Relieving the IPP pressure

The recent increase of IPPs and merchant power projects in the US has put pressure on existing transmission systems. New methods are needed to meet this demand and alleviate reliability and security fears. Since deregulation began, the USA has seen a dramatic influx of Independent Power Producers (IPPs) and merchant plants connecting to existing electrical systems. This is placing an additional strain on transmission systems and has prompted the utility industry to reevaluate its interconnection guidelines to prevent failures in system security and reliability.

The addition of new capacity is placing a strain on the US transmission grid
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Many of the diversified, repowered plants operated by IPPs use the original interface with the electricity grids which need to be changed or upgraded. Greenfield plants are often connected to transmission systems via inadequate infrastructures which also need to be upgraded in order to ease the strain on transmission grids.

Siting a plant

In the past, planning transmission reinforcements and expansions were done with knowledge of where the sources and loads were, the size and dispatch patterns, and availability. In such an environment, planners could design the transmission system according to certain reliability criteria with the incurred expenditure covered from the rate structures.

There is now a great deal of uncertainty as to when and where new generation facilities are going to be on-line, and hence, the magnitude, location, and type of network constraints are difficult to predict. Prompted by the Federal Energy Regulatory Commission (FERC) Orders 888/889 and 2000, the requests for use of the transmission systems by power marketers and IPPs is exceeding expectations, causing reliability concerns.

Studies into the best and worst case scenarios should be recognized in the siting of new IPP plants and the level of risks should be incorporated in the decision making process. This will allow transmission systems to facilitate trading and competition and optimize transmission utilization.

The viability of new plants

Transfer capability issues are complicated by the size and complexity of the market-to-market power trading and transactions. In response to this, a market simulation-based siting process can be used to capture the phenomena associated with unscheduled flows, network simultaneous transfer limitations, uncertainty in load forecast and unplanned generation and transmission outages. One of the commonly adopted methods by IPP developers in handling the uncertainty of siting generation is to analyze all possible scenarios and candidate sites.

This process requires many sites and scenarios to be analyzed. However, it is recognized that in selecting a plant site, the developer has to estimate the revenue streams from energy, capacity and potential ancillary services, and the cost for interconnection and system reinforcement, together with concerns of the availability of natural gas, water, and an environmental permit. Therefore, a plant opportunity and incurred capital cost in the marketplace can be used to minimize the number of scenarios in order to reduce the planning effort downstream.

IPPs also need to consider:

  • Energy locational marginal pricing
  • Capacity value of an asset
  • Transmission availability
  • Cost of transmission congestion relief
  • Value of ancillary services
  • Quantity of hourly reservations
  • Duration of reservation periods
  • Market powers

Interconnection system process
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Via market simulations, different energy market conditions can be estimated and the range of transfer needs within each scenario can be identified to map out future transmission capacity availability.

From the IPP developer’s point of view, the best location for its generator is at the cross point of gas lines and EHV electric transmission lines. However, injection of electric power at this point might cause stress to the transmission system with respect to line loadings, breaker ratings and transient/dynamic stability concerns. The impact on system reliability and security can be assessed through an interconnection study.

IPP impact

In order to accommodate the increase of IPPs in its territory in a uniform manner, Entergy has developed a sophisticated interconnection study process which involves four major steps to ensures fairness to all IPPs that have requested interconnection.

IPP plant siting process
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The first step is to place all the studies in the queue in the order they were received in. Each study is performed independently.

The second step is the interconnection study, which is divided into two phases. The first phase involves a feasibility study to determine local transmission constraints at various generation output levels and provide an estimate to fix local transmission constraints. Based on the results the IPP can decide to proceed to the second phase, reduce the generation output, or cancel the study and choose another location.

The second phase incorporates a detailed AC load flow analysis, and short circuit analysis to determine if there are any underrated breakers due to the addition of the IPP, and stability analysis to determine the transient and dynamic stability impact of the IPP. This will result in a list of mandatory and optional upgrades.

If the IPP wishes to proceed further, a facilities study is performed. This is a detailed study of the upgrades for the transmission system identified in the interconnection study and would involve field surveys, checking the practicality of the solution, refining the solution and providing an accurate cost estimate (+/- ten per cent).

The final step is to execute an interconnection agreement. This contractually commits the IPP to the terms and conditions set forth in the agreement, along with the physical requirements to connect to the transmission system.

Although the interconnection agreement provides the right to interconnect to the grid, it does not provide any rights to the transmission system. The rights to the transmission system can only be obtained by executing a transmission service agreement on request from Oasis (Open Access Same Time Information Systems). From this, a system impact study will be performed.

This study will determine whether the transfer capability is available to transfer the power to the appropriate control area. If there are no transmission constraints, a transmission service agreement can be executed. However, if transmission constraints exist, the IPP can request a facilities study to determine the costs to fix the transmission constraints.

Interconnection process

Order 2000 by FERC has sweeping implications for transmission owners and providers in the US, Canada, and Mexico. This order encourages new transmission projects by creating the necessary industry infrastructure through the formation of Regional Transmission Organizations (RTO) which may involve the formation of non-profit Independent System Operators (ISOs), or incentive driven Independent Transmission Companies (Transcos).

The RTOs will have many responsibilities. They will be independent from market participants, and have the authority to evaluate and approve request for transmission service as an Oasis site administrator. They will ensure reliability throughout their region by developing market mechanisms to manage congestion, address parallel flow issues, and monitor the markets they operate.

The RTOs will also ensure a reliable, non-discriminatory market for the future by planning market driven transmission additions and upgrades in coordination with state authorities. They will also act as a last resort provider for Ancillary Services.

The Order 2000 encourages market-driven operation and investment actions to alleviate:

  • Transmission congestion or access to load pockets
  • Parallel path flow
  • Inter-regional, state, and federal cooperation on agreements for new transmission projects
  • Transmission price differentials between congested areas
  • Delivery of ancillary services such as voltage support.

Entergy is pursuing a binary structure to meet the requirements of Order 2000. This binary structure contains a Transco, which will have responsibility for all operational, management and commercial functions under the oversight of the RTO. The RTO will serve as umbrella organization, with the independent Transco underneath.

Transmission systems will face some economic and reliability challenges through Order 2000’s transition period. These include right-of-way, environmental, system congestion, reliability, and inter-regional, state, and federal cooperation issues. This is already evident with increased load growth, inadequacy of supply, and congestion.

Final analysis

Market simulation is an effective way to help site IPP plants, taking into account their short run marginal cost and power system reliability requirements. In a competitive environment, the transmission grid should be strategically expanded to accommodate both near and long-term uncertainties imposed by the IPP activities and energy trading and marketing.


This article is based on a paper presented at Power-Gen International 2000: “Interconnection issues relating to IPPs in the deregulated marketplace” by Daniel Galvàƒ¡n, Sharma Kolluri, Henry Chao, Mahmoud Zayan, Kannan Tinnium, Doug Powell.

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