Transmission Grows Despite Hurdles

I recently attended a conference in Washington, D.C., called TransForum East. It was organized by PennWell through one of its latest acquisitions, TransmissionHub, a research, analysis and news portal. I decided to use this month’s column to share some of the event’s highlights with you.

Kent Knutson, TransmissionHub’s director of data strategy and content, said that during the first nine months of 2013, nearly $6.7 billion was invested in transmission projects, up from the $5.6 billion spent in all of 2012. Knutson expects continued growth through 2015. Much activity is being driven by Texas CREZ (competitive renewable energy zone) and WECC (Western Interconnection) projects.

I wasn’t surprised to learn that uncertainty is prevalent in the transmission industry. Changing technologies, cyber and physical security threats, regulations, siting and customer expectations have caused much of that uncertainty.

The changing generation mix, however, is the biggest culprit. Electricity generated by wind and solar rapidly is being added; coal-plants that can’t meet Environmental Protection Agency regulations are being retired; and abundant, cheap natural gas is resulting in a build-out of new gas-fired generation to replace retired coal plants and backup intermittent renewable energy. New transmission is needed to connect renewable energy and some new gas-fired generation to the existing transmissin grid and load centers. In addition, some gas-fired plants are being built in areas with constrained gas pipeline capacity. Transmission operators are concerned that these plants could fall off the grid if pipeline capacity is used for other demands such as home heating. Differing opinions and uncertainty exist about who will pay for needed electricity transmission infrastructure, as well as gas pipeline infrastructure.

Federal Energy Regulatory Commission (FERC) Commissioner Philip Moeller, spoke at TransForum, acknowledging that transmission owners and operators face many hurdles. Moeller said FERC knows the lack of a federal policy allowing transmission owners to build across state lines is a problem, but he doesn’t foresee a federal law changing interstate transmission siting issues soon. He also acknowledged uncertainty surrounding return on equity (ROE). He said FERC has created much of this uncertainty, but his only words of encouragement came when he said ROE is a “live” issue at FERC.

Low- to moderate-priced natural gas, which Moeller said will remian for some time, will continue to drive gas-fired generation and transmission growth. He said longer-term issues, such as who pays for the gas infrastructure to secure supply to generators, are more vexing. Part of the solution involves the two industries’ learning more about how the other works.

Even with its uncertainty, Moeller said he is bullish on transmission and “it’s an exciting time” in the transmission industry.

“If the issues were easy, someone else would have already solved them. You need to stay active and involved,” he said.

TERESA HANSEN   Editor in chief
TERESA HANSEN
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