IRVING, Texas — The Gulf Coast Power Association’s fourth annual SPP Regional Conference last week drew more than 130 registrations, but most from the Houston area and those involved in Hurricane Harvey restoration efforts were unable to attend, cutting the audience by almost 20%. GCPA Executive Director Tom Foreman said the organization refunded registration fees to those from Houston.
“My heart, prayers and concerns go out to all of our friends, family and colleagues in Houston and South Central Texas,” said Foreman, a Houston native. “They are still in the midst of a truly historic and devastating event. Please know that all of us at GCPA wish you well and hope you remain safe.”
SPP Chairman: ‘Green Revolution’ Faces Unknown Future
Referring to the SPP region as the “Saudi Arabia” of wind, SPP Board Chair Jim Eckelberger focused his keynote presentation on the RTO’s ample wind and solar resources, and the challenges they present.
He pointed to slides that listed the 17.9 GW of wind capacity currently in service and the 43.8 GW of additional capacity in all stages of development. That includes 36.8 GW in the generation-interconnection queue and 7.1 GW with signed interconnection agreements. SPP’s queue also has 7.7 GW of solar projects.
But that’s not all. Eckelberger said the Great Plains states of Kansas, Nebraska, New Mexico and Oklahoma, along with the Texas Panhandle, may produce up to 90 GW of wind capacity — almost double SPP’s current peak demand of 52 GW.
On April 24, Kansas wind farms generated more energy (3,712 MW) than the state’s load (3,507 MW). Oklahoma came close that same day, producing 5,054 MW of wind energy while the state’s load was 5,682 MW.
“There’s a future that’s really unknown. That unknown future is a dilemma for what this green revolution is,” Eckelberger said. “All this is happening, not because of the Clean Power Plan, and not because of government-subsidized wind and solar. It’s about science moving forward, technology moving forward and the market itself. That’s what pricing does.”
The wind revolution has resulted in more than 20,000 industry-related jobs, more than $23 billion in capital investments and more than $40 million in annual lease payments to landowners within SPP’s footprint, Eckelberger said.
“This is why governors say, ‘Don’t export wind to my state. I want that development to myself and bring those jobs to my state,’” Eckelberger said. “What a national energy policy would do is have us move this immense wind energy from west to the east. It would really make sense to be in that mode, but we don’t have a national energy policy. It’s not going to happen, at least in the foreseeable future.”
Asked why he is so pessimistic about a national energy policy, Eckelberger told RTO Insider some of the blame lies with “parochial [state] governors” protecting their states’ interests.
“I sense from the states they feel the same way,” he said. “There’s not a lot of oomph for a national energy policy. Of course, not much is getting done in Washington anyway.”
Can SPP Withstand More Negative Prices?
Bruce Rew, SPP’s vice president of operations, said wind energy is fast replacing natural gas as the RTO’s No. 2 fuel resource, and surpasses coal at times as the No. 1 fuel source.
“Gas is pretty much a secondary resource,” Rew said. “It’s still important for short-term reliability commitments.”
Khai Le, senior vice president for energy software provider Power Costs Inc., noted that SPP’s Integrated Marketplace has pushed almost 5 GW of less efficient capacity out of the dispatch stack most days, which has resulted in lower production costs. Le said the market’s prices “are rational and consistent with gas costs.”
However, he also said no market has more negative day-ahead and real-time LMPs than SPP. The Integrated Marketplace cleared about 160 negative five-minute intervals in 2016.
“With greater wind output and low gas prices, 70 to 80% of coal units are offered as must-run resources, so 20 to 30% of coal is out of the money,” Le said. “SPP will need more quick-start peakers, but under current SPP protocols, peakers do not receive sufficient reliability unit commitment make-whole payments to cover their full production costs.”
Still, Le said, he has yet to come across a market participant who wants to leave the SPP market. “If you talk to most market participants, they give a fairly high score to SPP,” he said. “Somewhere between an A- to an A.”
Golden Spread Electric Cooperative’s Mike Wise, the company’s senior vice president of regulatory and market strategy, said the region will have to decide what to do with the potential wind energy to come, given SPP’s lack of load growth.
“SPP is the renewable breadbasket of energy for the U.S., but we’re an island,” Wise said. “We’re throwing more and more renewable energy into this island, with very little capability to push this out. Can a market consistently continue with negative pricing long-term? This problem, or opportunity, is going to get deeper and deeper as you go on.
“[Our] congested areas have a large amount of renewable energy in those pockets and significantly high amounts of negative pricing. We need units able to operate and provide services necessary to support a reliable grid. Coal plants are paying to put coal-fired energy in the market. With that in mind, we need flexible units and the ability for market signals to encourage and bring on those units with short, quick-start capability.”
Improvements to SPP-MISO Interregional Process
SPP members offered recommendations to improve the interregional transmission planning process with MISO, which has yet to result in a project between the two organizations. MISO last month told stakeholders it was no longer considering the first transmission project to result from a coordinated study with SPP. (See SPP Glum as MISO Axes Last Interregional Project.)
American Electric Power’s Jim Jacoby said the RTOs should align their study processes and timelines, noting that MISO only allocates costs for 345 kV or higher, while SPP allocates down to the 115-kV level. He also pointed to a 2,500-MW export capability with MISO, “which isn’t much when SPP has a 50-GW system and MISO a 150-GW system.”
“AEP thinks that’s a problem. It thinks lower-level kV projects can be valuable,” Jacoby said. “[Aligning the study requirements] might help incent some of these projects get built.”
“We classify projects as purely reliability or purely economic or public policy, but it’s very unusual to see a project selected for reliability that doesn’t have economic benefits as well,” said ITC Holdings’ Alan Myers. “We need to be less limiting in our thinking.
“Bottom line, our traditional planning has focused on reliability and incremental fixes to the detriment of the overall system,” he said, emphasizing that ITC is not advocating less focus on reliability. “We’re in the midst of a green revolution and a rapidly evolving shift in load. All of this calls for, and demands, a new approach to the planning system, and bigger picture things across the seams.”
Jesse Moser, MISO’s director of transmission planning, promised his audience changes are coming. He said the two RTOs are working to resolve the differences in cost allocation and expect a FERC filing next year with an effective date for the 2019 planning cycle.
“We did get a push from FERC as a result of a complaint on the MISO-PJM seam,” said Moser, referring to the commission’s 2016 order on a complaint by Northern Indiana Public Service Co. (See FERC Signals Bulk of NIPSCO Order Work Complete.)
“If we don’t make those changes, we’ll probably get a complaint on the other side. We’re trying to get in front of that and be the masters of our own destiny.”
“If there’s an interregional solution to a regional problem, that’s what we think is very important,” said Missouri Public Service Commissioner Steve Stoll, who chairs SPP’s Regional State Committee. “So far, we haven’t come up with any [interregional solutions], but that doesn’t mean there won’t be any in the future.”
Political Uncertainty Cast Cloud over Market
Wise set the stage for a discussion of Lubbock Power & Light’s intended migration of 430 MW of load from SPP to ERCOT by asking what compels a load to switch grid operators.
“They’ve been served reliably [by SPP] for many, many years,” he said. “It’s not really a reliability issue. It’s purely economics. What are those compelling reasons loads would seek to move?”
Wise answered the question himself, saying that unlike SPP, ERCOT does not have capacity or firm transmission requirements. Transmission costs also are allocated differently in the SPP system. The Texas grid regionally allocates costs of service equally under “less intrusive” requirements than SPP in its base plan funding and highway/byway processes, he said.
“Those are the facts, and they’re undisputed,” Wise said, paraphrasing a line from the movie “A Few Good Men.” “Now we’ll have to spend time with what those facts mean. [The Public Utility Commission of Texas] will be dealing with those facts extensively over the next few months.” (See “Commissioners Undecided on LP&L’s Contested-Rate Case Request,” Public Utility Commission of Texas Briefs: Aug. 31, 2017.)
Asked by Wise why ERCOT didn’t simply build a DC tie as a cheaper option to connect Lubbock’s load, Jeff Billo, the ISO’s senior manager of transmission planning, said the alternative was never studied. ERCOT and SPP have determined in separate joint studies that LP&L’s proposed transition would cost the two nearly $370 million. (See Load Migrations Put SPP’s Focus on Retention.)
“Their request seemed to be, ‘We want to be in the ERCOT market and ERCOT regulatory construct,’” Billo said.
The studies considered the differences between the two grids’ market and regulatory structures.
“At the end of the day, the study results would not be apples to oranges, but apples to apples,” Billo said. “More like Jonathan apples to Gala apples.”
— Tom Kleckner
