Across the nation, the ongoing shift in utility generation to natural gas and renewables is only possible because of new transmission.
As power providers shape lower-carbon portfolios to meet federal emissions standards and achieve state renewables mandates, new lines managed by the nation’s grid operators are delivering power from those new resources.
The wind industry recently recognized three projects managed by the Electric Reliability Council of Texas (ERCOT), the Southwest Power Pool (SPP), and the Midcontinent Independent System Operator (MISO) for their role in facilitating the transition to a lower-carbon grid.
The $17 billion spent on ERCOT’s Competitive Renewable Energy Zones (CREZ) project, SPP’s Priority and Balanced Portfolio projects, and MISO’s Multi Value Projects produced benefits of 2.6 to 3.9 times their costs and value “beyond just the megawatts installed,” said Clean Line Energy Partners President Michael Skelly in presenting three American Wind Energy Association (AWEA) Excellence in Transmission Advocacy awards.
The new transmission supported an expansion of generation that “has enabled higher economies of scale and more improvements within the industry, as well as new wealth,” Skelly said. “Many companies, allies, and state officials can take credit for moving from concepts to policies to steel and wire but three individuals were in the lead.”
ERCOT: “It is almost a miracle it actually happened”
One of the three transmission awards went to Mike Sloan, president of renewable energy developer Virtus Energy and former executive director of the Wind Coalition.
Sloan received the AWEA honor for nearly 20 years of work conceptualizing and advocating for the CREZ transmission project. The $6.9 billion, 3,600 mile system is now carrying 18.5 GW of West Texas and Panhandle wind to population centers like Houston, Dallas-Fort Worth, Austin, and San Antonio.
When Sloan and his renewables advocate allies began thinking about growing renewables in Texas in the 1990s, they got the “wild idea” they might be able to eventually build 1,000 MW of new wind capacity, he recalled. Since then, the state has amassed over 17,700 MW of cumulative wind capacity, with 3,600 MW installed in 2015 alone.
“It had always been obvious Texas has great wind and solar resources but they are mostly abundant in the western part of the state and the population is mostly in the eastern part of the state," Sloan said. "So, the need was for transmission.”
“Mike knew, before anyone and from the first day the Texas RPS passed, that we would need a CREZ proceeding, or something like it,” said Pace Energy and Climate Center Executive Director Karl Rabago, who was a regulator on the Public Utilities Commission of Texas at that time. “He deserves great credit for his vision and for his work in making a successful CREZ a reality,”
In the 1990s, Sloan and his allies surprised state officials with studies showing the potential of Texas renewables. Their push for wind development captured the attention of the administrations of both Governors Ann Richards (D) and George W. Bush (R). When the natural gas market crashed late in the 1990s, the Bush administration’s interest peaked.
Sloan’s group worked with the Texas Renewable Energy Industries Association (TREIA) and got a state renewables mandate included in the long-sought electric restructuring bill in 1999. In next few years, they decided to focus on wind energy and formed the Wind Coalition. Sloan became the managing director in 2002.
The Wind Coalition, led by Sloan, brought together transmission planners and wind developers. Along with data, facts, and studies, they won over doubters with their commitment and enthusiasm, Sloan recalled.
With the support of wind and wires developers, they helped the Public Utilities Commission of Texas (PUCT) reform transmission financing and planning rules. When the commission did not follow through, Sloan and allies worked with the PUCT and the ERCOT staff to help advance understanding of the need and value of transmission.
Further work with state leaders, lawmakers, and commissioners, including support from Republican Governor Rick Perry, produced a recommendation for CREZ in the 2005 legislative session. Approval for the CREZ plan and an expanded state mandate guaranteeing its profitability followed.
“There were so many times this thing could have crashed and burned that it is almost a miracle it actually happened,” Sloan said.
During the 2008 recession, Perry’s commitment kept the project on track, he recalled. After construction got a green light, transmission builders shouldered the burden of dealing with clamor from landowners over rights-of-way.
“It took a long time getting things into place until it got to the commission,” Sloan said. “Then it took on a life of its own.”
SPP: “There were moments when those projects were not going to get approved”
In the SPP region, former Missouri Public Service Commission Chair Steve Gaw received the second AWEA award for his work on a cost allocation that paved the way for a group of transmission projects.
By making cost sharing more equitable between inter-regional transmission stakeholders, SPP’s Highway-Byway Cost Allocation (HBCA) methodology helped lead to a slate of transmission projects, including the system’s High Voltage backbone projects and Priority Projects developed through SPP's integrated transmission planning process.
With them, SPP has been able to enhance reliability, add over 10 GW of new wind capacity, and increase customer savings.
Investment between 2012 and 2014 is expected to return benefits exceeding $16.6 billion over the 40-year life of the system — a benefit-to cost ratio of 3.5, according to an SPP report.
Incremental solutions to inter-state coordination of transmission cost allocation, planning, and building had been emerging since FERC’s 2004 approval of SPP as a regional entity, Gaw recalled. “What broke the dam open and got transmission planning and building going at the level it was needed was the Highway-Byway Cost Allocation methodology.”
“The Balanced Portfolio and Priority Projects are the backbone of new transmission assets in the SPP footprint,” said SPP Regulatory Policy Vice President Paul Suskie. “As a leader in regional collaboration as a state commissioner and a representative of the wind coalition, Steve helped lay the foundation for SPP's Highway Byway Cost Allocation Methodology and his talents continue to help solve regional issues.”
Because other cost allocation methods had not driven growth, SPP created a task force with Arkansas and Texas commissioners and SPP stakeholders, Gaw recalled.
The task force found a solution in the “sweet spot” on a spectrum of alternatives, he said. The key was that the package of provisions “justified the cost allocation legally.”
For AC lines of 300 kV or more, the cost is regionalized equally, Gaw summarized. For lines of 100 kV to 300 kV, one-third of the cost is regionalized and two-thirds is paid by those within the zones in which the lines are built. For lines of less than 100 kV, the cost is paid by those within the zones.
The settlement also called for a new, more far-sighted integrated transmission planning process. It included planning consideration for transmission to meet state policies and policy requirements for renewable energy. One of the first uses of the HBCA methodolpgy was for the Priority Projects that improved the system’s ability to flow energy from the west to the east.
Because SPP gives substantial authority to the state commissions and puts high emphasis on member input, The HBCA proposal next faced internal and external vetting and encountered “significant opposition” from some stakeholders, Gaw said. “There were moments when it appeared those priority projects were not going to get approved.”
With support from the SPP Board, the governors of Kansas and Oklahoma, lawmakers in Kansas, and other stakeholders, it prevailed.
Important questions ahead will be about inter-regional planning and cost allocation but the HBCA package provides “a pretty good set of tools to deal with SPP’s load,” Gaw said. “It has done a tremendous amount about the underfunded infrastructure investment and it has clearly reaped significant benefits for consumers.”
MISO: “If they loved clean energy, they had to at least be OK with transmission”
By 2003, MISO was looking for new “no regrets” transmission that would improve reliability, serve load by making its energy market more efficient, and meet policy needs. Regional stakeholders, including advocacy groups like Wind on the Wires (WOW), quickly sought and obtained seats at the table, recalled WOW Executive Director Beth Soholt, the third AWEA transmission advocacy award winner.
“Planning and deploying the MVPs brought a wide range of interests together to develop regional transmission solutions that created billions in economic benefit for the region and the MISO stakeholder community played a pivotal role in creating the MVP portfolio,” said MISO Spokesperson Andy Schonert.
The process culminated in a set of 17 Multi Value Projects that will eventually allow MISO to add 25 GW of new wind capacity. When complete, they are expected to provide $13.1 billion to $49.6 billion in net benefits over the next 20 years to 40 years, which is 2.6 to 3.9 times more benefit than they will cost, according to the system operator’s most recent triennial report.
The lines are now expected to significantly outperform projections made during the 2003 to 2011 planning process. “Individual state level studies kept refining and defining what corridors and lines were appropriate,” Soholt recalled. “And we had other things happening at the state level. By 2008 six MISO states had renewable portfolio standards but by 2009, ten states had RPSs.”
As the needs of the system evolved and engineers honed their technical studies to identify the right set of candidate lines, cost allocation became contentious, Soholt said.
As part of a regional system, FERC had to approve the tariffs for building the transmission projects. But state regulators, protective of their jurisdiction, wanted to see ratepayer benefits that matched costs, Soholt recalled. While studies of the project's’ potential benefits went on, wind developers kept their plans on hold.
“Once construction begins, a wind farm can be built in 12 months to 18 months, but a 345 kV line takes a minimum of five to seven years,” Soholt said. “Lack of transmission capacity is our glass ceiling. We can’t provide megawatts of wind energy if there is no wire.”
To create its first MVP portfolio of “no regrets” lines, MISO identified load centers and matched them with wind resources mapped by the National Renewable Energy Laboratory, Soholt recalled.
MISO then settled on an allocation methodology that “peanut buttered,” or spread, costs among stakeholders. Soholt and her team did not ask for or get special consideration for wind. They simply argued that the benefits of transmission capacity should be quantified and equitably allocated.
“The fight for an equitable split of costs between wind generators and the rest of the load took 18 months to 24 months and was our biggest victory,” Soholt said.
One of the keys to building new transmission was winning the support of environmentalists who typically oppose new transmission as a facilitator of coal generation.
In meetings with them, Soholt and WOTW focused on two points, she said. First, they argued that new wind would not be possible without new transmission. Second, they argued that existing coal plants were not transmission constrained so new transmission would make no difference to coal’s marketplace availability or those plants’ life.
“It was hard but we convinced some NGOs that if they loved clean energy they had to at least be OK with transmission,” Soholt said.
The numbers vindicate their argument, Soholt added. “Studies over the past few years show there is a direct correlation between more megawatts of clean energy coming on the system and less megawatt-hours of coal-generation being dispatched.”
That is why she, Gaw, and others are already pressing for a new Clean Power Plan compliance planning process and another MVP portfolio.
The future of transmission
Sloan does not expect to see another CREZ-scale project in Texas. “You might have a scaled down version but there will not be a $7 billion project.”
Though the state’s natural gas industry has contracted due to slumping prices, the political climate is more hostile, he noted. And the price of electricity is so low that even wind developers lack the appetite for new transmission that would drive it lower.
“It is also naïve to think we can get a new $5 billion transmission line to support solar,” he added. “Solar will have to basically live off what was built for wind and incremental lines.”
Sloan has begun thinking about other infrastructure. “We need to move away from incentives and toward valuing certain services like the things that storage or solar-plus-storage or even wind plus storage can provide to the system. Those things need to be monetized.”
Both Gaw and Soholt are thinking about the seams between SPP and MISO. They collaborated on a proposal for a joint MISO-SPP planning study that did not get results with which either advocate was satisfied.
SPP’s Suskie and MISO’s Schonert both said planners in their systems are also working on seams issues.
“There is significant potential for low cost wind and solar energy from SPP going to the east and for low cost wind energy from MISO north going to MISO south,” Gaw said. “But there are no tools for building transmission across the seams and lowering the hurdles for marketing power back and forth.”
Seeing the generation mix changing, Gaw wants SPP and MISO planners to begin addressing a lower carbon future. There is talk of such a study but early indications are that it will be very limited, he said.
“Planning takes a year to eighteen months,” he added. “Looking at transmission needs for a Clean Power Plan or a lower carbon future and doing that planning as soon as possible would be the right thing to do.”
Soholt agreed. The drivers for MVP 2.0 will be different than those for MVP 1.0 and they will include the seams issues and CPP planning, she said.
“Some of the ingredients in the recipe that got the first round of projects approved will be used in the second round,” she added. “But this is a different time and place in the energy world.”
There are different state regulators, different governors, new attitudes about cost allocation, new utility understanding of renewables mandates, and incumbent generators are under greater pressure, Soholt said. “There will be a new combination of ingredients.”
A major new factor is the role of merchant transmission developers, she said. FERC Order 1000 allows incumbent utilities the right of first refusal but some new lines will be put out for competitive bidding, she said. That could add a year to the approval process, especially because some utilities have launched transmission building subsidiaries to compete in that market.
“We don’t have enough experience with competitive bidding to know how it will affect the rest of the process,” Soholt acknowledged. “In theory, a transmission building specialist should be able to move through the process as effectively or more effectively as a utility but only time will tell if competition will make the result better.”
Soholt sees one certainty. “Everybody has acknowledged there will be another round of transmission development.”
Gaw concurred. “Veterans in the transmission industry often say they don’t remember ever building a transmission line that didn’t get used,” he noted. “The need for transmission for wind has always been underestimated.”