IMPERIAL – The Imperial Irrigation District is dipping into its own reserves to fund transmission upgrades and has instituted a wheeling rate discount in hopes that the state’s renewable-energy boom will not bypass the public utility’s transmission system. Dramatic steps are needed, according to IID officials, because projects in IID’s transmission queue have failed to attract utility power-purchase agreements.
Meanwhile, projects interconnecting directly with the Cal-ISO grid system appear to be moving forward more quickly-indicating, IID officials and stakeholders say, that the playing field is not level.
Renewable-Energy Gold Rush Bypassing Imperial Irrigation District
The Imperial Irrigation District is located in the heart of the Imperial Valley-considered a mecca for renewable-energy development-yet the public utility is scrambling to ensure its transmission system remains relevant in the valley’s green-power boom. Â
IID owns and operates an extensive transmission system that runs throughout the Imperial and Coachella valleys. But there are grid-interconnection points within IID’s service territory that are owned by investor owned utilities and link directly with the Cal-ISO transmission system. According to IID officials, investor-owned utilities have shown a marked preference for projects that link directly with Cal-ISO’s system, rather than the transmission system operated by the district.
“A lot of projects are bypassing IID’s system and going straight into the ISO,” observed Carl Stills, deputy manager of IID’s energy department.
The problem is not attributable to lack of interest by developers. Back in July 2011, IID had signed generator-interconnection agreements for renewable projects totaling 1,225 MW. To accommodate these projects, IID planned several transmission projects, including a $25.8 million upgrade to the Coachella Valley- Ramon/Devers portion of the Path 42 transmission line. The upgrade would enable an additional 900 MW in export capacity to the Cal-ISO grid system. Currently, however, none of the developers in the cluster of projects that were driving the transmission upgrades have signed power-purchase agreements, which are critical for obtaining project funding. And a few have dropped out of the interconnection queue, leaving 11 participants with projects totaling 930 MW.
A primary concern for IID is that it needs wheeling revenue from projects to pay for transmission upgrades. If it does not have that revenue, transmission needed to export power from the Imperial Valley could be built around IID’s system-a tactic Stills said would be “a virtual strategy to take over the transmission system in Imperial Valley.”
IID is now moving forward with the upgrade to Path 42 using funds from the utility’s balancing authority reserve fund, rather than having developers fund the project and then paying back the funding through wheeling rate credits.
Â Hence, the project is no longer a “zero risk” undertaking for IID ratepayers.
The utility is hoping that if it increases transmission export capacity, the PPAs will come. But if not, more developers may drop out of the cluster, stranding investment. “Transmission takes time to implement,” Stills said. “At some point we can’t sit and wait.”
Stills said the bypass of IID’s transmission system is illustrated by the fact that many of the renewable energy projects in the Imperial Valley that do have PPAs in hand will interconnect with the Cal-ISO grid at the Imperial Valley Substation, which is owned and operated by San Diego Gas & Electric.
The Imperial Valley Substation provides a direct link to SDG&E’s service territory via the newly energized Sunrise Powerlink. California’s energy agencies have taken some steps to address IID’s plight.
In June 2011, for example, CPUC Commissioner Mark Ferron issued a ruling calling on the IOUs to use a maximum import capacity of 1,400 MW for imports from projects within IID’s balancing-authority area as part of their evaluation of project bids received in renewables portfolio standard solicitations.
Ferron’s ruling addressed the concern that IOUs planned to assign zero or near-zero resource-adequacy values to projects that export renewable energy from IID to Cal-ISO’s grid-putting those projects at an economic disadvantage. The zero or near-zero RA values were derived from the manner in which Cal-ISO had been assigning resource-adequacy value to RPS projects based on historic flows, rather than on in-progress or planned development.
“This historical approach, according to some parties, yields excessively conservative MIC values on some interties, hindering development on new RPS eligible resources outside the ISO BAA,” Ferron wrote.
More recently, in May, CEC Chair Robert Weisenmiller and CPUC members Michael Florio and Michael Peevey wrote a joint letter to Cal-ISO President Steve Berberich, encouraging the grid operator to “advance as necessary additional transmission reinforcements into the region to enable delivery of at least 1,400 MW of renewable generation from IID.”
“The commissions now understand that the cost of IID reinforcements recovered from generation development in the area may be a further impediment to the development of renewable generation resources in the region north of the Imperial Valley substation,” the letter notes. There are calls for additional interventions from stakeholders. Geothermal developer CalEnergy has asked the CPUC to require that the IOUs’ 2012 RPS plans be modified “to eliminate provisions that discriminate against Imperial Valley renewable resources.”
CalEnergy states that the draft versions of the plans express preferences for projects that are located within the IOU service territories, or that will be interconnected within Cal-ISO’s balancing area.
Renewables developer 8minutenergy Renewables, in a filing with the CPUC, has asked that remedial measures-such as a requirement that IOUs procure a certain amount of renewable energy from resources within the IID balancing authority-be considered for inclusion in a 2012 RPS solicitation.
Actions taken to date to “remove barriers to development of renewable resources in the Imperial Valley have not been wholly successful,” the company notes. Joel Link, vice president of development for SolarReserve, is working on a 170 MW solar project that would be physically located in IID’s territory, but would interconnect at the Imperial Valley Substation, bypassing IID’s transmission system. The company also has several projects in the IID transmission queue. Link believes the critical issue for IID and other systems is timing. Right now IOUs have already contracted enough renewable energy to meet the more immediate RPS milestones.
“Many of the utilities right now are asking for offers that will deliver renewable energy for the latter half of the decade,” Link said. “There’s less immediate development that will be signed.”
Steve Johnson, vice president of development for Tenaska Energy, echoed these sentiments, noting “there may not be a need for large solar projects on the IID system or elsewhere if the targets are met.”
Tenaska has four solar projects in the works in the Imperial Valley, all of which would interconnect directly to Cal-ISO’s system.
In addition to ponying up the upfront funding needed for transmission projects, IID recently instituted a reduced wheeling rate for intermittent power to make it more cost-effective for developers to export over the IID system.
Stills said the new wheeling rates are being subsidized by IID ratepayers. “We’re trying,” he said, “to make it so we’re competitive”