United States

United States

Cost-sharing transmission plan upsets Midwest

UNITED STATES: Wind developers and generators will have to pay for interconnecting lines as part of a proposal by the Midwest Independent Transmission System Operator (Miso).

Miso's proposal is part of a cost-sharing plan to spread major transmission upgrade costs among all electricity ratepayers in more than a dozen mid-American states that was approved by the Federal Energy Regulatory Commission (Ferc) in December.

In some cases, a single wind project may have to pay for many miles of interconnection wires in order to reach any of 17 so-called multi-value projects (MVPs) being considered under the plan. But the MVP transmission lines, at upwards of 100kV, are all proposed for areas near wind-rich tracts with regional significance and are expected to reduce the length of those interconnecting segments.

"It's a huge, great step forward," says Beth Soholt, director of Wind on the Wires, a Minnesota-based regional clean-energy advocacy. "But the proof is going to be in how many MVP candidate lines move forward and get constructed. (Then we have to see) whether those MVP lines really open up areas so that the interconnect cost is much less significant than it is today."

Miso's 13-state footprint extends eastward from windy Montana to western Pennsylvania, with several leading wind power states and the Canadian province of Manitoba in between. The MVP lines are under consideration in a region where many states must reach increasing renewable-energy goals over the next 20 years and are part of Miso's broader 2010 Midwest transmission expansion plan (MTEP), which recommends the addition of 231 transmission projects over the next decade.

The first MTEP project expected to move forward within the MVP plan is the $510 million Michigan Thumb Loop project, approved last year. Another project, a $725 million line that covers more than 200 miles between South Dakota and Minnesota, has been stalled by questions of finance for several years despite regulatory approvals - but is now likely to move forward quickly, according to Soholt.

Ratepayer costs for the MVP lines will vary according to the amount of power-plant capacity in each state. Not all states agree with the plan. "Some of the objections came from states that didn't really see themselves as benefitting as much from these long-distance transmission lines in the Midwest," says Sarah Johnson Phillips, an associate with law firm Stoel Rives. "Yet they would have to share in the cost."

One of the objecting states is Michigan, where the Thumb Loop project was approved before the MVP plan - which is backdated to July 16, 2010 - received the go-ahead from Ferc. Soholt says dissenting states need to recognise that transmission upgrades benefit entire regions.

"Michigan has already got theirs, essentially, and now is balking at having to pay for parts of others," Soholt says. "But you can't pick the projects apart and say 'OK, we got ours - now go away.' It doesn't work that way. The way to look at this is as a portfolio of projects and that's really the way Miso crafted it in the Ferc filing."

As for allocating interconnection costs, Soholt says different solutions are in the works that could allow the first project built in a given area to recover some of its costs as additional generators move into the area and use the new interconnection lines. In some cases, she says, interconnection lines might qualify as MVPs. "We just haven't had a lot of analysis done on exactly what that interconnection cost looks like," Soholt adds. "Once we start really looking at these transmission pieces in greater detail for individual projects, we'll have a better sense of whether this is going to work or not."

Learning by example

According to Michael Goggin, senior vice-president of public policy for the American Wind Energy Association (AWEA), transmission upgrade plans lacking broadly shared costs rarely move forward. "Regions without those policies are unable to build the transmission needed to modernise their power grids," he says.

Goggin points to a growing number of cost-sharing plans in other parts of the country, including Texas, which is building more than 320 kilometres of transmission lines that are expected to eventually connect about 9GW of new wind energy and result in reduced use of natural gas. Goggin is hopeful that Ferc's approval of the Miso plan will lead to similar proposals in other wind-rich areas of the country that currently lack cost-allocation policies.

But AWEA is also among those that lament the lack of cost allocation for interconnection lines in Miso's plan. "AWEA was disappointed that the Ferc-approved proposal retains the policy of assigning 90-100% of the costs of interconnection transmission to the interconnecting generator," Goggin says. "This policy has proven to be unworkable for moving those projects forward."

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