US grid: It’s our way or the highway

The US electrical transmission grid needs to match the scope of the country’s interstate highway network if it is to achieve the US’ core aims of securing its energy resources and combating climate change. Sadly, there is little sign of the new highway yet, write Edward Krapels & Stephen Conant of Anbaric Holding LLC.

Edward Krapels & Stephen Conant, Anbaric Holding LLC, USA

A century ago, the transmission system reflected local needs. Fifty years ago, regional requirements began to be taken into account. Today national goals have taken priority. However, the grid is inadequate to achieve these goals.

In the next 20 years, the US will need to make an intensive effort to expand its electrical transmission system. People are beginning to recognise that the expansion of the system is an essential component of any solution to several big problems that the US faces.

Today’s first priority, as always, is grid reliability. The northeast blackout of 2003 brought this priority home and provided an opportunity to highlight years of underinvestment in the grid.

The second priority is to address climate change and reduce the US’s environmental footprint. The third is to contain the US’s growing dependence on natural gas and avoid increasing the country’s reliance on imported liquefied natural gas. The development of an interstate extra-high-voltage transmission system (EHV), through the adoption of a nationwide EHV strategy, can make a modern transmission grid the backbone of a strategy to address these important national issues.

Adopting such a strategy will mark an important shift in US energy policy. Sound energy policy requires a periodic assessment of the needs of consumers and of society as a whole. If the US is to accomplish its new energy missions à‚— to combat climate change, while containing dependence on insecure imported natural gas à‚— the country needs to develop a true nationwide, power grid verion of its interstate highway system.

Over the past two decades, attention has been focused on developing competitive wholesale energy markets. Electricity market rules and regulations, however, have had the unintended consequence of discouraging diverse generating portfolios.

Under rules aimed at providing competition in the wholesale power markets, most investors would rather build plants and recoup their investment in just a few years than build facilities that take decades to recoup their investment costs. In other words, the US’s preoccupation with developing competitive power markets within confined regions has not created a fertile climate for long-range, strategic investments in the projects that are needed to achieve today’s major policy goals.

These projects include large wind farms, baseload clean coal and nuclear plants, and large EHV transmission projects. Of these, EHV transmission is unique in terms of the benefits it brings to the system. It provides the functional equivalent of an interstate highway system, allowing more efficient energy transport.

While on a highway system we talk about savings in terms of time and petrol consumption, on an interstate electrical transmission system we talk of the need for infrastructure, line loss and CO2 emission reductions.

NEW RESOURCES

From the broadest policy perspective, demand reduction and increased energy efficiency is the low-hanging fruit for reducing carbon emissions, but their potential is limited. With aggressive conservation measures, nationwide annual demand growth of one to two per cent may be slowed, but not eliminated. Inevitably new low-carbon supply side resources will be needed.

With nearly all hydroelectric resource in the US developed, there are just three large purely domestic sources for low-carbon electricity generation: renewables, including wind, geothermal, solar and biomass resources; nuclear power; and clean coal technologies with carbon storage and sequestration.

All three have received a great deal of public attention and policy support, as well as government incentives. A nuclear renaissance may yet be on the horizon in the US, and the inherent desirability of using coal (an abundant domestic fuel that now provides the country with 50 per cent of its electricity) in a less environmentally damaging way is extremely appealing. However, neither has received the overwhelming public support or private investment that the renewables industry has seen.

Renewables often have a problem, however. They are often remotely located, so an expansion of the transmission grid is needed to bring their energy to urban markets. For that to happen, a substantial expansion of the US EHV transmission system will be needed. If done properly, the expansion will support other supply resources that will also help achieve US reliability and fuel diversity goals.

DEVELOPMENT PLANS

The careful coordination of national EHV expansion is essential. And that means adequate planning that should extend beyond state and regional boundaries. Questions regarding the appropriate level of transmission infrastructure are typically raised early in the planning process.

One of the challenges associated with regional planning is the scope of the solution sought. For many, the most desirable approach to transmission upgrades in a minimalist one, to minimize investment. According to this rationale, a transmission solution only need be as strong as the expectations placed on it.

Expectations, however, are growing. In the past few years, the need for the US to take action to reduce its carbon emissions has increasingly been accepted by a growing number of cities and states, and integrated into their energy and environmental planning.

Many cities have announced ‘green’ and renewables programmes. Renewable portfolio standards (RPS) have been adopted in a majority of US states and are a major driver in accelerating the development of renewable resources, especially wind.


The US power grid network featuring a composite wind resource map. Areas in blue and red have high potential, areas in brown and orange are marginal/fair Source: NREL
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According to a joint study involving the American Wind Energy Association (AWEA), the US Department of Energy and the National Renewable Energy Laboratory, wind could provide up to 20 per cent, or approximately 350 GW, of the nation’s electricity. A 2008 update of that study concluded that “a 20 per cent wind scenario in 2030, while ambitious, could be feasible if the significant challenges identified in this report are overcome”.

Further analysis by AWEA and the Association of Electricity Producers indicates that the system could “enable significantly greater wind energy penetration levels by providing an additional 200 to 400 GW of bulk transmission capacity. The total capital investment is estimated at approximately $60 billion. While it is by no means the total solution, this initiative illustrates the opportunities that exist, and what might be possible with adequate cooperation, collaboration and coordination à‚— the ‘3Cs’.

The development of these facilities under a 3Cs model requires planners to look beyond the traditional utility or regional transmission organization (RTO) boundaries toward interregional and international solutions.

Recently the Southwest Power Pool, the Midwest Independent System Operator, the PJM Regional Transmission Organization, Tennessee Valley Authority and the Department of Energy announced that they would hold a stakeholder meeting to discuss the development of a coordinated system plan for their areas.

The result was the Joint Coordinated System Plan initiative. This development has the potential to allow the industry to take a giant leap forward in terms of how it designs the system and how it establishes expectations in terms of what the nation’s grid can deliver.

Planning, however, is not a solution in and of itself. Ultimately projects need to get built, which raises the sticky question of who pays. Participants in the electricity sector have long been embroiled in often bitter disputes about who pays for transmission.

The challenges associated with the allocation of the costs of such projects run the risk of discouraging the development of the right transmission solutions. Well-chosen projects have to emerge from a complex dialogue about the proper allocation of transmission costs between national, regional, state and local regulators.

More than a decade of power industry restructuring has seen important changes in federal and regional transmission cost allocation policy. This policy template, however, has gradually been overshadowed by its own deficiencies, as well as by increased concerns about climate change.

In its place, both state and federal regulators have been increasingly willing to accept that the costs of certain transmission projects should be socialized. This requires an acceptance of the premise that the real value of transmission is enabling and improving competitive markets for an array of generation resources, where the benefits outweigh the cost of specific transmission projects.

Given the desire of the US to increase the diversity of its fuel portfolio and ensure that it maximizes its transmission system’s overall efficiency, the US needs to move away from a project-by-project approach to infrastructure development.

THE BIG PICTURE

Those who believe that transmission is an essential facilitator of climate change solutions now have a primary mission for the grid that extends far beyond the narrow analysis of the beneficiaries of a specific project. Given the remote locations of resources, it is necessary to extend the EHV grid well beyond its current footprint to integrate these resources as a large portion of the nation’s electricity supply in order to meet an emerging national need to reduce carbon emissions.

In many parts of the US, however, conflicting state and independent system operator (ISO) regulations are currently impeding transmission development aimed at bringing renewables to market.

Development rules worked out with great difficulty over the past decade à‚— designed primarily to maintain reliability and promote competitive wholesale markets à‚— often hinder the development of EHV transmission for renewables. It is in the single-state ISOs, such as California and Texas, that we have seen the most progressive transmission development policies specifically aimed at bringing large quantities of renewables to market.

California provides an interesting example of how the schism between state and regional interests plays out, however. Behind the leadership of the California Public Utilities Commission, the California ISO pioneered the Federal Energy Regulatory Commission’s (FERC’s) recognition in April 2007 of a third category of transmission line known as a trunk line to access what FERC refers to as “locationally constrained resources”, meaning renewable energy resources such as wind, geothermal and solar resources.

While not prohibiting the use of the line by non-renewable generators, in effect, FERC agreed to allow ratepayers to fund transmission lines that do not meet traditional reliability or economic tests to achieve a different policy goal of encouraging development of renewable resources.

Meanwhile, Southern California Edison’s (SCE’s) attempt to build the Palo Verde/Devers II to access 5000 MW of gas-fired generation in the transmission constrained area of western Arizona was thwarted by rejection of the proposed line by the Arizona Corporate Commission, reinforcing the difficulty of building transmission lines across state borders. This is in stark contrast to the rate-based in-state transmission line to access 5000 MW of wind energy in the Tehachapi Mountains that SCEwill build as a result of the FERC order.

Given the schisms among state, regional and national approaches to transmission planning and construction, using an EVH transmission grid to address the national priorities of building a reliable grid, reducing the US’s environmental footprint and expanding the use of indigenous low- and no-carbon-based fuel will only be possible with a concerted national effort.

If the US is to accomplish the US’s new energy missions à‚— to combat climate change, while containing dependence on insecure imported natural gas à‚— the country needs a true nationwide, power grid version of its interstate highway system.

About the AUTHORS


Edward Krapels – founder, Anbaric Holding LLC
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Edward Krapels and Stephen Conant are, respectively, founder and VP of New England Transmission Projects for Anbaric Holding, LLC, which oversees incubation and development of various transmission projects,


Stephen Conant, VP for New England Transmission Projects
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including the Neptune Regional Transmission System, Hudson Transmission Project and the Green Line.

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