United States

United States

Transmission operators fight for right to build grid

UNITED STATES: A battle is being fought in the US over transmission law changes that could have a major impact on the development of grid links to key wind regions.

Electricity grid: Government’s transmission policy raises questions over who will build new lines
Electricity grid: Government’s transmission policy raises questions over who will build new lines

The Federal Energy Regulatory Commission's (Ferc) Order 1000 transmission policy, launched in July 2011 and currently receiving comments from industry, forces public transmission firms to take part in regional planning processes that consider the need for new grid links with reference to federal and state-level renewable energy targets.

A key issue in the policy is the question of who will build new lines, with Ferc facing opposition over its attempt to remove the right of first refusal (ROFR) for incumbent transmission-building utilities. Prior to Order 1000, incumbents used ROFR to sidestep competition by building lines themselves.

Two major transmission operators that between them operate lines in all or parts of 25 states - PJM Interconnection and Midwest Independent Transmission System Operator (MISO) - are among those aiming to retain ROFR.

"Their argument is that they can build lines faster than an outside entity," said Michael Goggin, transmission policy manager for the American Wind Energy Association (AWEA). "They want to retain the right to build these lines."

Existing transmission operators are able to finance new links by collecting money upfront from a utility's ratepayer base. If ROFR was removed, any firm bidding to develop a line under Order 1000 would be able to tap the ratepayer source of revenue.

HVDC boost

This would be a boost for the construction of the long-distance high-voltage direct-current (HVDC) lines beneficial to wind transmission, as these are projects that are generally proposed by independent developers and avoided by incumbent system operators who deem them too risky, claims Michael Skelly, president of Clean Line Energy.

HVDC systems move power faster and cheaper than lines carrying traditional alternating current (AC), but they require expensive conversion stations at each end for changing electricity to and from AC, the form typically generated by power plants and distributed to customers.

Houston-based Clean Line Energy is an independent transmission developer planning to build four 3.5GW HVDC lines across some of the windiest regions in the US market before the end of the decade.

However, as an independent, Clean Line is currently forced to finance transmission build by selling capacity on the open market rather than collecting money upfront from a utility's ratepayer base.

"It's expensive, it takes a long time and the risks are regulatory in nature and difficult to quantify - and those things are not a recipe for attracting a lot of capital," Skelly said, describing the difficulties his firm currently has in attracting upfront investment.

"If you're a utility, you don't get paid to take risks. You get paid to avoid risk, and that begets unfamiliarity with the technology. They're more comfortable with AC solutions, because that's what they've been around."

Clean Line's plans received a major boost in November when British energy transmission operator National Grid invested $40 million in the firm.

Overall, Skelly foresees an inevitable transmission boom rejuvenating the American wind industry regardless of the contentious federal production tax credit's long-term fate. Many of the new lines decreed by Order 1000 will connect remote windy areas to distant population centres just as renewable energy targets become due in many states.

Indeed, according to analysis from intelligence provider TransmissionHub, outlays of $15 billion are expected on transmission infrastructure this year and next, followed by $31 billion in 2015 - prompting more than 16,000 kilometres of new long-distance lines. Another $100 billion is projected by 2020.

Opposition fears

However, there are fears that opposition to ROFR by the likes of PJM and MISO could lead to much of this investment becoming embroiled in protracted litigation.

"The whole goal of Order 1000 was to get stuff built," said Chris Underwood, transmission development manager for engineering firm Burns & McDonnell. "Now there's a pretty good likelihood that it's just going to end up in the courts - and that could add two or three years of additional delays to the process."

Still, Underwood believes Ferc will try to avoid litigation by evoking its sweeping power to pursue the public's best interests. "But ROFR is really the crux of the issue," Underwood said. "Once that's removed, we'll see some new players enter the space."

Have you registered with us yet?

Register now to enjoy more articles
and free email bulletins.

Sign up now
Already registered?
Sign in