Major transmission projects based on two distinct models are showing signs of life. What can these projects teach us about future transmission investment?

FERC proposed a new set of regulations, under the new section 219 of the Federal Power Act, explaining in broad outline how it might approve generous financial incentives for new investments in transmission—incentives once dubbed as “candy.” As of mid-January, the new NOPR had spawned more industry comment than just about any other FERC proposal in recent memory.

Power-industry restructuring redistributed financial uncertainties that discourage generation investment and ultimately raise the price of electricity to consumers.

The “N-word” in the title first appeared in this journal more than 20 years ago, courtesy of the celebrated environmentalist Amory Lovins and his widely quoted piece, “Saving Gigabucks with Negawatts” (Fortnightly, 1985). Scroll forward a few decades. With restructuring of wholesale electric markets at FERC, plus formation of regional transmission organizations and independent system operators, the game was changed.

RTO practice creates less risk and uncertainty over the nominal short-term wholesale price of power, but more risk and uncertainty over the long-term cost of transmission. That spells trouble for the coal-fired plant, sited far off at the mine mouth, needing long-haul transmission over a long-enough term to pay back the capital costs.

Wholesale competition is working, and the best evidence to date is the savings produced from the opening of the PJM market to competitive power generation from the Midwest. A real-time case study unfolded before our eyes in May and October 2004.

A proposal to remove the bottlenecks on grid investment.

Investments in the U.S. transmission grid have been declining since the early 1970s.¹ Reasons include: 1) regulatory uncertainty; 2) onerous and multiple regulatory jurisdictions; 3) an extremely complex and time-consuming siting and permitting process; 4) uncertainty in the basic "who pays" vs. "who benefits" equation; and 5) shortcomings in the regional-planning processes.

Business & Money

A review of the ongoing evolution of market design.

LICAP, ICAP, UCAP, NoCAP. Some markets have them, some don't. Where they do exist, no two are equal.

Power Measurement

A forecast for California on Aug. 16, 2006

Transmission congestion affects both the cost and the efficiency of the electric power grid. Traditionally, transmission congestion has been managed as an engineering or contractual matter, through physical management of the grid or contractual management of "contract paths" for delivering electricity.

Commission Watch

What everybody missed in setting up the regional grids.

While the electric utility industry has largely agreed on what elements to include in a standard market design (SMD) to govern wholesale power trading in a given region, recent experience shows that the regulators from time to time have overlooked a number of things.