 80 MW [1, 2]. Sections 201 and 210 of PURPA encourage
the use of renewable energy. The main aspects of PURPA are:

r Utilities must offer to buy energy and capacity from small power producers at the marginal

rate (avoided cost) the utility would pay to produce the same energy.

r Utilities must sell power to these small power producers at nondiscriminatory rates.

Qualifying facilities are entitled to simultaneously purchase and sell. They have the right
to sell all their energy to the utility and purchase all the energy needed.

r Qualifying facilities are exempt from most federal and state regulations that apply to utilities.

Public utility commissions, utilities, independent power producers, and the courts determined
the implementation of PURPA. Determination of avoided costs was the main point of contention
between small power producers, independent power producers, and utilities.
The National Energy Strategy Bill of 1992 included the provision of wheeling power over utility
transmission lines. The Federal Energy Regulatory Commission (FERC) can order the owner of
transmission lines to wheel power at costs determined by FERC. The utilities are allowed to recover
all legitimate, verifiable economic costs incurred in connection with the transmission services and
necessary associated services, including, but not limited to, an appropriate share, as transmission
will be needed from any of the costs of any enlargement of transmission facilities. From the stand-
point of wind power, this legislation is very important of the major source of wind energy in the
Great Plains, to the major load centers. In 1997, FERC opened transmission access.
The deregulation of the electric utility industry by the states has changed the competition for
renewable energy. Deregulation essentially means the integrated electric utility companies are split
into three areas: generation of power, transmission, and distribution. Also consumers can buy from
different power producers. The other aspects for increased use of renewable energy are green power
and reduction of pollution and emissions from fossil fuel plants that generate electricity.
Cavallo [3] argued that wind energy could become a high-capacity system by wheeling power
from the Great Plains to California, or from the Texas Panhandle to Dallas-Fort Worth. He con-
ducted a paper study of a 2 GW wind farm in Kansas, which could have a capacity factor of 60%.
The first large wind plant (initially 40 MW, expansion to 80 MW) in Texas was in the western part
of the state, and power was wheeled to the Lower Colorado River Authority area in central Texas.

11.1 AVOIDED COSTS
Avoided costs were established by the public utility regulatory body in each state. The Federal
Energy Regulatory Commission defines avoided cost as the incremental or marginal cost to an elec-
tric utility of energy or capacity, which the utility would have to generate or purchase from another

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