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'T' Party Revolt

Transmission expansion costs are spread unevenly, driving a wedge between utilities and regions.

Fortnightly Magazine - October 2009

the Eastern Interconnect study conducted by the joint coordinated system plan, which assumes a single, organized, interconnection-wide grid overlay at very high voltages (765 and 800 kV), thus capturing significant economies of scale. By contrast, they argue, real-world grid expansion projects in the MISO queue occur sequentially, in piecemeal fashion, and so prove much more costly.

Opponents claim that MISO studies already have assigned much higher upgrade costs to various Group 5 projects now in the queue. These costs, they say, suggest wind developers will be required to pay for the $700 million (or more) Bookings 345-kV transmission line planned for southern Minnesota. They provide estimates for unit net-up costs ranging anywhere from $370/kW to $1,156/kW. Such figures imply that wind project development costs could climb by 7 to 14 percent, or even by as much as 17 percent, according to one estimate. AWEA reports that the plan of the CAPX2020 utility consortium to build transmission lines to serve 2,400 MW of new wind generation assumes a $625/kW unit net-up cost, and that net-up costs for some 19 projects (2,800 MW) in MISO Group 6 will be $2.2 billion, or about $770/kW.

Even the DOE’s Lawrence Berkeley National Lab has pegged the national median unit net-up cost at $300/kV, as was reported previously in this column. ( See, Titans of Transmission , March 2009. )

AWEA adds that for a typical 100-MW wind project operating at a high 40-percent capacity factor (as is possible in wind-rich North Dakota), every $25 million increment in grid upgrade cost requires an increase of $8/MWh in the wholesale LMP energy price for wind developers to be made whole. (See generally, industry comments, FERC Docket ER09-1431, filed through Aug. 13, 2009.)

These industry advocates would prefer to see net-up costs shared pro rata by all utility TOs within a given RTO, a sharing method commonly known as “postage-stamp” pricing. They see RTO-wide cost-sharing as particularly appropriate in light of wind energy’s apparent public benefits, such as carbon emissions reductions, as documented earlier this year by Dr. Ira Shavel, in his FERC testimony on the landmark study by Charles River Associates that analyzed CO 2 reductions likely from the massive Green Power Express transmission line. (See, Exhibit GPE-400, Direct Testimony of Dr. Ira Shavel, FERC Docket No. ER09-681, filed Feb. 9, 2009.)

And as AWEA noted in its written comments on the MISO tariff, the cost to typical residential consumers of postage-stamp pricing would total “less than the cost of an actual postage stamp on their monthly bill.”

MISO, however, doesn’t remain completely indifferent to wind project developers and their plight. For example, it recently has worked on reforms to its project queue, including a rule change that would allow a multi-party facility construction agreement, by which a group of similarly situated wind projects could share responsibility for upgrade costs, even if they come on line sequentially, thus mitigating the notorious “first-mover/free-rider” problem, which otherwise encourages developers to delay signing an interconnection agreement to avoid getting socked with the first round of upgrades. (See, FERC docket No. ER09-1610,