Cost-effective Way to Meet RPS? Transmission Build-Out

power-tower

by Trevor Stiles, American Transmission Co.

Aggressive renewable portfolio standards (RPS) necessitate additional development of renewable generation sources. State regulators should pursue holistic approaches to bring new renewable generation online while minimizing ratepayer cost and grid instability. As part of this approach, regulators should evaluate whether interstate transmission build-out can meet state energy policy goals at lower cost than simply building in-state renewable generation.

Although state RPS are by definition political implements enacted at the state level, the physics of power fail to respect state boundaries. The localization of the best sources of renewable generation engenders additional cost and grid stability concerns. In particular, because renewable generation sources are heavily localized, the lowest-cost renewable power necessary to satisfy a state’s RPS might be outside that state.

Further, different renewable generation types have different capacity profiles. Because few regions can access various renewable power sources, states that rely heavily on in-state renewable generation with similar capacity profiles could strain their transmission grids and experience grid instability.

These two issues-location of high-quality renewable resources far from load and operational issues inherent to integrating variable and nondispatchable resources into the grid-can drive up the cost of renewable power. Smart transmission build-out, however, can address these issues by connecting load centers to high-quality renewable power, strengthening the grid and reducing operational concerns. As a result, deliberate transmission build-out can reduce the cost of renewable power necessary to satisfy state energy policy goals.

State Goals, Out-of State Resources

According to the Database of State Incentives for Renewables and Efficiency (DSIRE), 29 states plus Washington, D.C., and two territories have RPS, while an additional eight states and two territories have nonbinding renewable portfolio goals. California is one of the leaders with an RPS that requires 33 percent of retail sales to come from renewable sources by 2020. Other states have similarly aggressive goals. The net result of these RPS (along with recent Environmental Protection Agency guidance on greenhouse gases) is that significant additional renewable generation must be built in coming decades.

Not all states are equally situated to develop high-quality, cost-effective renewable generation. For example, the southeastern U.S. lacks significant wind resources, and much of the northern U.S. lacks adequate sun for solar photovoltaics (PV) to reach grid parity even under optimistic scenarios.

If states met their RPS with only in-state resources, certain states might face substantial costs to scale up their renewable generation: political diktat simply cannot overcome physics and force the wind to blow harder or the sun to shine longer to satisfy in-state demand.

Fortunately for ratepayers, the Dormant Commerce Clause, as outlined in the 7th Circuit’s 2013 Illinois Commerce Commission v. Federal Energy Regulatory Commission (FERC) decision, limits the ability of states to mandate compliance using in-state resources. This decision limits the ability of states to force their ratepayers to subsidize protectionist policies. This limitation opens a new avenue for development: For states to comply with RPS and minimize rate shock, renewable energy can be imported from outside those states. Large-scale power imports likely require upgrades to and expansions of the interstate transmission system, bringing high-quality, low-cost renewable energy to satisfy state RPS.

Intermittency Concerns

Renewable generation raises further concerns related to its intermittency. Many types of renewable generation are not readily dispatchable. The wind does not always blow, and the sun does not always shine, even in relatively windy and sunny places. As grid penetration of these variable energy resources increases, the interconnected electrical system becomes more vulnerable to unexpected weather phenomena. Areas that rely on solar (such as the southwestern U.S.) must address shadow load, where distributed solar resources might go offline under certain weather conditions.

Similarly, within any particular area that relies on wind generation, a sudden drop in the wind could raise concerns about voltage collapse or grid stability if other generation sources could not be dispatched in time. This concern is not purely theoretical; in Texas in February 2008, an approximately 1,500-MW decrease in wind generation simultaneously coupled with an approximately 4,400-MW increase in demand resulted in a cut in power to interruptible customers seemingly out of the blue.

FERC has acknowledged and attempted to address these concerns through Order No. 764. The order adjusts the pro forma open access transmission tariff on matters such as intra-hourly scheduling and provides for better meteorological forecasting. To some extent, better forecasting can minimize disruptions and permit grid operators lead time to ensure backup generation can mitigate these disruptions. But within localized areas, the inability of many forms of renewable energy to be dispatchable drives up the true cost of that power.

Fortunately, a solution exists. Stronger transmission grid interconnections allow utilities to pull power from a broader area, substantially reducing the impact of localized weather to the grid. Building high-capacity lines that connect regions enables those regions to better manage generation fluctuations from renewable generation sources, minimizing grid stability concerns.

Upgrades to and expansions of the transmission system can enhance reliability and enable utilities to integrate renewable energy at a lower cost to ratepayers.

Isn’t Transmission Build-out Expensive?

Developing renewable generation in locations best suited for that resource is a more efficient and cost-effective way to generate power to satisfy state RPS. The necessary import capacity comes at a price: New high-voltage transmission lines must be built to move renewable power from places where it is abundant (such as the windy Great Plains) to load centers, primarily along the coasts. Building such lines to increase interconnections among regions increases the geographic footprint of transmission operators, which hedges against unexpected weather fluctuations.

Detractors argue that the cost of building high-voltage transmission lines is prohibitively expensive. At costs upward of $1 million per mile, these new high-voltage lines necessary to move power from generation to demand and to interconnect regions are a significant investment. The true cost and nominal cost, however, differ: A new line might cost hundreds of millions of dollars to construct, but these lines can pay for themselves and return benefits to ratepayers through increased reliability, reduced congestion and lower energy costs.

Regulators should not automatically view new transmission lines as the right answer. But neither should regulators avoid consideration of transmission alternatives. In a world moving increasingly toward renewable generation, transmission alternatives can play a viable, cost-effective role in ensuring the safe, affordable operation of the electric system.

Author

Trevor Stiles is senior counsel with American Transmission Co., a transmission-only utility based in Pewaukee, Wisconsin. Email him at tstiles@atcllc.com.

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