Transmission developers power forward in West as move to single market inches along
Planners and developers across the West are going as far and fast as they can toward regionalization.
Transmission planning and development all over the West is fast and furious — by transmission development standards. And yet, at the center of the activity, there is a frustrated waiting for efforts to organize the region into a single market.
The Western Interconnection covers 14 states and extends from Canada to Mexico and from the Pacific Coast to the Great Plains. Many utilities and power providers argue its 136,000 miles of synchronized transmission and 38 balancing authorities (BAs) could serve its more than 80 million electricity customers through a single organized electricity market.
The system’s 265,000 MW of installed generation capacity accounts for 20% of U.S.-Canada nameplate power, 70% of the region’s solar and 40% of its hydro. Yet the system has only one U.S. wholesale electricity market, the state-wide California Independent System Operator (CAISO).
CAISO’s proposal to expand across the West is being stymied by California political resistance. The system operator's plan would unify Western BAs by opening its marketplace to them. Some stakeholders say that would introduce complications if it opened the state's system to federal regulation, especially with the current administration. However, a new study argues that federal oversight would not compromise California's nation-leading push for renewables.
EIM moving forward
In the midst of the push for regionalization, CAISO's Energy Imbalance Market (EIM) is gaining momentum faster than advocates expected. EIMs allow BAs to exchange energy to meet real time supply-demand mismatches rather than starting up peaker plants. From two participants in 2014, it has grown to four BAs, with seven more scheduled to join in the next three years.
Transmission developers in the region are moving ahead. And the advantages of regional planning and competitive markets are changing once fiercely independent Western load serving entities' (LSEs) attitudes.
“There is a lot of creative thinking and a lot of movement right now because of where this all could go,” Julia Prochnik, director of Western renewable grid planning for the Natural Resources Defense Council (NRDC), told Utility Dive, referring to the emergence of a regionalized market.
But the political pushback against the CAISO expansion proposal has left some BAs and transmission planners waiting for a full-fledged regional wholesale power market before moving further, she said.
Other utilities and transmission developers in the West, however, are hedging their bets with projects and initiatives that could be beneficial with or without regionalization of the Western power market.
They include lines that allow the exchange of low-cost Wyoming and New Mexico wind and low-cost California, Arizona and Nevada solar. TransCanyon Energy transmission planner Bob Smith said such projects “may be cost-effective without a regional system. But, he added, "regionalization would make benefits bigger because the market would allow us to optimize the resources’ use.”
Modernized system operations, the EIM, improved exchange of inter-regional planning data, and the allying of individual utilities are already delivering benefits to customers. It has “opened the eyes of Western balancing authorities who, a decade ago, wanted to be independent," NRDC’s Prochnik said.
If CAISO or another system operator is finally able to begin building the legislative and policy structure for the long-awaited Western region reliability authority and power market, it will find scaffolding in place.
Transmission developers are pushing ahead with new lines that will support interconnection of the West's BAs.
The $3 billion, 730-mile, 600 kV high voltage direct current (HVDC) TransWest Express Transmission Project would carry 3,000 MW of Wyoming wind to a substation near Las Vegas. From there, local lines could disperse it to markets like Los Angeles, San Diego and Phoenix.
It could also allow distribution of the rich Southwestern solar resource, said Transwest Express spokesperson Kara Choquette. “It can transmit electric power in either direction, depending on system needs.”
In planning and development since 2005, TransWest won federal approval in 2016 for “about two-thirds of the needed rights-of-way,” Choquette added. The developer is now working on acquiring state and private land and permitting for the balance of the route.
“We hope the two year to three year construction phase can begin by the end of 2018,” Choquette said.
TransCanyon’s $667 million, 213-mile, high voltage alternating current (HVAC) Cross-Tie Transmission line is also moving ahead. It would make the same exchange of wind and solar possible by connecting a PacifiCorp Utah substation with an NV Energy Nevada substation. It is expected to be ready in late 2024.
TransCanyon’s Smith argued the Cross-Tie’s fewer transmission miles and its route along existing infrastructure gives it “a permitting and cost advantage.”
Choquette argued TransWest is more cost-effective because it is independent of other projects. “PA Consulting looked at the various transmission solutions for California to access Wyoming wind and found that the direct current project is the most economic,” she said.
LS Power’s 275-mile HVAC Southwest Intertie Project North (SWIP-No) is a third option. It would run from a PacificCorp substation in Idaho to the same NV Energy Nevada substation as Cross-Tie.
To add detail to its regionalization proposal, CAISO is studying the comparative benefits of Transwest, SWIP-No and Cross-Tie.
Another pair of lines is being developed to deliver high quality New Mexico wind to Southwestern population centers. The 515 -mile, $850 million HVAC SunZia line moved to pre-construction in September.
TransCanyon’s Smith acknowledged regional planners have not found any of the lines to be cost-effective under current market conditions. “The lines may not be cost-effective until a regional system makes the benefits throughout the entire region greater than the development costs,” he said. “Or they could become economic if a Wyoming wind developer contracts with a Southwestern off-taker.”
Even the Bonneville Power Administration (BPA) decision not to go forward with its I5 Corridor line produced important changes, said Cameron Yourkowski, senior policy manager at clean energy advocacy group Renewable Northwest.
Instead of a north-south line to connect Washington and Oregon, BPA will “modernize their transmission operations as part of their Transmission of Tomorrow initiative,” Yourkowski said.
“A more flow-based, efficient and cost-effective management of its grid will allow growth without building infrastructure,” Yourkowski added. “It is a step toward the transmission tools and efficiencies that underpin an organized market, but it is not specifically related to regionalization.”
The landmark Federal Energy Regulatory Commission (FERC) Order 1000 imposed requirements on all grids for regional planning. In the Eastern Interconnection, it is done by system operators like the Midcontinent Independent System Operator (MISO) and the Southwest Power Pool (SPP).
In the West, it is done by CAISO and by three planning entities specifically organized to allow load serving entities (LSEs) in the regions to meet the Order 1000 mandate.
They are not markets and have no responsibility for reliability, NRDC’s Prochnik said. They are more like trade associations.
The WestConnect is made up of investor-owned utilities (IOUs), along with municipal and co-operative utilities, and is the only regional entity to also include merchant transmission developers, she noted.
Like the other regional planning entities, its main work is to compare the cost-effectiveness and efficiency of the existing system with a proposed transmission addition.
WestConnect’s online bidding platform for available transmission capacity has partially addressed the problem of contracted-for but unused lines, Prochnik said. “But there is a lot more to do.”
WestConnect has not addressed the pancaking, or stacking up, of transmission tariffs as power is wheeled through balancing authorities, she said. It also has done little to break down barriers balkanizing regional systems with the building of transmission across boundaries, or seams.
The Northern Tier Transmission Group (NTTG) coordinates planning for six utilities, including PacifiCorp, according to Consultant John Leland of Comprehensive Power.
He agreed with Prochnik’s assessment of the limited impacts of the regional groups, but insisted the importance of their relatively new role in overseeing planning should not be underestimated.
It is a compromise between FERC’s intent to give utility planners a system perspective and Western LSE’s reluctance to surrender planning autonomy, he said. “The coordination of data between LSEs in a region and the broader coordination of data between regions is a benefit," he said. “It ensures that planning studies are based on accurate and complete data.”
Both WestConnect and NTTG found that TransWest, SWIP-No and Cross-Tie all fail to provide more cost-effectiveness and efficiency than the existing system, he said. “But our conclusion does not mean there are not benefits to other regions,” he added.
The third regional planning entity in the West is ColumbiaGrid. It coordinates planning for IOUs and public power entities, including BPA. Several sources told Utility Dive ColumbiaGrid and NTTG are in merger talks.
NRDC’s Prochnik said the FERC mandate for regional planning has given those merger talks new momentum because “it would reduce seams issues.” It could, she acknowledged, be preliminary to becoming part of the CAISO’s regional system.
Renewable Northwest’s Yourkowski said the merger is “more than a rumor.” Several representatives of each of the planning organizations told him “they are in late stage discussions,” he said.
He has been told the merger would form a larger planning entity but not a market and reliability authority, he added. “A lot of stakeholders support the merger and would like to be part of the discussions because the Northwest is more one grid than two and most of the major transmission lines under consideration cross both regions.”
Neither NTTG nor ColumbiaGrid responded to requests for input by deadline.
Even bigger news was the Sept. 22 confirmation that the Mountain West Transmission Group (MWTG) has entered final negotiations to join SPP.
The MWTG includes Basin Electric Power Cooperative, Black Hills Corp, Colorado Springs Utilities, Platte River Power Authority, Xcel Energy Colorado, Tri-State Generation and Transmission Cooperative, Western Area Power Administration and Colorado River Storage.
A Brattle study for MWTG estimated benefits of between $53 million and $88 million per year from joining a regional market. MWTG's first choice was CAISO’s proposed regional market but when political pushback delayed it, they turned to SPP.
An MWTG press release reported final negotiations “through a public stakeholder process” will begin in October. A “months-long process” will likely go into 2019 to win SPP stakeholder approval.
NRDC’s Prochnik said this represents a huge "missed opportunity" for CAISO. There could be “a domino effect” among Western balancing authorities who want to be part of a regional system, she said.
CAISO’S regionalization and the question of Trump
CAISO cannot implement its regional plan until California's legislature approves a restructuring of its governance and lawmakers just adjourned until January without acting. That prevents CAISO planners from interrupting the move by MWTG to SPP.
The good news is the CAISO-led Energy Imbalance Market (EIM) is picking up momentum of its own.
CAISO and PacifiCorp implemented the EIM in 2014 to balance real-time energy needs. NV Energy joined in 2015, and Arizona Public Service and Puget Sound Energy joined in 2016.
Participation is pending for PowereX of British Columbia, Arizona’s Salt River Project, Sacramento Municipal Utility District, Seattle City Light, Los Angeles Department of Water and Power, Idaho Power and Portland General Electric.
In Q2 2017, the EIM produced an estimated $39.52 million in gross benefits to participants, largely through reduced peak demand generation costs. Since going into operation, it has produced $213.24 million in total benefits.
NRDC Director of Western Transmission Carl Zichella said those millions come from only the real-time maker, which is just 5% of transactions. System operators offer even bigger benefits. “SPP decreased its reserve requirements from 18% to 13%, saving billions without compromising reliability, because the operator can use pooled reserves.”
To move ahead with regionalization, California lawmakers must allow CAISO’s board to be independently nominated and approved. It is now appointed by California’s governor and approved by its legislature.
That, Prochnik said, “raises the question of Trump.”
Some California legislators fear a change in CAISO governance would invite stipulations or conditions on California energy policy from FERC commissioners appointed by the president, she said. That could lead, some argue, to limitations on the state's renewables growth.
But Yale Law School’s “Enhanced Western Grid Integration: A Legal and Policy Analysis of the Effects on California’s Clean Energy Laws” refutes that concern, Prochnik said.
Paper co-author Josh Constanti said there is “no intrinsic reason” a shift in CAISO governance would allow any greater federal influence. “FERC now regulates all regional U.S. electricity markets, including California’s,” he noted. “But the Federal Power Act requires it to be apolitical and prevents it from interfering in state decisions.”
Co-author Franz Hochstrasser said interstate commerce regulation of wholesale electricity markets “would not subject CAISO to new challenges under the Supremacy Clause or the Commerce Clause.”
If CAISO’s regional grid remains within the Western Interconnection, it is protected by the FPA, Yale reported. It is not yet clear whether the recent proposal from the Department of Energy that would impose a cost recovery ruling from FERC would alter this opinion from Yale.
But the MWTG’s choice of SPP “could mean the opportunity to form a large regional grid may be slipping away from California’s system operator,” Prochnik said.