Step 3: Candidate Zones Selection

REZ step 3, no title


Certain areas with excellent renewable energy resources may not be attractive to private developers for reasons the previous assessment step (step 2) fails to capture. In the candidate zone selection step, the Zone WG invites developers to demonstrate their interest in the screened areas to ensure that the chosen REZs are commercially attractive for development. This step provides a level of certainty that development will occur in the chosen REZs and that any investment in transmission lines would be used and these costs could be recovered.

Gauge commercial interest

To gauge the likelihood of development occurring in the previously identified study areas, the Zone WG and the regulatory authority request indications of commercial interest from private renewable energy project developers. The regulatory authorities determine the threshold that constitutes enough commercial interest or financial commitment by developers for a zone to be considered a candidate zone.

Private developers can demonstrate financial commitment or commercial interest in different ways. The acceptable forms of commitment can be specified during step 1–Program Design and Vision Statement. Examples of commercial interest and financial commitment may include:

  • Pending or signed interconnection agreements
  • Leasing agreements
  • Letters of credit
  • Interconnection studies by a transmission owner or grid operator (see box below)
  • Any other indication deemed appropriate by the regulatory authority.

Examples of Commercial Interest and Financial Commitment

Interconnection studies require financial commitments from developers in the form of fees and deposits. Using a 10 MW generator as an example, a developer in ERCOT could pay $15 per MW for a full interconnection study and a $5,000 security screening study deposit (ERCOT 2017).

For a similar 10 MW generator, the Midcontinent Independent System Operator could pay a $5,000 application fee as well as a total of $224,000 (deposits and fees) for a definitive planning study (MISO 2017).

In the California Independent System Operator area, a similar generator could incur an interconnection study deposit of $60,000 as well as a generator site exclusivity deposit of an additional $100,000 (CAISO 2017).

Produce candidate zones map

Once the period to provide information has ended, the Zone WG and the regulatory authority evaluate the submitted evidence and decide which study areas have generated sufficient developer interest. This finding leads to a selection of candidate zones, which have high-quality resources and high probabilities of being developed.

The Zone WG and the regulatory authority may at this point decide to modify candidate zones, combine some adjacent zones into a single zone, or eliminate a candidate zone for reasons that may only become obvious at this stage of the process as new information is available, such as supply curves and developer interest.

The figure below (left) shows three types of metrics used in the Texas CREZ initiative to compare levels of developer commitment for study areas: the amount of existing development in the study area; signed interconnection agreements (IAs) with ERCOT; and pending IAs for projects under study by ERCOT.

The figure below (right) also presents an example candidate zone map from the Texas CREZ process, in which 10 candidate zones were selected out of 25 study areas based on demonstrable commercial interest of developers. Study areas that did not receive enough interest, such as zones 8, 13, and 20, were not included in the final selection of candidate zones.

two maps of texas crez projects for step 3 guidebook

Figure. Candidate zone selection example from the Texas CREZ. Left – Existing wind development, signed IAs, and pending IAs in each study area. Right – Candidate zone map: 10 candidate wind zones selected from 25 initially identified study areas, outlined in red (ERCOT 2006)

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