July 1, 2009

The Odd Couple: Renewables and Transmission

Martin Piszczalski, PhD

Longer-Distance Transmission

The principal renewable resources — wind, solar, geothermal, and hydroelectric — are usually great distances from load centers. Typically, the greater the length of the transmission lines, the more time, money, and regulatory hurdles there are to clear.

There are positive indications that a more regional transmission planning process is taking hold; however, the long period of time necessary to develop interstate transmission lines makes planning, siting, and permitting problematic — for the developer as well as the investor. We recommend several actions to shorten these too-long projects that delay bringing additional renewable energy to market.

Provide More Regulatory Oversight. We believe that more oversight needs to be provided by regulators who have the authority to resolve any impasse that occurs, especially when new transmission lines cross state lines and more regulatory agencies are involved. A super-regulator is needed both for master planning as well as for specific project approvals. Today, federal agencies such as FERC, the U.S. Forest Service, the Fish and Wildlife Service, the Bureau of Land Management, and others are involved in virtually every interstate transmission project, not to mention a host of state and local regulators, any one of which can bring a project to a standstill for a host of reasons.

More market oversight is also required so that even when transmission does exist, a renewable developer doesn’t have to negotiate with multiple companies to deliver power at a distance. For instance, Claude Mindorff of Mainstream Renewable Power said his company contracted with six transmission operators to move power from one Alberta, Canada, wind farm to one customer. There should be one authority for one-stop shopping to determine the costs of delivering electricity anywhere at any time.

Shorten Procedural Time. The surge in renewable power is stretching out project completion times. For instance, a necessary project step is acquiring a transmission interconnection agreement. The California Independent System Operator recently had 361 interconnection requests pending at one time, overloading its processing and planning capabilities. In a similar queue at the Southwest Power Pool, 61% of the requesters were from the wind industry alone.

Minimize the Extra Money Required. Greater transmission distances, in general, increase per-unit transmission costs. In particular, the more transmission operators that are involved in connecting a generation source to a single customer, the greater the potential for "pancaking" charges (multiple rate surcharges for electricity crossing service territory boundaries).

More insidious are unpredictable transmission costs. Power sellers, buyers, and investors adamantly want price certainty in the total delivered cost. However, congestion charges can make the delivered price vary, especially in locational marginal pricing.

For new transmission construction and upgrades, cost allocation and recovery remains contentious. The issue here is how to apportion costs. To the new generator? Across all users of the upgraded network? Ultimately, rate payers cover the cost of transmission.

Everyone wants to know the answer to the question, What is the added premium to deliver renewable energy? Many transmission networks have both fossil fuel and renewable generators sharing the same network. Certainly, intermittent renewable sources have higher system-integration costs. Load balancing is more involved as well.

A recent Lawrence Berkeley National Laboratory study may provide an early answer to the cost question. It indicates that transmission unit costs for wind are only about $15/MWh (see sidebar).

However, that cost varies, depending on the configuration. For instance, the lowest cost scenario is having a concentrated pool of new power (thousands of megawatts). In this case a very high voltage line (765 kV) can transport that power very economically, even over great distances.

Nevertheless, renewables do add additional costs to the whole system. For instance, speedy ramp-up of backup power is essential when a wind farm goes down with as little as one-hour warning. Reliability issues kick in as well.