Indiana Utility Regulatory Commission and Regulation and Electric and Energy Efficiency and Wind Power and Energy & Environment and Renewable Energy and Utilities

Wind energy transmission raises equity questions

July 10, 2010

The Midwest's booming wind energy industry could cost Indiana households more than $40 million a year in the coming years, but experts say it's a necessary expense as the region tries to move away from reliance on coal-fired power plants amid federal crackdowns on emissions.

Transmission lines costing about $16 billion are needed to move wind energy into the electric grid. But the cost has sparked a debate over who should pay for getting the power from where it's made to where it's consumed.

Most regions have placed that burden on rate payers. In Indiana, that could translate to utility bill increases of $2 or more a month for 1.5 million households.

But some question whether it's fair for someone in Indianapolis to subsidize electricity made by North Dakota wind turbines and used in cities like Chicago, Milwaukee or even Fort Wayne.

"We are advocating for assurance that ... Indiana consumers end up with, as close as possible, the least-cost solution to get the job done," said Indiana utility consumer counselor David Stippler.

The Federal Energy Regulatory Commission will discuss how to allocate transmission costs next week in Washington. Presenters will include the Midwest Independent Transmission System Operator, a Carmel not-for-profit that monitors the electric grid in Canada and 13 states.

MISO president John Bear predicts that wind will supply 16 percent of MISO's power within 25 years.

MISO initially proposed having power generators pay 20 percent of the transmission costs and consumers in the 13 states pay the remaining 80 percent. Now it says consumers should carry the full cost.

Jamie Karnik, a spokesman for Minneapolis-based Wind on the Wires, said the trade group prefers that approach.

"It's not a matter of we don't want to pay this 20 percent. It's that we can't pay," Karnik said. "It's too expensive."

Experts say having developers pay the transmission costs could drive them to regions willing to shift the cost to consumers. The Southwest Power Pool serving Texas, Kansas and other states is placing the full cost of building the transmission lines on consumers.

"If you make the developers pay for transmission, that cost is enough to make wind energy uneconomical," said Doug Gotham, director of the State Utility Forecasting Group, a Purdue University unit that advises the General Assembly on electricity issues. "If you make the local utility in Minnesota pay, they get no benefit. Why pay for a transmission line so some wind farm can sell power to customers east of you?"

Gotham acknowledged that spreading the cost equally among 13 states raises some fairness issues. But with environmental concerns over coal and clean air regulations rising, experts say finding a successful plan for wind energy transmission is becoming more urgent.

"As long as coal was cheap, there was not a lot of value to diversification," Gotham said. "But there's a lot of uncertainty now over what the environmental rules are going to be over the next 10 to 100 years. In the Midwest, where we burn a lot of coal, we're kind of exposed when it comes to those rules."

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