On July 19, the D.C. Circuit Court of Appeals rejected a wind farm’s challenge of the Federal Energy Regulatory Commission’s (FERC’s) decision to allow the Southwest Power Pool (SPP) to charge more than $100 million for upgrades needed to connect the facility to the grid operator’s system. In a unanimous decision, the court deemed FERC’s choice to allocate these mitigation costs to Tenaska Clear Creek Wind as fair, given that the wind farm introduced operational issues for SPP that would not have occurred otherwise. The core idea is that if a facility generates electricity far from its consumption area, the transmission system isn’t responsible for the expense of transporting that electricity to where it is needed.
Clear Creek’s appeal stemmed from a September 2022 FERC order which confirmed SPP’s allocation of approximately $66 million in network upgrade costs following a reassessment of a Missouri wind project. The commission denied in part a rehearing request in December 2022, although it directed SPP to restudy the project with different planning models, where the results obtained were essentially the same. The network upgrade costs eventually were set at $102 million.
The appeals court was not swayed by Clear Creek’s arguments. The wind farm claimed that FERC’s order violated cost-causation principles and that SPP’s cost allocation was inconsistent with the commission’s “but for” policy. Additionally, Clear Creek argued that FERC overlooked SPP’s interconnection study and the use of firm service in cases where the facility wasn’t using or seeking deliverability service.
The court found that FERC’s decision was well-supported by precedent and adhered to the cost-causation principle. It agreed that the wind farm’s operational impact on SPP justified the allocation of mitigation costs to Clear Creek. The court also noted that there was substantial evidence supporting FERC’s determination that the upgrades were necessary for interconnection rather than regional transmission planning.
Regarding Clear Creek’s objections to SPP’s use of firm service or network resource interconnection service (NRIS), the court concluded that FERC had reasonably justified its approach. FERC’s decision was based on established practices and demonstrated that Clear Creek’s NRIS request aligned with SPP’s justification for its interconnection study.
Clear Creek is a 242-megawatt wind farm connected to Associated Electric Cooperative Inc.’s transmission system. The facility, which began operations in May 2020, is located north of Maryville, Missouri, and spans 31,000 acres with 111 Vestas turbines. It sells its wind power under a 25-year agreement with Associated Electric Cooperative Inc., a cooperative serving several regional cooperatives. Construction started in spring 2019 with an investment exceeding $300 million.
The Southwest Power Pool (SPP) is a regional transmission organization that manages transmission system reliability and balances electric supply and demand across 15 states, including Arkansas, Colorado, Iowa, Kansas, Louisiana, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, Texas, and Wyoming.
U.S. Wind Power Trends
In 2023, wind power generated 425 billion kilowatt-hours of electricity, a decrease from the 434 billion kilowatt-hours produced in 2022, marking the first annual drop since 1998. This decline occurred despite the addition of new wind facilities; utilities brought 7 gigawatts of wind power online last year. Over the past five years, 53.3 gigawatts of wind capacity were added, raising the total to 147.6 gigawatts by the end of 2023, reflecting an average annual growth of about 9 percent. Despite substantial subsidies leading to increased capacity, actual wind power output has decreased as prime wind sites have been developed.
Wind power requires extensive high-voltage transmission lines due to its location on large land areas with the most wind resources, often distant from major demand centers. This contrasts with traditional coal and natural gas generators, which are typically located near demand centers and require less high-voltage infrastructure. In 2023, only 55 miles of high-voltage transmission lines were added, a significant drop from the average 1,700 miles per year from 2010 to 2014. Despite this slowdown in construction, annual transmission spending has risen to over $25 billion in 2023, up from $20 billion in 2013.
Conclusion
The D.C. Court of Appeals upheld FERC’s decision, supporting SPP’s $100 million charge for upgrades needed to connect the wind farm, as these costs were directly related to the operational issues introduced by the facility. The need for new transmission investments largely stems from the Biden-Harris administration’s emphasis on wind and solar power as preferred technologies to replace coal and natural gas. Consequently, taxpayers and consumers are bearing the cost of connecting these renewable energy sources, which are often situated far from major demand areas to access optimal wind and solar resources.
