Developers Hope 2016 is the Year Clarity Comes to Transmission Planning in the West

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--This year is shaping up as a momentous one for transmission developers, who hope events at the federal and state levels result in a clarified, expedited transmission planning process, speakers told the Fifth Annual TransForum West conference, held last week in Denver, Colorado.

Speakers said the presidential election in November and the appointment of a U.S. Supreme Court justice to replace Justice Antonin Scalia, who died in February, are two of the most important events that will affect the nation's ongoing transmission buildout. Whoever is elected president November 8th will have the power to continue, or change, the energy and environmental policies implemented by President Barack Obama. Those policies have introduced significant changes to energy and environmental markets, ranging from decarbonizing and cleaning up the nation's Power supply to permitting liquefied natural gas (LNG) export terminal and overseeing the dramatic growth of Oil & Gas production from hydraulic fracturing.

The next president also is expected to nominate a new Supreme Court justice as well as the fifth commissioner to the Federal Energy Regulatory Commission (FERC) (Washington, D.C.), the agency that regulates wholesale power transactions and interstate transmission. With only four commissioners, FERC could deadlock 2-2 on critical transmission issues in the same way the recently ended Supreme Court term deadlocked 4-4 on several votes.

FERC has announced plans to convene a technical conference on its Order 1000, issued five summers ago. That order sought to expedite transmission development by streamlining the planning process and setting forth a cost-allocation methodology. Unfortunately, that order has not, as yet, had the desired effect. Different regional reliability organizations have adopted disparate policies regarding allocating the costs and benefits of transmission policies that cross their boundaries, hampering the efforts to expedite planning and construction of transmission projects that cross regions. This so-called "seams" problem has bedeviled transmission developers trying to build projects that carry renewable energy from resource-rich areas to load centers. For more on Order 1000, see July 28, 2011, article--Surge in Spending Could Follow FERC's Transmission Cost-Allocation Order.

Also on the federal level, the U.S. Court of Appeals for the D.C. Circuit is scheduled to hear oral arguments in September over Obama's Clean Power Plan (CPP), several speakers noted. Whenever the court hands down its decision, the losing party is expected to appeal to the U.S. Supreme Court, which may or may not have a 9th justice. The CPP is expected to reduce coal's share of the nation's electricity mix, increase the shares of gas and renewables and spur additional transmission development to bring renewable energy from remote central-station sites to load centers. For more on the CPP, see August 5, 2015, article--Obama Unveils Final Clean Power Plan, But Will it Survive Court Challenge?

Speakers at the TransForum West conference, organized by PennWell Corporation (Tulsa, Oklahoma), also heard about numerous state-level initiatives affecting transmission development in the West. Most importantly, the scheduled expansion of an energy imbalance market (EIM) between the California Independent System Operator (Caiso) (Folsom, California) and utilities located to California's north and east may be the first step to creating a regional reliability organization, similar to Midcontinent Independent System Operator (MISO) (Carmel, Indiana), PJM Interconnection (Norristown, Pennsylvania) and the Southwest Power Pool (SPP) (Little Rock, Arkansas).

Regional reliability organizations expedite transmission development because those groups, operating under FERC's authority, are able to determine the region's need for transmission projects and allocate the costs of those projects among companies in the region. The Western U.S. is the only part of the country not covered by a regional reliability organization. Until it gets one, interstate transmission projects will continue to be governed by FERC.

Aside from the numerous state and federal regulatory and judicial issues that attendees hope will improve transmission planning and construction, utilities and developers also are assessing the impact that distributed generation, including rooftop solar, energy efficiency programs and electric storage technologies are having on transmission planning. For more on how one utility in the West is trying to tackle that issue, see November 20, 2015, article--SCE Aims to Turn Electric Grid from One-Way Street to Two-Way Electricity Freeway.

Xcel Energy (NYSE:XEL) (Minneapolis, Minnesota) is one of many utilities in the West assessing the impact those developments are having and could have on its transmission system. Alice Jackson, Xcel Energy's vice president of rates and regulatory affairs, told TransForum West conference attendees the utility is trying to determine "how we integrate new technologies and new resources into our system so we meet changing customer expectations. What do we need to build and when do we need to build it?"

"Electrons that are green are seen more favorably than those that are not," she told about 75 conference attendees. The utility, already a leader in renewable central-station generation, has about 2,500 megawatts (MW) of renewable energy on its Colorado transmission system, which is designed to carry a total of about 6,500 MW of electricity from all generating sources. Having that many intermittent generation resources creates significant scheduling challenges. Xcel Energy is trying to add another 600 MW of windpower in eastern Colorado, which necessitates construction of about 90 miles of 345-kilovolt transmission. All told, those eastern Colorado projects represent about $759 million in total investment value (TIV). The utility expects to receive a decision on these proposed projects from the Colorado Public Utilities Commission (Denver, Colorado) later this year. If all goes well, the first phase of the windfarm and its transmission project will be operating by late 2018.

While Xcel Energy is working at the central-station level to bring more renewables to its system, between 5,000 and 6,000 customers are adding rooftop solar systems to their homes each year, Jackson commented. Those additions reduce the demand on Xcel Energy's transmission and distribution (T&D) system during certain hours of the day, but increase it during other hours.

Jackson told conference attendees Xcel Energy already has 30,000 customers with some form of distributed generation totaling about 260 MW. "Some of the customer activity we're seeing at the distribution system level is starting to have an impact on transmission system in the form of feeder backflow," she said.

"Right now, it's really hard to figure out a 'no regrets' strategy," she continued. "Customer expectations are changing. Government requirements are changing. It's not clear what generating resources need to be replaced, and what they will be replaced with. The lack of an organized regional reliability market in the West makes it even harder to make the right call. There is no one solution that works for every situation. We're trying to find the best mix of steps to respond to our customers' changing wants and needs."

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