This Article addresses the legal, technical, and economic challenges of integrating high levels of renewable power generation into electrical grid system operation. Part II shows that the primary integration challenge is reducing the total costs of integration and allocating the costs of integration in a hybrid regulatory structure, which presents different institutional impediments than traditional cost-of-service ratemaking or rate-of-return regulation. We demonstrate that the primary impediment to improved integration is a failure to make the critical policy choice about how such costs will be allocated. Part III describes and analyzes the BPA-wind dispute in order to evaluate the adequacy of the existing legal regime to address this policy issue. Part IV describes and analyzes a suite of strategies proposed by the Western Governors’ Association (WGA) to reduce the cost of integrating renewable generation. Finally, Part V demonstrates that FERC Order No. 764 is only a first step toward improved integration because it does not address the fundamental policy decision regarding the distribution of integration costs and methods for cost recovery. We then offer recommendations for action by FERC, state regulators, state legislatures, and Congress to promote improved integration of renewable generation. Throughout the Article, we distinguish between four distinct (but interrelated) integration problems: (1) the technical challenges of integrating variability; (2) the economic costs of integrating variability; (3) the policy choice regarding distribution of integration costs; and (4) the legal framework for implementing that policy. Proper analysis of the technical, economic, and legal issues depends on the critical policy choice regarding cost allocation. Resolution of the cost allocation policy decision is therefore essential to development of a new institutional structure that will promote high levels of renewable generation
