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resources
Wind Energy FAQ
Interconnection
Requirements: Non-Technical
What legal or contractual requirements do I have to meet to interconnect
my wind turbine?
Most utilities and other electricity providers require you to enter into a
formal agreement with them before you interconnect your wind turbine with
the utility grid. In states that have retail competition for electricity
service (e.g. your utility operates the local wires, but you have a choice
of electricity provider) you may have to sign a separate agreement with
each company.
Who
writes these agreements?
Usually these agreements are written by the utility or the electricity provider. In the case of private (investor-owned) utilities, the terms and conditions in these agreements must be reviewed and approved by state regulatory authorities.
What is usually in these agreements?
These contractual agreements usually address two sets of issues: the terms and conditions for installing and operating your wind turbine; and the terms and conditions for the exchange or purchase of power from your facility.
The first category covers issues such as the physical description of your wind turbine (including the peak generating capacity and the protective equipment used), permitting and design requirements, technical requirements for interconnection,* maintenance requirements, disconnection of the wind turbine under certain conditions, and legal liability issues such as indemnification and insurance.
The second category addresses issues such as the price the utility or electricity provider pays for any excess electricity that you deliver back to the grid, the premium paid (if any) because you are producing ‘green’ (environmentally preferred) electricity, metering and billing requirements, and any metering, standby, or backup charges you might be required to pay. In many states, small-scale wind turbines are eligible for ‘net metering,’ which allows customers to use any excess electricity to offset their own electricity use during each billing period or over an annual period.
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These agreements sound complicated. Will I need the services of a lawyer
or engineer?
Some states have required utilities to develop simplified, streamlined agreements for interconnecting small-scale renewable generating facilities, including wind turbines. These simplified agreements are often no more than a few pages long, and in some cases even shorter. These shorter agreements are designed to be relatively consumer-friendly and avoid complicated legal or technical jargon.
Unfortunately, many utilities still treat all non-utility owned generating facilities the same – whether a 10 kW home-scale wind turbine or a 200 MW industrial cogeneration facility. In these cases, the agreements are usually long and complex, with elaborate terms and conditions that are unnecessary or inappropriate for home-, farm- or ranch-scale facilities. In such cases, you should feel free to discuss the provisions of the agreement with the utility, your wind turbine vendor and/or installer, and state utility regulatory authorities. In any event, you should clearly understand your rights and obligations under these agreements before you sign them. Small wind turbine manufacturers have experience in dealing with the contractual issues of interconnection and will often be your best source of guidance on the reasonableness of utility’s standard contract. Unreasonable requirements can often be overcome by challenging them before the regulatory authorities.
What issues should I look out for?
The three most common problems in these contractual agreements are high liability insurance coverage requirements, one-sided indemnity provisions, and high customer charges.
- Insurance: Some utilities require small wind turbine owners to maintain liability insurance in amounts of $1 million or more. Utilities argue these requirements are necessary to protect them from liability for facilities they do not own and have no control over. Others argue that the insurance requirements are excessive and unduly burdensome, and that the cost of maintaining these policies can make wind energy uneconomic. In the 21 years since utilities have been required to allow small wind systems to interconnect with the grid there has never been a liability claim, let alone a monetary award, relating to electrical safety.
In six states (California, Maryland, Nevada, Oklahoma, Oregon, and Washington) state laws or regulatory authorities prohibit utilities from imposing any insurance requirements on small wind systems that qualify for ‘net metering.’ In at least three other states (Idaho, New York, Virginia) regulatory authorities have allowed utilities to impose insurance requirements, but have reduced the required coverage amounts to levels consistent with conventional residential or commercial insurance policies (e.g. $100,000 to $300,000). If your utility requires insurance amounts that seem excessive, you may want to protest these requirements to regulatory authorities (in the case of private investor-owned utilities) or to the utility’s governing board (in the case of publicly-owned utilities).
- Indemnification: An indemnity is an agreement between two parties where one agrees to secure the other against loss or damage arising from some act or some assumed responsibility. In the context of customer-owned generating facilities, utilities often want customers to indemnify them for any potential liability arising from the operation of the customer’s generating facility. Although the basic principle is sound – utilities should not be held responsible for property damage or personal injury attributable to someone else – indemnity provisions should not favor the utility but should be fair to both parties. Look for language that says, "each party shall indemnify the other . . ." rather than "the customer shall indemnify the utility . . ."
- Customer Charges: Customer charges can take a variety of forms, including interconnection charges, metering charges, and standby charges, among others. You should not hesitate to question any charges that seem inappropriate to you. Federal law (PURPA Section 210) prohibits utilities from assessing discriminatory charges to customers who have their own generation facilities.
AWEA is particularly troubled by the threatened imposition of standby charges on small wind systems by a few utilities. Standby charges may be appropriate for customers who effectively disconnect from the utility but need back-up emergency power in the event that their natural gas or diesel generator breaks down. However, customers with wind system do not disconnect from the grid and they engage in a two-way exchange of power with the utility. Customers who encounter these charges should consider challenging them in an effort to get them reduced or eliminated.
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