By Tom Kleckner
ERCOT’s Board of Directors last week unanimously approved two transmission projects intended to ease congestion and reliability concerns in South Texas, where proposed LNG plants are expected to increase the region’s load.
The Regional Planning Group’s Valley Import Project will add a static VAR compensator at two 138-kV substations, at an estimated cost of $91 million. The Hidalgo-Starr Project will result in two new 345-kV lines, a 345-kV double-circuit line, two 345/138-kV transformers and various other improvements in the North McAllen-Edinburg region. The project is estimated to cost $51.5 million.
Both projects are projected to go into service as early as 2019.
Two LNG plants have already been approved for Corpus Christi and Brazoria, south of Houston. Another eight plants have been proposed, including six — an additional 2,400 MW of load — for the Port of Brownsville on the Mexican border.
ERCOT said further improvements may be needed to meet the Rio Grande Valley’s load in 2023, but the compensators will buy time until a long-term solution addresses the challenge.
“The issue we face is a limited amount of generation in the Valley,” Warren Lasher, ERCOT’s director of system planning, told the board June 14. “This is a situation where if we could get generation to site in the Valley region, it would significantly increase reliability in the region and preclude the need to build more transmission. … If [the two projects] get built, we would not need additional transmission into the Valley.”
Lasher said two large combined cycle gas plants have signed generation interconnection agreements, but neither were included in the planning models as they have not yet been “collateralized.” Staff did conduct a sensitivity analysis that assumed 780 MW of new generation and 700 MW of LNG load; it showed reliability criteria could be met without additional import facilities.
Board member Judy Walsh, a former Texas commissioner and MISO’s board chair, wondered aloud whether building additional generation might be a cheaper alternative.
“It looks like chicken and eggs to me,” she said. “Without a [financial] product to incent generation, it makes it less likely generators will build.”
“If the board approves this, if the SVCs are installed, would that discourage new generation?” asked Public Utility of Texas Commissioner Ken Anderson, who also suggested eliminating mitigation schemes and letting prices rise.
Lasher said congestion pricing would influence future decisions about generation, but the SVCs could also play a role by changing the voltage-stability limits in the Valley.
“The SVCs will not be competing with the generation units. They will be changing the voltage-stability limits in the Valley, and may actually support the ability for thermal-based congestion to create a little more pricing incentive.”
Anderson also asked whether eliminating mitigation schemes in the Valley and letting prices rise would lead to the construction of more generation.
“The challenge in the Valley is that it doesn’t affect just the Valley,” pointed out Potomac Economics’ Beth Garza, director of ERCOT’s Independent Market Monitoring Unit. “It affects all the prices in the South load zone.”
Two transmission projects went into service in the region during the last two months, easing some of the congestion issues. However, the 524-MW Frontera combined cycle plant will disconnect from ERCOT during the third quarter and begin dispatching into the Mexican market. The plant is owned by Viva Alamo, a subsidiary of The Blackstone Group. [An earlier version of this story incorrectly identified the owner as Direct Energy, which sold the plant to Viva Alamo in January 2014.]
“One thing in favor of strengthening transmission … is that it’s pro market,” said unaffiliated board member Peter Cramton. “It allows a larger set of generators to compete in a more robust marketplace. You don’t always want to throw money at transmission, but at same time, you have to recognize it’s transmission that’s enabling the market.”
American Electric Power, which owns the two substations that will be upgraded and proposed both projects last year, will handle the construction. Sharyland Utilities and CPS Energy also submitted a proposal for the Valley Import Project.
