Paying the Costs of Wind Power

Governors from eleven eastern states have written a letter protesting plans to charge their customers the cost of transmitting wind power from the Great Plains and Midwest to the East Coast. Who will pay for moving wind power is a hundred billion dollar question.

Share This:

Everybody likes wind energy, at least in principle. The fighting begins, however, when it comes to who will pay the cost of moving the electricity produced from the spinning turbines on the plains the many miles to the cities that need the power.

The cost of transmitting power from the Midwest and Great Plains to the cities will require thousands of miles of new transmission lines that will cost hundreds of billions of dollars. The question of who will pay the cost of these new lines is, as yet, unanswered.

East Coast residents fear they will be stuck paying the majority of the costs for wind development and they are rebelling at the prospect. Last week, eleven East Coast governors wrote the leaders of the U.S. Senate warning that a bill now before Congress unfairly requires the governors’ constituents to pay for wind turbines built in the rural Midwest.

The governors note that a renewable energy bill now before the Senate calls for the construction of a new transmission corridor from the middle of the country to the coast. The cost of those lines, the governors write, would total at least $160 billion, “the majority of which would be paid for by East Coast states, costing our ratepayers hundreds of dollars per year.”

(The governors signing the letter hailed from Massachusetts, Rhode Island, Connecticut, Delaware, Maine, Maryland, New Hampshire, New Jersey, New York, Vermont and Virginia. A full text of the letter can be found here.) 

The governors objected that the bill before the Senate would prevent Eastern states from creating their own renewable sources of energy and shift the cost of Midwestern power production to Eastern ratepayers.

“In its current form, this legislation would harm regional efforts to promote local renewable energy generation, require our ratepayers to bear an unfair economic burden, unnecessarily usurp states’ current authority on resource planning and transmission line certification and siting, and hamper efforts to create clean energy jobs in our states,” the governors wrote.

The Massachusetts Secretary of Energy and Environmental Affairs, Ian A. Bowles, had a more direct assessment of the Senate bill. “This is a radical Soviet-style approach to transmission planning,” Bowles said. “If the market needs those resources, the market will create a way to get those resources.” 

What’s the benefit to East Coast residents of subsidizing Midwest power production? — the governors asked. Wouldn’t the money be better spent locally, creating transmission lines to bring wind energy from off the Atlantic coasts to the cities? And why should these choices be mandated from Washington, D.C.? — they asked. 

The Senate bill “threatens to undermine the significant renewable energy potential along the East Coast by subsidizing distant terrestrial wind resources…,” the governors wrote. And it would give the Federal Energy Regulatory Commission the power to shift the cost of transmission lines on to consumers and off of the owners of the new generation facilities who would benefit most from the construction of the new transmission lines.

The darker the blue on this map, the greater capacity the area has for producing wind-generated power.

This isn’t just an East Coast versus Midwest argument, however. It’s also a Midwest versus Midwest fight.

Ted Evanoff of the Indianapolis Star explained earlier this month: “The rural Midwest is booming with wind turbines these days — but guess who’s going to pay the $16 billion it will cost to move all that clean electricity to the cities that need it? Probably you.” 

Evanoff writes that paying for new transmission lines “raises an issue of fairness because households in, say, Indianapolis could subsidize electricity made by North Dakota wind turbines and used in cities such as Milwaukee, Chicago or Fort Wayne, experts say.” 

Equity in financing new power sources has always been an issue, says one utility manager. But wind brings the debate over cost allocation to the front as power is produced in rural places and then sent many miles to cities. 

The Senate would give the Federal Energy Regulatory Commission the power to settle these issues and to map the right-of-way for these new lines. FERC is leaning toward a system that would spread the cost of new transmission lines according to their capacity.

In a case involving the Southwest Power Pool, FERC has proposed allowing utilities to recover the cost of new, high capacity transmission lines from consumers across the entire eight-state region. Consumers would pay the entire cost of these large electricity “highways,” under the FERC plan, with ratepayers in Kansas picking up a share of the cost of large lines in Texas. 

An alternative would be to have the power producers themselves pick up as much as 20 percent of the cost of moving their power to market. But wind energy proponents say that plan would make wind energy uneconomical.

“It’s not a matter of we don’t want to pay this 20 percent. It’s that we can’t pay,” said Jamie Karnik, a spokesman for a wind energy trade group. “It’s too expensive.”

“If you make the developers pay for transmission, that cost is enough to make wind energy uneconomical,” said Doug Gotham, an electricity specialist at Purdue University, explaining the conflict inherent in wind energy. “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?”

The issue has reached the White House, especially since the 11 Eastern governors openly opposed the transmission line scheme in the Senate bill. “I sympathize with their concerns and we’re going to have to work this out in a way that works for all the stakeholders,” said Jared Bernstein, an economic adviser to Vice President Joe Biden. But “there are always going to be growing pains when talking about a new large economic endeavor that crosses all kinds of sectors and borders. The efficient transmission of clean energy is a critical part of the backbone that the president envisions here.”

 

 

x

News Briefs