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United States: Transmission for wind rich region - Critical mass of regulatory support

The Southwest Power Pool (SPP), a geographically diverse and wind-rich electricity market spanning eastern New Mexico, the Texas Panhandle, Nebraska, Western Oklahoma and Kansas, is planning to make major changes to how it allocates cost for transmission upgrades.

If approved, the new approach would, for the first time, spread the full cost of major transmission line projects to the entire nine-state SPP ratepayer pool. Big lines that can efficiently export wind from SPP's rural western plains are likely to pave the way for major wind development.

The transmission planning and funding structure that has worked in the past is no longer suitable for today's market, particularly if SPP's rich wind assets are to be used on a national level, says Steve Gaw, a consultant for the Texas-based Wind Energy Coalition, a wind industry trade association focusing on SPP and the Texas market.

Generators that benefit from a new transmission line are required to pay around two-thirds of the construction costs, with the remaining third of costs rolled out to all 12 million ratepayers in the SPP, in what is known as the postage-stamp payment. "A lot of transmission didn't get built because you didn't have everyone at the table who would benefit from transmission," says Gaw.

Around four years ago, SPP adopted a system that allowed costs for transmission to be paid through a postage-stamp structure if it could be demonstrated that a proposed transmission line showed a one-to-one ratio of cost and benefit to all regions in SPP. That, however, was hard to prove in SPP's nine state area covering almost a million square kilometres. "It helped, but it wasn't great for wind," says Gaw. "Instead of helping to build transmission in a more robust fashion it actually acted as a restriction." One proposal, the so-called balanced portfolio transmission plan that passes costs through to ratepayers, has been approved and will help bring more wind online in coming years.

Regulatory barriers

SPP policies have been hampered politically and legally by different regulatory rules in different states. Gaw says agreement among SPP planning board commissioners and state regulators this spring "reached a critical mass" in support of a new approach to building and funding major transmission expansion.

What appears likely is a move to a so-called highway-byway approach. This splits transmission proposals into two categories. Very large transmission lines for efficient transit of electricity across long distances, probably at the 345 kV or above threshold, will be given full postage-stamp approval for all costs to be covered by the entire SPP region. Lines smaller than 345 kV will be paid either through the current two-thirds generator, one-third postage stamp or a variation on that. "It could be a very positive thing because those are the lines needed for wind," says Gaw.

"We're in a territory where the (energy demand) is not very concentrated so you don't generally have large transmission running around, particularly in the western half where the wind is the best," says Gaw. "So in order to deliver wind in SPP and also on a more national basis because of the great wind that exists, you have to have that delivery system built up. It's a very critical component of moving forward in wind development."

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