Order 764, issued by the Federal Energy Regulatory Commission on June 21, 2012, requires transmission service providers to permit renewable energy generators and other transmission service customers to schedule transmission service in intervals of 15 minutes or less, rather than the current hourly intervals that were originally designed for fossil-fuel and nuclear generation. In the near term, this should reduce the exposure of renewable energy generators to imbalance charges they would otherwise be unable to avoid due to the intermittency of their wind, solar, or other renewable generation resources, and thus enhance the cost-certainty of renewable generation operations. In the mid- to long-term, intra-hour scheduling may provide even greater benefits to renewable energy growth by providing the framework for renewable energy generators to also be dispatched in intra-hour intervals.

The Scope of Order 764

When Order 764 takes effect next summer (12 months after its publication in the Federal Register, assuming it does not become subject to rehearing or federal court review), it will require transmission service providers to offer all transmission service customers, including most significantly wind, solar, and other renewable energy generators, the option to schedule transmission service in 15-minute intervals. This will be the case unless a provider can demonstrate that it has implemented an alternative to such intra-hour scheduling that provides equivalent or greater benefits in reducing (i) the exposure of renewable energy generators to imbalance charges and (ii) reliance on comparatively high-cost reserves of dispatchable generation capacity to correct imbalances of generation output and load attributable to the variability of renewable energy generation.

The rule will also require new renewable generators to provide meteorological and forced outage data for their facilities to their transmission service providers, to help the transmission providers manage the flow of renewable energy onto their systems with improved power production forecasting.

FERC declined, however, to adopt a proposed requirement that transmission providers provide renewable energy generators with generation-balancing services, which use capacity reserves to offset the frequent changes in output of renewable generation. Likewise, while the new rule requires intra-hour scheduling, it does not require transmission service providers also to dispatch renewable energy generators in the same intra-hourly intervals.

Did FERC Go Far Enough?

While the proof will be in the implementation of the new rule, some initial reactions from renewable energy proponents reflect disappointment that FERC simply did not go far enough to level the playing field for renewable energy generators. Indeed, FERC recognized in Order 764 that a commenter on the proposed version of the rule had contended that implementing intra-hour scheduling absent an established market for dispatchable resources to manage variability could potentially do more harm than good to grid integration of renewable energy generation. The same commenter had also recommended that FERC allow public utility transmission providers to provide intra-hour schedules at intervals of 30 minutes as an interim step to participation in an energy imbalance market.

FERC expressly acknowledged in Order 764 that additional market reforms—such as intra-hour imbalance settlement, an intra-hour transmission product, increasing frequency of resource commitment through sub-hourly dispatch, and formation of intra-hour imbalance markets—could yield additional benefits for both public utility transmission providers and their customers. FERC concluded, however, that those additional reforms could have significant costs associated with them, and that a more measured approach to promoting grid integration, which allows greater flexibility to transmission service providers to achieve the desired benefits, is more appropriate at this time. FERC expects that intra-hour scheduling will, in time, facilitate the creation by market participants of intra-hour balancing products to manage the variability of renewable energy generation and the development of intra-hour trading in such products.

FERC also expressed its expectation that, as the liquidity of intra-hour energy products stabilizes, market participants may begin to commit or otherwise acquire fewer reserves in advance, and instead increasingly plan to purchase additional reserves on an as-needed basis from third parties. This suggests that FERC believes that market-driven intra-hour trading will ultimately provide a more cost-effective means for integrating the variability of renewable generation into the grid than would FERC-imposed market reforms. FERC noted that requiring public utility transmission providers to offer intra-hour scheduling is a necessary predicate to facilitate market opportunities for such intra-hour trading.