Johannes P. Pfeifenberger | The Brattle Group
Both reliability and clean energy related public policies are increasing the need for and benefits of large-scale regional and interregional transmission to avoid increased total electricity costs. Most studies of decarbonization find that a cost-effective end result requires at least a doubling of the delivery capacity of the U.S. transmission network.
Proven industry practices show that the industry already knows how to put together transmission plans based on co-optimizing generation and transmission to reliably and cost-effectively link anticipated future generation with anticipated future load. Any reasonable estimate of future generation reveals that each region will have a generation mix that is very different from today’s. But as FERC said in its recent Advanced Notice of Proposed Rulemaking, “transmission planning processes generally do not plan for the needs of anticipated future generation.”
In a new report, analysts from the Brattle Group and Grid Strategies offer some solutions that need to become standard practice, based on some proven examples of forward-looking, multi-benefit planning by some RTOs/ISOs and other grid planners in the U.S. and abroad. (See related story, New Tx Study Calls for Holistic Planning Across Regions.)
Rob Gramlich | Grid Strategies
The U.S. has been investing between $20 billion and $25 billion annually in improving the nation’s transmission grid. Over 90% of these investments are justified based on: (1) the local reliability criteria of transmission owners, including the replacement of the many aging transmission facilities built before the 1970s; (2) the local and regional reliability upgrades triggered by generation interconnection requests, which are now dominated by renewable generation and storage resources in many regions; and (3) the reliability criteria associated with regional planning processes conducted by grid operators. To date, only a small portion of transmission spending is justified on economic criteria and full analysis of broader regional and interregional benefits and costs.
The prevalent approach to transmission planning can be described as inefficiently reactive and incremental. It fails to take account of the large economies of scale and scope that exist in more holistic forward-looking plans. It fails to capture the co-benefits that exist in “reliability,” “economic,” and “public policy” based transmission facilities. Improved practices will significantly reduce electricity costs relative to status quo planning.
Costs associated with the prevalent planning approaches can be shown to be excessive when comparing studies under the current approach versus a holistic plan. For example, our report compares the results of a recent “regional” offshore wind analysis with the results of PJM’s generation interconnection studies. PJM’s study shows that the current generation interconnection study process (evaluating one interconnection cluster at a time) approximately doubles the transmission-related costs of integrating offshore wind generation compared to a more proactive, regional study process.
Improve Planning Processes
The planning processes can be improved by taking advantage of the last decade’s proven industry experience. MISO’s Multi-Value Project planning effort was a great example. It was proactive by incorporating anticipated future generation and load. It was multi-value, considering reliability, public policy, production costs and other benefits. It was scenario-based, finding a “least regrets” set of lines that were valuable under multiple potential future states. And it was portfolio-based, finding efficiencies and a less contentious cost allocation approach compared to considering projects individually.
MISO’s MVP plan is only one example. SPP’s Integrated Transmission Planning, numerous CAISO economic planning efforts, New York’s public policy transmission planning, and ERCOT’s CREZ and long-term system assessment approaches are all great examples of what can and should be done routinely.
These examples of successful, effective and proactive transmission planning demonstrate that we have proven and workable planning methodologies that can be employed. RTOs, their stakeholders and members, states, and FERC should see to it that these methods become the rule, not the exception. Thus far we do not have any good examples of joint interregional planning efforts that could lead to efficient interregional transmission infrastructure, but we’ll need to have that as well to achieve an efficient, reliable and resilient network.
The Planning Imperative
It will be critical to improve the existing processes for transmission planning and generation interconnection with proactive approaches that employ the above methodologies. Without such improved planning, we will not be able to build the more cost-effective, more flexible electricity grid necessary to meet reliability, economic and public policy needs at lower overall costs. In fact, without improved planning processes we may not even be able to bring online the clean-energy resources necessary to achieve the public policy mandates in place today.
Johannes P. Pfeifenberger, The Brattle Group’s practice leader for electricity wholesale markets and planning, is an economist with a background in electrical engineering and over 25 years of experience in electricity markets, regulation and finance.
Rob Gramlich is founder and president of Grid Strategies LLC, which provides economic policy analysis for clients on electric transmission and power markets in pursuit of low-cost decarbonization. He serves as executive director of Americans for a Clean Energy Grid and the WATT Coalition.