By Tom Kleckner

HOUSTON — When Missouri regulators recently rejected Clean Line Energy Partners’ application to build a high-voltage transmission line through the state, it seemed to sound the project’s death knell.

After all, it marked the company’s third unsuccessful attempt to gain Public Service Commission approval for its 780-mile Grain Belt Express, a $2.3 billion initiative that would deliver 4,000 MW of wind power from western Kansas through Missouri and Illinois to the Indiana border.

The company’s first attempt in 2015 was shot down after the PSC determined the project did not provide enough benefits to Missouri consumers. A second attempt last year failed on a technicality. The project has already been approved by Kansas and Illinois.

But Michael Skelly, Clean Line’s founder and president, was undeterred. Moments after the PSC determined that Grain Belt had not obtained approvals from all the counties it would cross, Skelly turned to his staff and said, “We’re not giving up.”

Two weeks after that ruling, Clean Line filed an updated application for a certificate of convenience and necessity and asked for a rehearing. (See Clean Line Seeks Rehearing on Grain Belt Rejection.)

The commission rejected that request Sept. 19. This time Clean Line responded by hiring former Missouri Gov. Jay Nixon and his law firm as Grain Belt’s legal counsel.

Nixon’s first bit of advice? Take the case to the Missouri Court of Appeals’ Eastern District, because the Western District had greased the skids for the PSC’s previous rejection when it ruled that an infrastructure project must secure approvals from each county it crosses. (See Clean Line Ponders Options After Grain Belt Rejection.)

Clean Line did just that on Sept. 19.

Staying Power

Skelly does not easily take “no” for an answer. Developing long-term projects requires vision and staying power, something Skelly learned as a founding partner of the Rain Forest Aerial Tram in Costa Rica’s rainforest. Skelly had come to the country as a Peace Corps volunteer after earning a bachelor’s in economics from the University of Notre Dame and an MBA from Harvard Business School.

Tenacity also was essential in his role developing wind farms as employee No. 3 for Zilkha Renewable Energy in the 1990s. Skelly was the firm’s chief development officer when it became Horizon Wind Energy after Goldman Sachs bought it in 2005. The banking giant sold Horizon (now EDP Renewables North America) for $2.2 billion in 2007.

Skelly then took a brief stab at politics, but after an unsuccessful run for Congress as a Democrat in Texas’ 7th District (he lost by 13 points), he turned his attention back to the power industry and wind energy.

Sensing an opening, he founded Clean Line in 2009. Skelly had financial backing from Houston’s Zilkha family, which had also bankrolled the wind company, and ZBI Ventures, owned by the Ziff family of New York.

Clean Line’s business model is building long-distance transmission lines to deliver wind energy to urban population centers. “We thought transmission was going to be the linchpin of expanding wind energy,” Skelly said. “If you look at the right technical solution to move lots of wind a long distance, you pretty quickly come to the conclusion that DC lines are the right answer. For anything over 100 miles [long], DC makes more sense. Then, thinking about it further, it was clear that the incumbents weren’t going to do this. It’s not their job to move energy to the Southeast or PJM. Their job is to focus on native load” and meeting demand.

“That felt like an opportunity for an individual to come in and tackle this job. No one else is going to do it.”

HVDC can cost as much as $2 million a mile, according to Clean Line. The high capital costs and the regulatory obstacles that have delayed construction led the company to seek additional financial backers. The company, which has almost 40 employees, has no current source of revenue.

In 2012, National Grid USA announced it was investing $40 million for about a 40% stake in Clean Line. In 2015, Bluescape Resources, an energy investment and operating company headed by former TXU Chairman and CEO C. John Wilder, agreed to spend up to $50 million for equity in Clean Line, with the potential to invest more in the company’s transmission projects.

Clean Line spokeswoman Sarah Bray said Bluescape is now the company’s “principal investor,” although National Grid, ZBI and the Zilkha family have retained equity stakes.

Project development for Grain Belt began in 2010, and in late 2012, the company was hoping to begin construction as early as 2015. Clean Line now says construction could begin in 2019, with the project operational as soon as 2021.

Besides Grain Belt, Clean Line is developing four other projects. Below is a description of the projects and their current status, contrasted with the company’s projections from 2012, where applicable:

• The Rock Island Clean Line, a 500-mile project from northwest Iowa to Illinois, delivering 3,500 MW of wind energy. The project was originally expected to be operational in 2017. But on Sept. 21, the Illinois Supreme Court rejected the Rock Island application because Clean Line held only an option agreement on a parcel for a converter station — rather than a completed purchase agreement — when it applied to the Illinois Commerce Commission. The company said the ruling will cause “great delay” for the project. “Although we are disappointed with the Supreme Court ruling on the Rock Island Clean Line, on the positive side, the decision did not impact the authority of the ICC, and the court made clear that we have an opportunity to refile with the ICC at a later date,” the company said in a news release. The company hasn’t decided on its next steps.
• The Plains & Eastern Clean Line, an approximately 700-mile project from the Oklahoma Panhandle through Arkansas to Memphis, Tenn., delivering 3,500 MW of power to the Tennessee Valley Authority and 500 MW to Arkansas. The company is involved in commercial negotiations with potential customers, both wind generators and loads seeking power. It will begin construction once it has contracts for 2,000 MW of capacity.
• The Centennial West Clean Line, a 900-mile project delivering 3,500 MW of renewable energy from New Mexico and Arizona to California. The company had expected construction to begin in 2017 and be operational in 2019. Development has slowed down while the company works on its other projects.
• The Western Spirit Clean Line, a 140-mile project complementing the Centennial West project, delivering 1,000 MW of renewable power from east-central New Mexico to markets in the western U.S. Clean Line acquired the project, originally named Power Network New Mexico, in 2013. Construction, which will take about one year, could begin by the end of 2018.

Like jugglers, Skelly and his staff must keep their eyes on many balls at the same time. The project teams are regionally based, but they enjoy legal, financial, communications, environmental and other support from Clean Line headquarters in downtown Houston, where black-and-white photographs of rock stars and the New York punk scene hang on the walls.

“You would think in eight years, you would have sort of a lull, but it’s a sort of a mad dash every day to move these projects forward,” Skelly said. “It’s more like an Ironman [Triathlon], not a marathon. It’s more like a decathlon, but it goes on for eight years.”

Projects that take so many years to put together will inevitably face changes at the federal, state and utility commission levels, Skelly said.

“One of the things you want to think about is putting together projects that can last through administrations,” he said.

One example: In March, the Arkansas congressional delegation — all Republicans — asked Energy Secretary Rick Perry to “preserve states’ rights” and reverse the Department of Energy’s decision to partner on the Plains & Eastern project over the objections of Arkansas officials. (See DOE Agrees to Join Clean Line’s Plains & Eastern Project.) The department had invoked Section 1222 of the Energy Policy Act of 2005, which, the legislators said, “risks codifying into law the practice of federal eminent domain seizures.”

The lawmakers also are sponsoring a bill that that would prevent the department from using eminent domain for Section 1222 transmission projects without the approval of both the governor and utility commission of affected states.

The project also has drawn the ire of Sen. Lamar Alexander (R-Tenn.), a member of the Energy and Natural Resources Committee, who said it could burden TVA with expensive wind power it does not need.

TVA has signed a memorandum of understanding with Clean Line, which has begun buying rights of way for the project. But neither TVA nor any other utility has signed a contract to buy the power the project would transmit.

Bray said she’s confident that Perry, the former Texas governor, will see the value of the project. “He’s seen the benefits of wind power first hand,” she said, citing the economic growth the state’s Competitive Renewable Energy Zone projects brought to rural Texas.

Skelly has said seeking DOE authority for the Grain Belt and Rock Island lines is an option but not his first choice because it is slow and costly.

Nothing to Show

Skelly doesn’t have to be reminded that Clean Line has yet to see a project come to completion, but that’s through no fault of the staff, he says.

“We haven’t done anything yet. We haven’t built anything yet,” he said. “You have to have a very motivated team. You have to be tremendously tenacious, you have to be creative. You’ve got to think long, long term. You have to have a team that works.”

Skelly said that while landowners’ opposition to transmission projects is “understandable,” the pushback from within the industry is more frustrating.

“We need to do a better job in embracing new ideas and innovation,” Skelly said. “If you separate [transmission and generation], you generally get more innovation. You don’t have the same level of common interests.”

Pointing to Commonwealth Edison’s opposition to the Rock Island project in Illinois, he said, “Why are they doing that? They’re doing that to protect their generation. If you look at what other countries are doing to build up their grid, they are embracing new ideas and innovation. They’re coming up with cost-effective solutions and they’re getting big projects done.”

ComEd did not respond to a request for comment.

In May, ComEd asked the Illinois Supreme Court to dismiss Clean Line’s appeal seeking to overturn an appellate ruling that reversed the ICC’s approval of the project. ComEd said the project had changed since the ICC’s approval in 2012.

Interregional Planning

Skelly is among those who have been frustrated that FERC Order 1000 hasn’t resulted in interregional transmission projects. WIRES, an industry organization supporting transmission investment, says the order has failed to produce true interregional planning because of inconsistencies in how neighboring regions evaluate projects.

“It is common for projects that are shown to provide benefits in interregional evaluations to fail regional evaluations for inclusion in regional plans,” the group said in comments following a FERC technical conference last year (AD16-18). (See Five Years Later, FERC Takes Another Look at Order 1000.)

WIRES also says transmission planning should model “a broader range of plausible market conditions, system contingencies and public policy environments” to consider the “flexibility benefits and insurance value that a more robust interregional transmission infrastructure can offer.”

In its grid study released in August, DOE called for a review of “regulatory burdens for siting and permitting” of transmission and actions to “accelerate the process and reduce costs.” (See Perry Grid Study Seeks to Aid Coal, Nuclear Generation.)

Building Relationships

Clean Line has worked hard in Missouri to gain community support for Grain Belt. The company signed up more than three dozen cities to purchase about 100 MW of power from the project; many of the cities also offered statements of support. That $525 million project, the company says, will save the state’s consumers $10 million annually and create more than 500 permanent jobs to maintain and operate the wind farms and the transmission line.

“You have to build alliances,” Skelly said. “We’ve got support from labor groups, environmental groups, business groups, from political leaders … doing these projects without building those types of alliances would be really, really difficult.”

That relationship-building extends to RTOs. While SPP, MISO and other grid operators don’t manage long-distance DC lines, their responsibility for grid reliability comes into play when interconnections are discussed.

Clean Line also must “fit within the context of how they do their market operations,” Skelly says.

The RTOs’ “paradigm is around the cost allocation of projects built by incumbents, which comes out of their planning process. Their planning process doesn’t plan around significant transmission exports. We have to make sure and work with them, so our projects fit within the context of those plans.”

Skelly said Clean Line recently spoke with an SPP member concerned about congestion caused by wind farms in the RTO’s western footprint. “They said, ‘We used to think you were too early. Now, we can’t get you to build your project soon enough,’” he recalled.

‘Preservation and Adaption’

While his business is focused on energy sources of the future, Skelly is also a history buff and preservationist. He and his wife, Anne Whitlock, live in a renovated firehouse in East Houston, which was recently recognized by Preservation Houston as a “shining example of preservation and adaption.” Nearby sit six Victorian homes that Skelly had moved and refurbished.

Firestation No. 2 and the other buildings served as a refuge for residents forced from their homes during the flooding during Hurricane Harvey, an act that drew attention from The Washington Post.

Skelly writes occasional op-eds in the Houston Chronicle, in which he has advocated for making the car-centric city more pedestrian- and cyclist-friendly.

Optimistic About the Future

Meanwhile, an optimistic Skelly continues to look to the future. Although federal production tax credits for wind projects will expire at the end of 2019, he thinks continued technological advances in wind turbines will compensate for that loss.

“We thought that the combo of open-access, low-cost wind [that is] relatively easy to permit … would result in an overbuild of wind,” requiring transmission to move the excess energy to load centers, he said. “We didn’t think that would happen until 2030, but it’s upon us now. Over time, we are moving to a leaner energy mix, there’s no question. Economics favor that. That’s just reality.

“There’s a lot of people pulling for us. I don’t think [demand for renewable energy] is going away any time soon. There are very large consumers of power in this country that care about carbon [emissions], and they’re putting their money where their mouth is in how they source electricity.”