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The Federal 'Green' Superhighway: 3,000 Miles to Nowhere? (Part I: siting politics and state wealth transfers)

Investment in interstate transmission has not kept pace with the need for more electricity capacity, despite wakeup calls such as the widespread Northeast and Midwest blackout in August 2003. Transmission siting authority has become the mantra for those who claim that the “not in my backyard” (NIMBY) syndrome is driving U.S. energy policy. FERC was given the opportunity to flex their national siting authority muscle with passage of the Energy Policy Act of 2005 (EPAct), but their game plan failed to pass court scrutiny. Today, siting new transmission remains a state’s rights issue as it has always been.

Transmission siting controversies are increasing given the growing number of renewable energy projects that want to interconnect with scarce transmission capacity. Now, another layer of complexity is in play due to the potential of a national renewable portfolio standard that portends hundreds if not thousands of new renewable projects that will all seek priority for grid access.

There are new renewable projects in development today that are already in the queue waiting for transmission capacity on existing lines or the construction of new lines because of the prohibitive costs of transmission upgrades. Other projects are so remote that only a purpose-built transmission line can bring the energy to market.

Adding uncertainty to uncertainty, Congressional leaders have proposed constructing new transmission lines dedicated to moving only renewable energy coast-to-coast whereby state’s rights will be of secondary importance. Regardless, ratepayers will end up paying the tens of billions of dollars for these new lines and further driving up the cost of electricity.

Below, we discuss how FERC failed to implement the siting authority granted in the Energy Policy Act of 2005 and provide a case study on the reasons for failure. Part II (tomorrow) will look at the latest rendition of the siting authority power grab: Obama’s promise of a 3,000 mile coast-to-coast “green power” superhighway. We’ll also discuss the recent work by regional transmission planning organizations to bring renewable energy to market and the costs to do so. It won’t come as a surprise that the costs are extremely high.

 

 

New Transmission Sites May Take Years

Siting new transmission lines is an exercise in patience and endurance. The industry has plenty of war stories about state, county or local authorities being unable or unwilling to approve new transmission projects, especially projects that merely transit through a state to get energy to an out-of-state market. One of the long running and always contentious debates is the resistance of Connecticut residents to allow transmission of electricity generated upstate to pass that power through to New York City.

One of the most egregious examples of how a project can become a career in my memory is AEP’s Wyoming-Jackson Ferry line completed in 2006—16 years after the project’s launch, 14 of which were spent wrangling over siting.

Another example; a plan hatched in the late 1980s to move surplus power from coal power-rich West Virginia to power-short New Jersey and New York crashed in the early 1990s due to the opposition of Pennsylvania. Delegates from the Keystone State asked, appropriately, “What’s in it for us?” The answer: “Not much.” Pennsylvania responded, “No thanks.” End of project, after nearly a decade of contention.

Congress has made numerous attempts to reduce these delays and shorten the time required to add new transmission capacity where it is most needed. And each time the new laws have failed miserably.

The most recent attempt was provisions in EPAct that gave FERC the authority to override state and local opposition to the construction of interstate transmission lines if the agency determines that they will reduce system congestion. In April 2007, the Department of Energy designated two regions that qualify for such treatment as “national interest electric transmission corridors.” One covers a broad territory stretching from Maryland to New York and as far west as Ohio. The other includes a large chunk of southern California, southern Nevada (including Las Vegas), and parts of Arizona all the way to Phoenix.

In announcing FERC’s plan at the time, then-Energy Secretary Samuel Bodman said, “The parochial interests that shaped energy policy in the 20th century will no longer work.” Maybe so, but instead of serving the “national interest,” the proposed corridors look a lot like a lot of poaching routes to me. Their result was said to enable regions that have resisted building generation locally—in hopes of buying cheaper power from other regions—to avoid paying the full costs of “their” power. The problem with this plan is that it saddles out-of-state generating regions with the environmental and lost-resources costs and consequences.

California Dreamin’

The Sunrise Powerlink is certainly the most ambitious project developed by San Diego Gas & Electric (SDG&E) in many years. The recently approved project is running a new 150-mile transmission line east from San Diego into the deserts. SDG&E claims the link will spur development of renewables (geothermal and solar), lower transmission system congestion costs, and “reduce subsidies paid to local, aging power plants that are more expensive to operate.”

The second and third justifications are closely related and often given short shrift by the media. In the report backing its national corridor designations, the DOE states that one of the biggest reasons it considers the southern California grid “troubled” is the high cost of running those old plants in California—typically gas-fired units in urban areas. No surprise: SDG&E hasn’t built a new power plant in its service territory in more than 30 years.

In the interest of full disclosure, I worked on the design and construction of SDG&E’s last major power plant project Encina Unit 5 when it was constructed in 1976-78. I was also present when then-CEO Tom Page announced in 1978 that SDG&E was not going to construct any more plants but would become a “wires” company and in the future import energy from other sources rather than construct any new plants. To do so was a pure business decision made at the time given the resistance of local governments and citizens to building any more power plants. This business plan was a conscious decision to avoid building local generation and rely solely on imported energy to cover load growth. To their credit, the plan has worked for over 30 years, but now Arizona has the surplus power capacity and a growing population and is unwilling to share their electricity resources. This is a game changer for Southern California.

Buddy, Can You Spare a Megawatt?

I recently drove my 4WD truck to the top of a small mountain just south of the Palo Verde Nuclear Generating Station in Arizona, about 100 miles from the California border. The power park view warms a power engineer’s heart: The three-unit 3,739-MW nuke lies to the north, and to the south sit Sempra’s 1,250-MW Mesquite Generating Station, Pinnacle West Energy’s 1,136-MW Redhawk Power Plant, and LS Power’s 713-MW Arlington Valley Energy Facility. Travel over the next hill and south a few miles and you’ll find the 2,400-MW Panda Gila River Project. All but Palo Verde are gas-fired combined-cycle plants.

I’d venture that a big chunk of the more than 9,200 MW is just aching to find a path into Southern California. Why? The average retail electricity price is almost 50% higher there than in Arizona: 15 cents/kWh vs. 8.5 cents/kWh. Finding new customers willing to pay more for the same commodity would be a business coup for the plants’ owners. The only hurdle would be permitting the new lines needed to deliver it. But the Arizona Corporation Commission (ACC) has a different vision of how that power will be used—generate it in Arizona, use it in Arizona.

To its credit, the ACC saw through the “master plan” scheme and unanimously voted down a Southern California Edison (SCE) proposal to build a 231-mile transmission line to connect the power park to a substation near Palm Springs (and ultimately to the Sunrise Powerlink and points west). SCE execs argued that the link would “increase the state’s ability to transmit energy.” What they really meant was the ability to transmit energy to Southern California. Bill Mundell, an Arizona energy commissioner, explained the rejection succinctly at the time: “I don’t want Arizona to be the energy farm for California.” Commissioner Kris Mayes added, “You [SCE] are trying to drop a giant extension cord into Arizona.”

The final meeting on the project turned a bit testy when commissioners quizzed Dian Grueneich of the California Public Utilities Commission about her state’s recent lack of progress building new power plants and transmission lines. Mundell asked, “Why should Arizona put its natural resources, environment, and future energy supply on the line while California does relatively little?”

That’s indeed what California is asking Arizona to do, in an updated version of Aesop’s fable of the grasshopper and the ant. And that’s precisely why the entire national interest corridors program will face challenges from power “donor states.” In California’s case, taxing that nasty coal-fired power coming into the state up north and strong-arming its neighbor to the east for a bigger slice of existing gas-fired capacity is an energy plan doomed to failure. Nevada, keep an eye on these guys.

New Developments

Unable to convince Arizona’s utility commissioners to approve the new power line, the California utilities did just as was expected: ask FERC to step in and exercise some of that authority vested in them by EPAct to make Arizona plug in their extension line. FERC tried to mediate the disagreement with no success and subsequently developed an order forcing Arizona to agree to the interconnection. The inevitable federal court case resulted.

In February 2009, a federal appeals court slapped FERC’s hand for overreaching the authority granted to the agency by EPAct when it took an “expansive interpretation” of the law in asserting its power to override state decisions.

The U.S. Fourth Circuit Court of Appeals in Richmond, Va., issued its decision in a case brought against the regulatory commission by the Piedmont Environmental Council and multiple states and parties—including the New York Public Service Commission (PSC) and the Minnesota Public Utilities Commission (PUC).

At the heart of the matter was the authority granted by EPAct, which allowed the commission to approve interstate power lines after the affected state had “withheld approval for more than a year.” But in an issuance of a final November 2006 rule, FERC substantively interpreted the phrase, “withheld approval for more than one year” to include a state’s denial of a permit within the one-year statutory timeframe.

The petitioners had filed requests for rehearing on FERC’s final rule, arguing that the agency had erred in its interpretation. The parties also asked the court to review several rulemaking decisions FERC had made with the application of that interpretation.

“FERC’s interpretation is contrary to the plain meaning of the statute,” wrote Judge Blane Michael for the majority. “Simply put, the statute does not give FERC permitting authority when a state has affirmatively denied a permit application within a one-year deadline.”

Michael said that FERC’s standing interpretation would mean that state commissions would lose jurisdiction unless they approved every permit application in a national interest corridor. “Under such a reading it would be futile for a state commission to deny a permit based on traditional considerations like cost and benefit, land use and environmental impacts, and health and safety. It would be futile, in other words, for a commission to do its normal work,” he wrote.

The court’s decision now sets hurdles for FERC-approved projects whose public commissions have issued denials but that hasn’t slowed down the pressure to overhaul (again) the provision of the EPAct failed to pass judicial scrutiny.

In essence, FERC powers granted under EPAct were neutralized by the appeals court’s decision and Arizona’s rejection of the construction of a new transmission line stands.

But, this court decision doesn’t bring an end to the push for federalizing transmission siting authority. Far from it. The next page of the game plan uses the supposed need for a “green” coast-to-coast transmission superhighway as cover for nationalizing all future transmission siting decisions.

— Also contributing to this article was Sonal Patel, POWER senior writer

5 comments

1 Richard W. Fulmer { 09.22.09 at 7:44 am }

I wonder to what extent the transmission line siting issues described in Mr. Peltier’s excellent post would have been eased had we not stopped building nuclear power plants in this country. With the possible exception of gas-fired plants, most other types of power generation facilities tend to be placed near their primary energy sources (e.g., coal mines, wind corridors, sunny areas). Because of nuclear fuel’s significantly smaller volume, nukes do not have to be built near uranium mines and can, instead, be placed near consumers.

That leads to another question. What is the “carbon footprint” of constructing a wind farm and its transmission lines vs. constructing a nuke or gas plant and their (shorter) transmission lines? A thorough study would have to include the “carbon cost” of clearing trees for the lines. Assuming the wind farm footprint is larger, how many years would it take to “catch up” to a gas plant before it starts “saving” carbon emissions?

2 Michael Goggin, American Wind Energy Association { 09.22.09 at 12:59 pm }

Contrary to what this article claims, building new transmission would actually make consumers better off by giving them access to lower cost power and by improving the efficiency and reliability of the grid. For more on this topic:
http://www.awea.org/pubs/factsheets/Transmission_and_Consumer_Savings.pdf
http://www.awea.org/GreenPowerSuperhighways.pdf

Michael Goggin, American Wind Energy Association

3 Richard W. Fulmer { 09.22.09 at 2:09 pm }

Michael,
Perhaps I misread Mr. Peltier’s article, but my understanding is that he wasn’t saying that transmission lines were bad. He was saying that they are very difficult to build because of local resistance.

4 John Droz { 09.22.09 at 3:30 pm }

Mr. Goggin is doing an excellent job as a lobbyist: spinning every situation for the benefit of his client. This assures his continued employment.

Consumers will NOT be better off by building thousands of miles of transmission lines — but wind developers (his mployer) will.

Wind is not really “low cost power” if the government subsidies are taken into account. Read the EIA report that shows how high wind costs really are.

Contrary to Mr. Goggin’s unsupported assertion, adding more wind energy to the grid will result in LESS reliability. There should be some penalty for misrepresentation.

Here is a more accurate assessment of the “Smart” grid “http://www.infrastructurist.com/2009/02/23/the-smart-grid-a-little-stupid/”.

5 Patience { 09.13.11 at 12:02 pm }

If you want an example of a transmission line money grab, take a look at the failed Potomac Appalachian Transmission Highline (PATH) project, which was intended to carry coal-fired power from WV to a substation in MD.

Yes, there was a lot of NIMBY opposition – but that’s because opponents proved, more than once, that it was not “needed” to protect “reliability.” Indeed, the final nail in PATH’s coffin was when Dominion Power (not one of the companies involved in PATH) proposed rebuilding an old transmission line – cause of most of the alleged “future” problems. When new scenarios were run to assess the impact on “reliability” the rebuilt line would have, poof! All the problems moved out at least 15 years, i.e., outside PJM’s “planning horizon.”

Another source of landowner anger: The dishonesty of the companies making representations about the purpose of the project.

You state above that “a plan hatched in the late 1980s to move surplus power from coal power-rich West Virginia to power-short New Jersey and New York crashed in the early 1990s due to the opposition of Pennsylvania.”

PATH was the reincarnation of that plan, running through WV, VA and MD, skipping PA. The proposed substation in Maryland that was the “terminus” of the project included unoccupied bays for future lines to carry the electricity to … New Jersey! The PATH companies could lie by telling the truth – they were the ones getting it to MD, while other companies would be responsible for the next phase of the project, to build new lines from the substation to NJ.

We can read a map. (As well as PJM’s various planning documents, reports, etc.) The MD-to-NJ line wasn’t in the RTEP … until the spring of 2010.

Now PATH is a zombie project; it’s “suspended,” but the companies are continuing to rake in the 14.3% incentive ROE. This is a category that FERC never created, or authorized, but the companies – presumably backed by PJM – brazenly claim they can do this. Huh.

If you want to understand why citizens are so resistant to transmission projects, it’s because we are lied to, we are cheated, we are manipulated, and we are utterly cynical about the motives of all the institutional players, from FERC to the RTOs to the individual companies (and in some cases our own state agencies). We are shut out of the planning process, our concerns are dismissed out of hand, and somehow “the national good” always means we take it in the shorts.

As near as I can tell, there is no HONEST conversation under way at any level to develop national energy and transmission policy. It is ALWAYS about the Benjamins.

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