Whatever U.S. the energy future is going to be, one thing that seems certain is the nation will need a lot more transmission in the near future.
Whether the new additions across the country are natural gas plants, renewables, or a combination of the two, the generation fleet is turning over.
Almost 14 GW of coal generation capacity was retired in 2015, according to the Energy Information Administration (EIA). Even if the Clean Power Plan is struck down, the EIA projects the retirement of 40 GW of coal generation through 2040.
If the federal carbon regulations survive their court challenges, 152 GW of fossil fuel generation will have to be replaced by 2040, according to the agency's most conservative estimates. Utility-scale renewables growth would account for 283 GW of new capacity.
With the time needed to build new transmission averaging five to ten years, delivering these new generation resources will not be easy. But one project in the Midwest involving nearly a dozen utilities could provide a blueprint for future projects necessary to support the nation's transition to a cleaner power mix.
“We are at a point right now where large scale transmission projects are absolutely critical for the development of new energy infrastructure, but they are incredibly hard to do,” said Elizabeth Wilson, professor at the University of Minnesota Humphrey School of Public Affairs Professor and co-author of the paper “Planning and CapX2020; Building trust to build regional transmission systems.”
The paper details the formulation and growth of CapX2020, a collaboration of 11 Midwestern utilities that has brought a $2.1 billion, 800-mile high-voltage transmission system to the verge of completion across Minnesota, Wisconsin and the Dakotas.
The last sections are expected to go online in 2017, on budget and three years ahead of schedule, said Marta Monti, a research associate at the Humphrey School and paper co-author.
“Throughout the 12 years these companies have been working together, things were done that can be used by other developers,” she said. “From the way they formed their project management agreements between 2004 and 2007, this can serve as a model for other transmission-building groups in the region.”
“There are best practices that became clear through the work that CapX2020 did,” agreed Beth Soholt, executive director of Wind on the Wires (WOTW), who participated on behalf of the wind energy organization from the project's inception.
“The other important thing, and the paper shows it, is that a lot of the promised benefits have accrued to the states where they built, in infrastructure, in jobs, and in the tax base,” Soholt said.
Origins of the project
CapX2020 (Capacity Expansion Needed by 2020) was formed in 2004 in response to 1999’s Federal Energy Regulatory Commission (FERC) Order 2000. The Order supported the expansion of regional transmission and electricity market systems “to ensure that electricity consumers pay the lowest price possible for reliable service.”
CapX2020 “was the first instance of a large group of utilities working collaboratively to address the transmission needs of an entire region,” the paper reports.
The Upper Midwest’s grid was already “struggling with reliability issues.” It was also facing new stresses in the form of new state renewables mandates requiring the addition of the region’s rich but variable wind resource.
While the FERC order enabled the project, CapX2020 itself was the "brainchild" of Will Kaul, a vice president and transmission officer at Great River Energy, and Teresa Mogensen, a vice president at Xcel, the paper reports.
Kaul reached out to several utilities in the summer of 2004, including Minnesota Power, Missouri River energy, Otter Tail Power and Xcel, the paper reports. Together, the utility officials formed "the Vision Team" for the CapX project.
First, they tackled the need for regulatory reforms that make it economic for the IOUs to participate. They also began work on ownership, cost allocation, and permitting process agreements.
These moves were “bold” at the time because “no coordinated project of this scale had ever been attempted in the country and there was no certainty that this group could succeed,” the paper reports.
“Although the existing system was adequate to meet the reliability needs of customers in 2005, the study region would experience numerous transmission overloads, outages, and voltage problems if no additions were made by 2020,” the paper reports of the study findings.
The 'no-regrets' path
After the technical studies, the Vision Team identified 800 miles of new high voltage transmission lines, spread across five projects in four states, which would meet current and future regional needs.
“The question on transmission is always about what to build,” Soholt said. “For CapX2020, they coalesced around the no-regrets path to building infrastructure.”
After evaluating alternative scenarios, the group chose lines that met utilities’ and regulators’ three key justifications for new infrastructure, Soholt recalled. Those were keeping the lights on, serving projected 15-year load growth, and delivering new renewables to meet state mandates.
The utilities then went to the Minnesota Public Utilities Commission and state policymakers to introduce their vision and report their findings and their initial stakeholder support.
“Because of those meetings, the PUC was engaged from the very beginning in the planning process,” the paper reports.
To enable the CapX2020 to advance, the team next “changed laws and regulations in Minnesota,” the paper reports.
“The 2005 Minnesota Omnibus Energy Bill changed investment in high-voltage transmission from least favored to most favored investment in the eyes of IOUs,” Marti said.
The bill did this by allowing IOUs to recover costs as construction progressed through a PUC-approved rider, instead of when construction was completed. The change was crucial because the smaller utilities did not have the resources to back the project.
“That municipal utilities and cooperatives were able to see the benefit of passing investment recovery legislation to the whole group even though it did not directly impact them was a testament to their ability to support each other,” the paper notes.
The bill included other provisions that shifted some jurisdiction to FERC and some to the PUC. Both changes made the project more attractive to investors and builders.
The coalition had the resources to finance and manage large-scale projects and the political influence to ally with a broad range of stakeholders to change laws and regulations, Kaul said. The result was “a political foundation for regulatory reforms necessary for the success.”
The utilities engaged “to an unparalleled degree” with stakeholders, including landowners, local administrators, and state regulators and policymakers, the paper reports.
Their commitment to “a new era of transparency and civic engagement” was largely because of the ferocious controversy over the last round of transmission building in the region in the 1970s. Because developers failed to make benefits to local stakeholders clear, violent protests erupted.
The story was detailed in Powerline: The First Battle of America’s Energy War by Minnesota Sen. Paul Wellstone, who died in a plane crash while in office in 2002. Between 1976 and 1978, 120 people were arrested in connection with the protests, four people were convicted of criminal counts, and one person was convicted of felony charges, according to the book.
Kaul started his utility career in 1978 and remembered stakeholders in that struggle for new transmission feeling so “wronged” that they were “risking their lives” in protest efforts.
“My promise to myself,” Kaul said, “was never on my watch will we have something like this, and I think all of the other utilities felt the same way.”
During their three years pursuing permits, the CapX2020 builders’ unprecedented outreach softened resistance. They made sure that commissions, consumers, and landowners understood the project offered increased electricity delivery reliability and important local economic development opportunities, Wilson said.
In response to opposition groups that argued the new lines would end up carrying coal-generated electricity from the Dakotas to meet Eastern demand, CapX2020 set out to “make the case,” the paper reports.
There were thousands of direct-mailers to landowners, presentations at public meetings and countless hours of media ads and coverage, according to the paper. Throughout it all, the stakeholders presented a united message that the lines would increase reliability, allow load growth, and deliver renewables.
When utilities file with regulators for permits to build transmission, “they need to load the record with why the transmission line is needed,” Soholt said. “Utilities have to convince regulators of the need to meet reliability, load, and policy despite local objections.”
The success of this strategy with state and local regulators left CapX2020 leaders convinced “engaging with landowners early and often” is the way to build “any infrastructure that faces the public,” Monti said.
A 'successful example' for other regions
The “heroic efforts” of the CapX2020 group “set a precedent for the way coordinated development, permitting, and construction of new high-voltage transmission lines should be done,” the paper reports. “It will serve as a successful example that other regional groups can follow.”
Soholt agreed. “Utilities need to engage with communities and do the kind of outreach that CX2020 did.”
Regional systems managed by RTOs and ISOs have, to some extent, eliminated the need for the CapX2020 kind of ad hoc collaboration, she acknowledged.
“Generally, utilities have become comfortable with the larger regional systems and coordinating their local needs through them," she said. "But local initiatives can still be met by local utilities.”
Such coordination could also become necessary if states choose the regional compliance strategies for the Clean Power Plan that studies have shown are more cost effective, Soholt said.
The CapX2020 group’s efforts can also be an example for non-utility merchant transmission builders “if they realize they need to do the groundwork and build the foundation that will make the project a success,” Monti said.
The important discussion of how to integrate power systems inter-regionally is coming soon, Monti believes. But whether the CapX2020 example can be used by merchant builders of long-distance lines like Clean Line Energy Partners, Tres Amigas, and TransWest Express is uncertain “because transmission is a very local issue,” she added.
“Nobody wants to have somebody in Washington, D.C., telling somebody in the Midwest what plot of land to put a line on. That is the best way there is to create opposition,” Monti said.
CapX2020 showed how very different kinds of utilities can collaborate, she said. Transmission development across the county “will probably look different everywhere, depending on the generation mixes and utility types in each region."
Giving merchant developers access to regional systems’ transmission building can add as much as a year to the already very long process because projects have to be opened to competitive bidding, Soholt said. “And we need transmission sooner not later.”
But marketplace participation is also important and "we probably can’t have too much infrastructure development right now,” she said. “It may not all get built but we need more, not less.”
The merchant developers have significant challenges, Soholt pointed out. First, they are taking on inter-regional transmission challenges institutional developers have shied away from. Second, their long distance lines' local benefits can be more difficult to quantify and demonstrate.
The CapX2020 group showed local support is vital. Developers are “more aware than ever of how important it is to get out and talk to the communities early and often,” she said. The unique challenge today is that local advocates, especially energy advocates, know there are options to new transmission like renewables and distributed energy resources.
“If utilities look at the full spectrum of options and at ways to mitigate the need for new transmission, they will be able to make an airtight case to stakeholders and regulators when transmission really is the most efficient and cost-effective solution,” Soholt said.