U.S. States Hatch Solution to Transmission “Chicken-Egg” Dilemma

The signing of higher renewable portfolio standards and accompanying transmission policies by Colorado Governor Bill Ritter (D) and New Mexico Governor Bill Richardson (D) in March signaled a new phase in renewable energy policies. Colorado and New Mexico join California, Texas, and Minnesota as leading wind states that have adopted proactive transmission planning policies as critical pieces of their strategy to promote renewable energy.

The need for transmission to deliver wind energy from the best resource areas to load centers is now widely understood and transmission planning — and cost recovery policies — are now widely accepted solutions. Most of the wind energy capacity in the country was built without new transmission facilities. Developers could find sites that had both good wind and good transmission access. The first 5% to 10% of electricity from wind in leading wind states exploited these easier locations. However, as states move above 10% electricity from wind, as these five states are doing, low-hanging fruit is hard to find and one must look a little harder for accessible sites. Fortunately, many states like these four have excellent wind resource areas available that are cost-effective to access over the long run with new transmission. Building transmission is no easy endeavor. There is a classic “chicken or the egg” dilemma because currently the standard U.S. transmission protocol is to build transmission only if: one, an individual generator requests service that requires an upgrade; or two, reliability criteria are expected to be violated in the planning horizon. Under that protocol, no wind generators will come to a wind-rich area that requires a large high-voltage transmission line to serve multiple projects that will be developed over time. No transmission comes without generation, and no generation comes without transmission. California, Texas, Minnesota, and now Colorado and New Mexico all faced this same chicken or egg problem. Their solutions are somewhat different but essentially they made a state policy decision that the chicken and egg problem should be resolved by building transmission first. State actions on transmission After a long debate involving its Tehachapi wind resource area, California is pursuing permitting for new lines and is establishing a generic cost recovery policy for future areas where plentiful renewable resources await the arrival of transmission. There is a state cost recovery backstop through the Public Utilities Commission, and a proposal before the Federal Energy Regulatory Commission to recover costs through a wholesale transmission tariff. Transmission companies can depend on these policies as assurance that they will be repaid for the transmission. Texas’ lead in wind energy is poised to continue because of the vast resources that new transmission plans are proposing to tap. The RPS law known as Senate Bill 20 not only increased the state’s RPS requirement to 5,880 MW by 2015, and set a goal of 10,000 MW, it also required for the creation of Competitive Renewable Energy Zones (CREZ), which are areas suitable for renewable resource development that would be accessed by planning and cost recovery for new transmission. While the CREZ process is in the midst of extensive implementation discussion and debate involving many AWEA members and the Wind Coalition, it holds great promise and has stimulated some very ambitious transmission proposals. In February, Minnesota Governor Tim Pawlenty (R) signed into law a renewable energy requirement for 25% of the electricity produced by the state’s utilities to come from renewables by 2025. While the legislation allows for the possibility of the targets to be delayed because of such barriers as inadequate transmission, it also includes language to ensure that roadblocks would not indefinitely delay or prove fatal to implementation of the requirement for any utility. For example, in the event that utilities cite transmission as a reason for not hitting their incremental renewables targets, they would be required to move forward in the regulatory and construction process for the needed new lines or upgrades. Minnesota has a consortium of utilities planning for the state’s future power and grid needs through a series of transmission investments. The group, known as CapX 2020, identified a variety of generation development scenarios with differing geographic balance for the new supplies that would come online; each of those options includes over 2,000 MW of new wind. The consortium’s analysis showed that transmission is needed regardless of the scenario that becomes reality. Thus, it already has initiated the approval process for new transmission projects, including lines going from Brookings, S.D., and Fargo, N.D., to the Twin Cities area, which would be ready by 2012. Colorado’s new law follows in the mold of Texas, identifying renewable energy areas and providing for utility cost recovery through retail electricity rates. AWEA, the Interwest Energy Alliance, and the utility Xcel Energy supported this initiative as a win-win for all involved. New Mexico’s transmission policy that accompanies its new 20% renewable energy requirement by 2020 utilizes a Renewable Energy Transmission Authority to facilitate needed transmission development and help the state export wind, solar, and other renewable energy. Region-wide opportunities In support of state activities and moving beyond what can be done just at the state level, the interstate transmission system offers opportunities to deliver more distant wind resources to load. Regional transmission planning is taking place in various areas, with regional planning for large amounts of new wind beginning a few years ago in the Midwest and the South Central regions that are served by regional transmission organizations (RTO). The Southwest Power Pool, an RTO, is promoting large transmission “backbones” of higher voltage for interstate transmission, and in its planning is using wind-export scenarios to both Texas and regions to the east that are not necessarily endowed with excellent wind resources. The Midwest Independent System Operator, meanwhile, has produced a “Vision Plan” that anticipates a 10% RPS in all of its states (as well as the 20% already on the books in Minnesota) with transmission ideas that reach all the way to the East Coast. Both of these plans are still conceptual, but they have received the green light to be developed into more detailed plans. They are driven in part by awareness that moving wind across the regions they cover to more populated areas is part of the national energy policy debate: big transmission provides an outlet for wind energy projects developed in more rural areas (read: positive economic impact), and allows better overall balancing of supply and demand across regions by adding diverse wind power to the mix of conventional sources and supplying more users-all resulting in a stronger system. Federal activity and beyond Against this backdrop of regional and interstate planning, momentum is building on transmission issues at the federal level as well. In January, the Federal Energy Regulatory Commission issued significant reforms of transmission rules that wind energy advocates have long sought-reforms aimed at ensuring competition and open access to more generators as well as increasing the development of transmission. The new Order 890 includes other mandates that are wind friendly: regional planning as well as planning for much-needed new transmission to lower consumer costs-all further proof that transmission development is a win-win for everyone. Formerly the deputy policy director at the American Wind Energy Association, Mike Jacobs is now the vice-president for transmission at UPC Wind Management in Newton, Massachusetts. Previously he was part of TransEnergieUS when that firm built the Cross-Sound Cable. This article was reprinted with permission from the American Wind Energy Association.

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