Gen Interconnection: Comparability or Common Sense?

 

Why power plants should pay for grid upgrades.

Do we make all generators equal-using affirmative action to give rights to merchants that are "comparable" to utility-owned plants?

Or, do we let the locational price signals shine through-trusting all plant developers, whether regulated or not, to act in self-interest?

These questions capture the choice now pending before the Federal Energy Regulatory Commission (FERC) in its rulemaking case on generation interconnection,¹ as FERC ponders who should pay for expanding the transmission grid to accommodate new power plant projects.

The Problem

Let's look at a simple example that compares variable operating costs between two power plants located in different states.

One developer builds a gas-fired, combined-cycle power plant in Southern California. A second developer builds a plant in Arizona. In operational terms, the two plants are similar. Both projects have similar characteristics: minimum up/down time, forced outage rates, maintenance rate, capacity, and heat rate. They both have identical fuel prices, as they are both tied to the same gas transmission pipeline.

Nevertheless, the two plants differ significantly in actual performance, if we compare the two on the basis of unit dispatch and variable costs (ignore capital cost recovery and emission constraints).²