California's Transmission Future

Unlike conventional energy, renewable power plants need to be built where the resources are, which is often far from existing development and electricity transmission. However, unlike building a new natural gas power plant where 500 MW of capacity can be built in a central location of choice, renewable resources are more spread out and geographically sensitive. Most large-scale renewable resources are also usually in remote areas rather than near major load centers. To access these resources, new transmission infrastructure needs to be developed. Even projects built near existing transmission find there is little available capacity and that the queue for interconnection is quite long.

If states are going to meet their RPS goals, most of them are looking at a substantial amount of new transmission development required.

Building new renewable energy transmission infrastructure is easier said than done. The short timeframe and already expensive cost of developing renewables mean it is more important than ever to be efficient and choose transmission pathways deliberately. The geographic nature of renewables alone makes optimally siting transmission more complex. Another layer of complexity is added by the broad range of groups who have an interest in where new transmission lines are sited, including utilities, generators, regulatory agencies, public interest and environmental groups. Not only might these groups have valuable input, but timing and cost also make it prohibitive to risk facing opposition from one of these groups too late in the planning process. Therefore, it is important to reach out to different stakeholders early in the process to include their participation and get buy-in before making costly mistakes. To accommodate the unique challenges facing renewable energy transmission development, it is necessary to combine a renewable resource siting study with stakeholder input in a new transmission planning process.

A New Way to Plan Transmission

California was among the first states to adopt a RPS and with its 33 percent requirement by 2020 it has one of the most aggressive portfolio requirements. California faces many of the issues already mentioned; there is little available capacity on existing transmission and many of the best resources are dispersed throughout remote regions. The state regulatory agencies recognized the need for a new transmission planning initiative early on and in 2007 the Renewable Energy Transmission Initiative (RETI) was formed.

The goal of RETI’s work is to identify major upgrades to California’s electric transmission system needed to access the most cost effective and environmentally sensitive zones of renewable resources sufficient to meet the state’s energy targets. RETI is a collaborative stakeholder planning process initiated as a joint effort among the California Public Utilities Commission (CPUC), the California Energy Commission and the California Independent System Operator (CAISO), together with publicly owned and investor owned utilities. RETI’s work is undertaken by a 29-member stakeholder steering committee (SSC) that involves a range of participants, first to gather information and advice and then to build active support and consensus for specific plans for renewable energy and related transmission development. By combining a stakeholder process with a siting and zoning approach specifically designed for renewables, the planning process used in RETI effectively addresses many of the challenges that face renewable transmission planning.

Competitive Renewable Energy Zones

After organizing the stakeholder process, the first step in the RETI process was to perform an assessment of the renewable resources in California and surrounding out-of-state areas. Many of the potential renewable resources in the RETI study area are in common areas and would be attached to the transmission system at a common interconnection point. These resources were then aggregated into zones called Competitive Renewable Energy Zones (CREZ).

The use of CREZ was first recommended and used by the Texas Energy Planning Council in 2004. In 2005 it was passed into law and has been the basis for renewable energy and transmission planning in Texas. The idea behind the CREZ is to identify the best renewable resources to prioritize transmission infrastructure development. Once CREZ are designated they are also valuable for guiding the activity of generation developers. This leads to greater overall efficiency, reducing the time and cost of transmission and generation development.

CREZ boundaries were identified based on density of resources in different areas, their estimated development costs and shared transmission constraints. Planned or proposed projects by renewable energy developers were considered, in addition to areas believed to be suitable for development but in which developer interest is yet unknown. During this process, areas specified by RETI’s environmental working group (EWG) as prohibiting or restricting energy development as a result of law and policies were taken into consideration.

An initial assessment identified resource areas sufficient to provide renewable energy far in excess of California’s 2020 needs, albeit at increasing costs. At the direction of the stakeholder steering committee, initial screening was performed to winnow the prospects to a more manageable number based on expected economic viability.

A total of 31 California CREZ with over 80 GW of capacity have been included in the current analysis. To account for the possibility that higher quality out-of-state resources may have a lower cost in California, despite higher transmission costs, areas from 10 states with over 100 GW of capacity were also included in the analysis. For some out-of-state analysis, a detailed assessment was performed for RETI, but in most cases, data from the Western Renewable Energy Zones (WREZ) study was used. More information on WREZ can be found here.

Economic Assessment

CREZ are ranked by their cost-effectiveness based on their developable potential, taking into account environmental concerns, the quality of the resources, the cost to develop those resources and the cost of transmission needed to deliver those resources to load centers. The economics of each CREZ was assessed based on assumptions about generating technology costs, output characteristics, transmission costs, the geographic, seasonal and diurnal value of the electricity generated and available financial incentives. The stakeholder process provided a unique forum to communicate about assumptions with experts of diverse backgrounds. The assumptions were therefore developed throughout several discussions with stakeholders, who also agreed together on their use for the analysis.

Throughout RETI the economics of resources are evaluated using a metric called the “rank cost,” which combines generation cost, transmission cost, capacity value and energy value. The cost of generation is calculated as a levelized cost of energy (“LCOE”) at the point at which the project will interconnect to the existing transmission system. The LCOE for a project is the total life-cycle cost of generating electricity at the facility normalized by the total generation from the facility and is calculated in terms of dollars per megawatt hour ($/MWh). LCOE provides a consistent basis for comparing the economics of disparate projects across all technologies and ownership. Similar to generation costs, transmission costs are calculated as the levelized cost of transmission (“LCOT”) and are affected by numerous factors including distance, line utilization, right of way costs, the number of substations required among others. The in-state transmission costs varied from $7.88/MWh to $30.93/MWh. The capacity value of a generating resource is based on its ability to provide dependable and reliable capacity during peak periods when the system requires reliable resources for stable operation. The energy value of a resource assesses the value of its hourly output to the energy markets. Resources that produce more power during high-price, peak demand periods will have a higher energy value than resources that provide power primarily during low demand periods.

Uncertainty and Sensitivity Analysis

It is important to consider the uncertainty in the estimates used to quantify and value resources. By their very nature, these estimates include a margin of error due to the assumptions made by the RETI team. In addition to general uncertainty, there is wide variety of plausible future scenarios which may affect the modeling results and the ranking of the CREZ. An uncertainty and sensitivity assessment was carried out to identify which CREZ and resources areas might be economically viable under certain situations. In addition to a general uncertainty assessment, sensitivity studies were performed to investigate the impacts of several key issues, such as:

• Tax credits
• Out-of-state transmission costs
• Shaping and firming of resources (British Columbia example)
• Advanced solar thermal technologies costs
• Distributed solar photovoltaics

Environmental Assessment

An important aspect of the RETI study is that it does not only examine the quality of renewable resources and costs, but also the environmental impacts. This is imperative for transmission planning, particularly due to the importance of environmental impact during permitting processes. However, environmental concerns are considerably more difficult to quantify than the factors used in the economic assessment. Nevertheless, some quantification of these concerns allows CREZ to be compared in a manner similar to economic ranking. The environmental working group (EWG) used publicly available data and formulas to provide a score for indicating the relative level of environmental concern for each California CREZ. The criteria used in the formulas were designed to identify those CREZ which disturb the least amount of land per unit of energy output, including land needed to collect and transmit that energy to the existing transmission grid; minimize potential conflicts with areas of special environmental concern; minimize potential impacts on wildlife and significant species; and maximize the use of previously disturbed lands.

Lack of data prevented inclusion of criteria to evaluate several environmental concerns, including visual impacts and effect of project development on cultural resources. The extent to which EWG formulas should express preference for development on disturbed land, and how such lands should be defined, remains problematic and controversial. For wind projects in particular, consensus could not be reached on how project footprint should be defined and applied in assessing their environmental effects and an alternate scoring is available provided by the wind industry.

Results

Ultimately, it is necessary to balance both costs and environmental impacts when ranking the CREZ. The results of both analyses were combined in a bubble chart showing the economic rank, the environmental rank, and the relative amounts of energy in each CREZ. CREZ that fall in the lower left portion of the graph have both low costs and low environmental impacts and would the most desirable areas for prioritizing transmission development.

The Renewable Energy Transmission Initiative is the most comprehensive study of its kind. With its aggressive RPS goals, California has had the impetus to pioneer this ground-breaking effort which can hopefully serve as an example for other transmission planning initiatives throughout the country. Already a similar study is underway for the State of Utah, the Utah Renewable Energy Zones. Other states that have renewable energy transmission initiatives include Texas, Nevada, Colorado and Arizona.

Currently RETI is in Phase 2, the development of a conceptual transmission plan to access priority CREZ. In Phase 3, RETI will develop detailed plans of service for commercially viable transmission projects and help to establish the basis for expedited regulatory approval of specific transmission projects. More information about the RETI project, including publicy available reports, models, and data can be found here.

Authors: Ryan J. Pletka is a project manager in Black & Veatch’s renewable energy group and directs work in the company’s San Francisco office focusing on assessments of advanced, distributed and renewable energy technologies. Mr. Pletka has participated in Black & Veatch assessments of more than 100 renewable energy projects and technologies since joining the company in 1998. He holds bachelor of science and master of science degrees din mechanical engineering from Iowa State University.

Sally Maki is a Renewable Energy Consultant in Black & Veatch’s renewable energy group in the company’s San Francisco office. Ms. Maki supports projects in strategic planning and solar photovoltaics. She holds a master’s degree in Energy and Resources from the University of California, Berkeley.