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Category — Electricity: ‘Smart Grid’

California Looks Harder at the ‘Smart Grid’ (CPUC’s Division of Ratepayer Advocates new analysis)

“Regulators who don’t approve smart stuff are by elimination reducing themselves to certificators of dumb stuff. When nuclear optimism peaked, backers said that its power would be “too cheap to meter.” The bill for the smart grid is turning out to be too confusing to meter, but like in the nuclear heyday, the momentum is irresistible.”

I have some kind words for the California Public Utilities Commission’s Division of Ratepayer Advocates (DRA), its in-house department charged with representing small consumers in rate proceedings.

DRA has long been agnostic about the benefits of smart meters. But with the release of “Case Study of Smart Meter System Deployment: Recommendations for Ensuring Ratepayer Benefits,” the issue of high costs relative to benefits is on the table.

Better late than never.

Complexity Unbound

DRA’s lightly redacted public version analyzes the gap between anticipation and reality in Southern California Edison’s “Advanced Metering Infrastructure” (AMI or SmartConnect) rollout program.

The numbers are interesting, but DRA’s big point is that the CPUC has hardly any idea about what it does or doesn’t know amid the hyper complexity of smart meter costs and benefits. [Read more →]

May 3, 2012   13 Comments

Smart Grid Wiseup: Google and Microsoft Quietly Exit (energy efficiency vs. the hassle factor)

“I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need to be employed in dissuading them from it.”

- Adam Smith, The Wealth of Nations (1)

We all know that Google is incredibly future-oriented, and that, for all its problems, Microsoft, knows a lot about technology and markets. Why, then, did each shockthe ‘smart grid’ movement by announcing the phaseout of their home energy metering and control technologies (Microsoft’s Hohm and Google’s EnergyMeter)?

The deep meaning of this is less about technology than it is about politics.

Two PR Moments

You will learn nothing from the announcements from Google and Microsoft. Both companies’ PR departments broke the news as sanctimoniously as possible, using the language of planetary consciousness.

Google claimed that its device was really a charitable endeavor that originated in the company’s philanthropic arm. (Thank heaven for free cash.) For much of its lifetime EnergyMeter was managed by a former astronaut (honest), who said the company was “not trying to build a business model around it.”

Microsoft’s release is a contender for the record in concentrating words like sustainable, ecosystem, quality of life, climate, collaborative, etc., etc. into four fairly short paragraphs. Being Microsoft, however, it closed by touting the sustainability of its new hobby horse, the cloud, almost certain to be as insecure as Windows.

Second-hander business…. Where do-goodism reigns over bottom line discipline. Where perception is the main game. Remember Enron? Remember the wisdom of Adam Smith who saw bad results in his eighteenth-century day?

Penny-wise, Pound Foolish [Read more →]

October 26, 2011   3 Comments

The Smart Grid and Distributed Generation: A Glimpse of a Distant Future

A smart grid/distributed generation combination could have a large role to play in the future of electricity systems in terms of both supply and use. But it is incorrectly being touted as the solution to our perceived electricity problems in the short term, that is for the next 10 to 20 years. Meaningful fulfillment of a “smart” grid and/or extensive Distributed Generation could be a half-century away, even more. Therefore, early, extensive, and expensive initiatives that claim to be on the “right track” are very likely to be on the wrong track later.

Is the right track (1) upgrading the grid capacity and implementing new transmission lines to facilitate the integration of utility-scale wind and solar or (2) the implementation of smart meters to match (read restrict) demand to the erratic and unreliable supply of these?

Absolutely not. Such ill-advised initiatives will require an unacceptably large investment in grid elements that will likely all too quickly become irrelevant as the  needed electricity infrastructure changes are engineered and introduced in the future.

But first things first: what is meant by Distributed Generation (DG) and the smart grid? [Read more →]

April 28, 2011   9 Comments

The Smartest Grid In The Room: California Scheming Goes Awry

Any reader lucky enough to have a new iPhone4 knows that sometimes technology just doesn’t work out the way sellers claim. Other times they do, but not in the way that consumers want or expect.

Such is the case with a major component of the so-called “smart grid”– the smart meter. There is growing agreement among federal and state policymakers, business leaders, and other key stakeholders, that a Smart Grid is not only needed but well within reach.

But it is not. Think of the Smart Grid as the 4G network for electricity. Smart meters, are a prime example of an unnecessary and expensive change that will provide little in the way of consumer benefit. They do, of course, provide utilities and energy marketers and government with a host of new tools, which is why they’re being sold in the policy arena. That plus the fact that makers just want the consumer to pay for something that isn’t (yet) cost effective explains the extracurricular (political) push. Add to all this the government’s insistence–encouraged by intermittent renewable developers lobbying efforts and billions in “stimulus” funding–and the momentum is hard to overcome.

The energy utilities want the meters to send price signals that change as generation costs change. By charging you more during high-usage “peak” times (e.g. hot days) they hope to persuade you to shift your usage to “off-peak” evenings and weekends, as many consumers now do with long-distance phone calls, when generation costs are lower. Of course, after a few days the inconvenience of getting off the couch every hour to read the new signal and turn on or off appliances, may lead people to the conclusion that the savings are not worth the effort. It might be smarter, and more effective to install additional generation capacity that can actually perform on those hot days.  [Read more →]

July 15, 2010   19 Comments

Smart Meter Chaos: Maryland PSC Gets Real (consumerism, anyone?)

“The Proposal would not, in and of itself, enhance the electricity transmission grid or the Company’s distribution ‘backbone,’ and therefore it doesn’t justify the proposed customer surcharge by BG&E.”

- Public Service Commission of Maryland, IN THE MATTER OF THE APPLICATION BEFORE THE OF BALTIMORE GAS AND ELECTRIC COMPANY FOR AUTHORIZATION TO DEPLOY A SMART GRID INITIATIVE  AND TO ESTABLISH A SURCHARGE FOR THE RECOVERY OF COST CASE NO. 9208 (June 22, 2010)

The smartest guys in the electricity room believe that a path to energy efficiency and environmental goodness is to hook up so-called smart meters for us little users. The smart machines would signal (jolt?) us to use less power in peak times when the price is high and to use power more when the price is low.

But the very concept has problems aplenty. First, time-of-use pricing for residentials (versus commercial and industrial customers) is a nice ‘green’ theory, not fact. Some states like California do not want or allow such residential pricing because of equity concerns. 

Second, so-called smart meters are all about government (taxpayer) and class ratepayer subsidies, not stand-alone economics between willing buyers and sellers. 

Third, there is the hassle factor (called transaction costs) of setting up appliances with time-of-day usage. Relatedly, (in)flexibility costs are incurred.

And last but not least, smart meters are intrusive. Big Environmental Brother lurks behind each smart meter to tell you what to do and when to do it. Civil libertarians take note of this government-dependent machine. 

Smart meters as ENERGY POLICY appear to be penny-wise and pound foolish. But members of an eco-energy elite want to individually pay by the pound to impress the neighbors and save the world, let them be ‘early adopters’. And perhaps these special users should also pay the costs of utility manpower in setting up time-of-day pricing to leave nonusers whole. Such is life under public utility regulation.

Make no mistake: smart meters are not a ‘let-the-market decide’ proposition. If they were, utility customers could decide individually and on a stand-alone basis whether or not to buy and install the meters. This should be an individual demander-to-provider proposition without other ratepayers or taxpayers involvement.

One final point: the federal budget is in horrendous deficit. Smart-meter money earmarked for Maryland should not be redistributed by the Department of Energy to other states as planned. The monies should be axed from the budget, reducing the deficit on a dollar-for-dollar basis.

And by removing this component of the program, the broader Smart Grid investment concept, which has all the earmarks of a rate base perversity as explained by Robert Michaels, can be given a reality check as well.

From the PSCM Decision [Read more →]

June 25, 2010   12 Comments

The Federal 'Green' Super Highway: 3,000 Miles to Nowhere? (Part II: Obama's power grab and high cost)

[Yesterday's post discussed how FERC failed to implement the siting authority granted in the Energy Policy Act of 2005 and examined a case study about why it failed. Part II looks at Obama’s “green power” superhighway, the recent work by regional transmission planning organizations to bring renewable energy to market, and the extremely high costs to do so.]

Public policy has long supported the ability to construct new transmission lines that relieve congestion and reduce the cost of energy to consumers. However, it is another question entirely to construct a new “green” coast-to-coast transmission corridor given the mess our transmission system is in today and its prohibitive cost. Critics have complaint that it is throwing good (transmission) money at bad (renewable) generation money.

Slowly, regional system operators are resolving transmission bottlenecks and improving the smooth flow of energy in their service territories. The good news is that virtually all of the most important regional projects are likely to be in-service well before our Washington representatives will complete their transmission siting authority “power grab” (not that it will change their game plan). Also, regional transmission planning organizations are actively promoting and siting transmission lines. The regional system is working and they don’t need FERC or congress to help to fix it.

The local siting processes are working (regardless of how you feel about siting renewables-only transmission lines) but the costs for constructing this transmission is extremely expensive per unit of energy generated given the periodicity of the output from wind and solar power plants. Costs of constructing new transmission for renewable projects can easily equal a quarter of the cost of building the power plant alone. In ERCOT, the price is over $2 million per mile to bring renewable energy into the existing grid and will add at least 5 cents/kWh for the transmission portion of the cost of renewable electricity alone—more than double the cost of electricity from our existing fleet of nuclear power plants and 60% more than the cost of coal-fired electricity at the busbar. The Western Interconnect planning process is currently identifying likely renewable sites and looking at transmission line corridors.  

 

FERC: Try, Try Again

In Part I we discussed how federal siting authority of new transmission lines was granted under the Energy Policy Act of 2005 (EPAct) yet FERC’s implementation of that authority failed judicial scrutiny. In addition, the case study presented concerning adding an interconnection between Southern California and Arizona clearly shows that there are many other issues that must be considered when establishing the need for FERC to intercede on behalf of one state or another. In my mind, the most significant issue, and the Arizona Corporation Commission agrees, is that a state must completely exercise their ability to construct local power generation facilities before attempting to cross connect to an adjacent state. Merely needing the power is no reason for the federal government to exercise its eminent domain powers when there is an unwillingness to construct new plants.

Today, we now hear the next stanza to this same tired tune. We continue to be told that a complete overhaul of the U.S. power delivery system is required but now the grid updates must also accommodate the higher levels of renewable energy expected to be generated over the next decade. Senator Harry Reid (D-NV) gave us a look at our future when, at a conference in February hosted by the Center for American Progress Action Fund, a group organized by John Podesta, proclaimed, “My legislation (referring to another round of legislation he promised to introduce that will speed approvals of transmission lines) will require the president to designate renewable energy zones with significant clean energy-generating potential.” Reid went on to explain that the federal government should be given the authority, through FERC, to overrule state and local governments that slow the development of Obama’s promised 3,000 miles of new interstate transmission lines.

The proposed legislation would also provide FERC the power of eminent domain should states be unwilling to yield to the inevitable pressure from Washington to approve the plans. “We cannot let 231 state regulators hold up progress,” Reid said. “They should be given every opportunity to see if we can work this out through the state regulators. If that can’t be done I think there are very few alternatives for the American people,” other than eminent domain. But any delays or obstacles would be quickly settled, Reid said. “Whatever we pass at the federal level trumps all that,” he said.

John Podesta, president of the Center for American Progress, said a stronger federal siting authority is needed, given that the 4th U.S. Circuit Court of Appeals ruled that FERC’s interpretation of its backstop siting authority under the 2005 energy bill was too expansive.

“It’s time to get back to the table and find a way so that states and regions can plan for the transmission that they need but that the federal government has a role to play to make sure that gets done,” Podesta said.

Reid has yet to provide any details of his proposed bill but a legislative aid said the bill would contain four main components: an interregional planning component, federal siting authority, a national cost allocation plan and a requirement that any generation that connects to the grid meet “green” standards. The four parts appear very similar to a plan produced by the Energy Future Coalition and the Center for American Progress.

Thankfully, Reid’s proposed legislation has yet to see the light of day given the extraordinary costs involved with constructing new national interstate transmission lines. For example, grid operators in the eastern half of the U.S. earlier released in August a study estimating that more than $80 billion in new transmission infrastructure would be needed to get 20% percent of the region’s electricity from wind generation by 2024.

Does Siting need Fixing?

The Federal Energy Regulatory Commission (FERC) recognizes the challenges posed by bringing electrons from new and disparately located renewable energy sources to population centers. In late May, FERC announced a series of transmission planning meetings that will focus on “wider integration of regional energy resources into the nation’s power grid.” In essence, renewable energy generation, principally wind energy, is located where the transmission infrastructure does not exist, and other distributed energy resources are located in transmission-constrained regions.

According to FERC Chairman Jon Wellinghoff, “Planning is one of the three legs on the transmission policy stool—the others are siting and cost allocation—and all are crucial to meeting the goals of assimilating demand resources, renewable energy and distributed generation into the grid for the benefit of consumers.” Here we go again.

From Market Pull to Product Push

Historically, electric utilities dictated when, where, and how much new generation would be added. Their integrated resource plans (IRP) determined the timing of plant additions, the fuel sources, and the location of the new generation resources. Transmission planners followed the lead of utilities to route the necessary transmission capacity while also seeking to lessen area congestion, if necessary. Traditionally, new power generation resources—and, by extension, new transmission—responded to a market pull: predicted load demand. The role of the state and local governments was oversight, providing access to transmission, and setting rates.

In contrast, renewable mandates have upended the traditional approach to developing an IRP. Rather than anticipated customer demand driving generation and transmission decisions, government mandates are now in the driver’s seat. Twenty-nine states and the District of Columbia have a renewable portfolio standard that requires utilities in those states to supply some percentage of renewable electricity by a date certain.

For instance, the California Public Utility Commission requires that 33% of that state’s power originate from renewable energy sources by 2020. In order to achieve this extraordinary goal, all new power generation procured by the state’s utilities must come from renewable energy sources. In this new world, the “pull” of market demand has been supplanted by a government-mandated “technology push” that determines which renewable developers pushing new power into the system in response to state-mandated levels of renewable power have access to limited transmission infrastructure.

One of the other challenges to building new transmission capacity to move renewable energy long distances that was discussed by Wellinghoff is identifying acceptable siting locations for renewable energy facilities. In spite of FERC’s interest is being part of that decision process, much progress has been made at the local level that makes FERC irrelevant in siting transmission lines in practice.

Transmission Planning Out West

One important initiative toward this goal in the Western Interconnection is the Western Governor’s Association’s (WGA) Western Renewable Energy Zones (WREZ) study. In the WREZ study—which covers 11 western states, two Canadian provinces, and areas of Mexico that are part of the Western Interconnection—as many as 50 zones with substantial renewable resources are in the process of being identified so that renewable projects can be expedited and transmission projects can be planned in advance.

The ultimate goal of the WGA is to “develop 30,000 MW of clean and diversified energy by 2015.” The approach used by WGA is to first identify regions with high potential for generating renewable energy—solar, wind, geothermal, etc by involving all the relevant stakeholders. The results of these studies in turn drive transmission planning.

The most recent draft map from the Western Governor’s Association illustrates Qualified Resource Areas as those areas with a high density of developable renewable energy resources after screening for known technical and environmental limitations for which data are available. These data will be used to determine Western Renewable Energy Zones (WREZ) in the Western Interconnection.

The state with the largest installed wind power capacity has already identified Competitive Renewable Energy Zones (CREZ) within the ERCOT Interconnection. In March, the Texas PUC assigned approximately $5 billion of transmission projects to be constructed in these CREZ that will eventually transmit 18,456 MW of wind power over more than 2,300 miles of new transmission lines from power-heavy West Texas and the Panhandle to highly populated metropolitan areas of the state. To put the magnitude of these numbers into perspective, the cost of transmission is over $2,000,000 per mile or over $270/kW of installed capacity.

The regulatory body expects that the new lines will be in service within four or five years. The Texas PUC took about three years to select the most productive wind zones in the state, designate them as CREZ, and devise a transmission plan to move power generated from those zones to various populated areas in the state. Many of these new transmission projects will begin construction later this year.

As an aside, T. Boone Pickens’ investment in his now delayed plan to build 1,000 MW of wind power in the Texas panhandle is in jeopardy. The ERCOT transmission plans do not extend the wires far enough into the Panhandle to reach Pickens’ projects. Pickens now has 687 wind turbines available that cost him a cool $2 billion that he hopes to recycle on a number of smaller projects in the U.S. and Canada. That’s a lot of wind turbines.

The Cost of New Transmission Is Substantial

More insidious are unpredictable transmission costs. Power sellers, buyers, and investors adamantly want price certainty in the total delivered cost. However, congestion charges can make the delivered price vary, especially in locational marginal pricing.

Everyone wants to know the answer to the question: What is the added premium to deliver renewable energy? Many transmission networks have both fossil fuel and renewable generators sharing the same network. Certainly, intermittent renewable sources have higher system-integration costs. Load balancing is more involved as well.

A recent Lawrence Berkeley National Laboratory study may provide an early answer to the cost question. Lawrence Berkeley National Laboratory (LBNL) recently issued a research report that examines the expected costs for new transmission infrastructure that would be needed to support an accelerated program for renewable energy projects, particularly wind energy. The report, “The Cost of Transmission for Wind Energy: A Review of Transmission Planning Studies” was released in February 2009. (A copy of the report can be downloaded at http://eetd.lbl.gov/ea/ems/reports/lbnl-1471e.pdf.)

The authors’ objectives in preparing this report were threefold: to define the transmission costs for a rapidly growing wind power industry, to discuss different transmission planning approaches, and to examine the models used to estimate future wind deployment. Our interest is this article is to focus on the transmission cost estimates prepared by LBNL.

The cost estimates are based on a review of 40 transmission planning studies completed between 2001 and 2008 by various developers, independent system operators/regional transmission operators, state agencies, and individual utilities. There is a wide range in transmission costs, although the costs are generally less than $500/kW. The cost of the median study scenario was $300/kW, or about 15% to 23% of the typical installed cost of a wind turbine plant. These numbers are quite consistent with the $270/kW from ERCOT discussed above.

The authors also concluded that variation in the study methodologies used in these 40 transmission siting studies and the characteristics of the specific grid may affect transmission installation costs (see table). Depending on the original purpose of the transmission line under study (whether it was congestion or deliverability focused), the authors concluded that the purpose affected the costs of adding wind energy to the mix.

Estimated Installed Cost of Wind Transmission Based on Three Higher-Level Studies of Wind Transmission. Source: LBNL

Study

Wind Capacity

Unit Cost of Transmission for Wind Power

10% Wind Energy by 2030: AEP 765 kV Overlay Study

200-400 GW

$150-$300/kW

20% Wind Energy by 2030: Wind Deployment System

290 GW

$207/kW

Annual Energy Outlook 2008 Projections for 2030: National Energy Modeling System

40 GW

$450/kW consisting of $316/kW for transmission and $133/kW for “long-term” multipliers

The study also reviewed three high-level wind transmission–only studies, as shown in the table above. These costs are generally consistent with the median cost identified in the original study sample of $500/kW, or about 25% of the $2,000/kW cost of constructing a new wind project.

The study also concluded that the historic cost of transmission was in the range of $35/MWh to $79/MWh with an average of $45/MWh. Using reasonable economic assumptions on the ERCOT transmission projects and a 33% capacity factor, the transmission lines add about $50/MWh to the price of power generated by the wind projects. For perspective, existing nuclear plants as an industry deliver power to the grid at less than $20/MWh and coal plants are in the range of $30 MWh.

Another Approach: Requiring Backup Power

Nevertheless, renewables do add additional costs to the whole system. For instance, speedy ramp-up of backup power is essential when a wind farm goes down with as little as one-hour warning. Reliability issues kick in as well.

For example, an ERCOT report concluded that only 8.7% of historic wind generation was produced during peak power hours limiting its effectiveness in trimming system peak demand.

Someplace in the delivery chain this intermittency of energy production versus load demand must be smoothed out. Utilities traditionally have taken on this burden themselves. Typically, a utility backfills wind/solar gaps with gas-fired plants to make up for any shortfall in energy production based on a number of factors, including the season, weather, and the region’s operating experience. Using the same approach with very remote wind and solar farms isn’t as straightforward. To do so would make the entire long-distance energy delivery chain, in effect, run intermittently—if the remediating, balancing measures are not applied.

A more recent procurement practice is for the electric utility to insist that the renewable producer directly supply steady, baseload-style power. In particular the utility expects the renewable power producer to have its own storage or natural gas backups. An example would be Xcel Energy’s April 2009 request for proposal for 600 MW of solar thermal that is “fortified” in this way.

Conclusion

Central planning based on temporary political majorities–or, dare one say, ‘political whim’–is not a viable long-term electricity policy. Free-market incentives to expand and build are preferable, and do not expect a 3,000-mile ‘green’ superhighway as a result.

— Also contributing to this article was Sonal Patel, POWER senior writer, and Martin Piszczalski (Ph.D), an industry analyst with Sextant Research

September 23, 2009   No Comments

The Federal “Green” Superhighway: 3,000 Miles to Nowhere? (Part II: Obama’s power grab, high cost)

[Yesterday's post discussed how FERC failed to implement the siting authority granted in the Energy Policy Act of 2005 and examined a case study about why it failed. Part II looks at Obama’s “green power” superhighway, the recent work by regional transmission planning organizations to bring renewable energy to market, and the extremely high costs to do so.]

Public policy has long supported the ability to construct new transmission lines that relieve congestion and reduce the cost of energy to consumers. However, it is another question entirely to construct a new “green” coast-to-coast transmission corridor given the mess our transmission system is in today and its prohibitive cost. Critics have complaint that it is throwing good (transmission) money at bad (renewable) generation money.

Slowly, regional system operators are resolving transmission bottlenecks and improving the smooth flow of energy in their service territories. The good news is that virtually all of the most important regional projects are likely to be in-service well before our Washington representatives will complete their transmission siting authority “power grab” (not that it will change their game plan). Also, regional transmission planning organizations are actively promoting and siting transmission lines. The regional system is working and they don’t need FERC or congress to help to fix it.

The local siting processes are working (regardless of how you feel about siting renewables-only transmission lines) but the costs for constructing this transmission is extremely expensive per unit of energy generated given the periodicity of the output from wind and solar power installations. Costs of constructing new transmission for renewable projects can easily equal a quarter of the cost of building the generation alone. In ERCOT, the price is over $2 million per mile to bring renewable energy into the existing grid and will add at least 5 cents/kWh for the transmission portion of the cost of renewable electricity alone—more than double the cost of electricity from our existing fleet of nuclear power plants and 60% more than the cost of coal-fired electricity at the busbar. The Western Interconnect planning process is currently identifying likely renewable sites and looking at transmission line corridors. [Read more →]

September 23, 2009   7 Comments

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

September 22, 2009   5 Comments

Smart Grid or Strong Grid? Comment on Ken Maize

Ken Maize’s recent post arguing for a strong grid instead of a smart one made an important point: the Smart Grid is largely an assortment of tweaks and minor fixes that lets America’s utilities get by with the transmission status quo to cope with the growing demand and integration of intermittent renewables.

Policy should instead aim at a strong grid. Redundancies and “excess” capacity could better maintain reliability and lower delivered power costs in a world of monopoly utilities. It would also facilitate market transactions if competitive retail and wholesale power markets prevail.

Maize has well-founded concerns about how utilities in a smart-grid world will

1) administer their new gizmo-heavy systems;

2) justify the benefits that small consumers will get in return for higher bills, and

3) make up for the prospect for increased vulnerability to innocent or serious hacking.

Rate Base Aplenty

Unfortunately, the Smart Grid has one great upside for utilities. If politics force them to invest less in generation (what they should be doing), they will need to plug a hole in their rate bases, i.e. the assets on which they can earn regulated returns with near-certainty. The Smart Grid does just this; its sheer size will require lots of costly meters, communications hardware and software, equipment to process the information produced, and still more investments to dispatch generation and manage demand on the basis of that information. The full cost also includes stuff on the consumers side of the meter, some of which utilities are also likely to supply. [Read more →]

July 8, 2009   5 Comments

Does the "Smart Grid" Have a Smartest-Guys-in-the-Room Problem?

[Editor note: Ken Maize, a long-time energy analyst, joins MasterResource for the first time (see his bio at the end of this post). A MR previous post by Robert Michaels has questioned 'smart metering,' part of the 'smart grid' concept]

However politically incorrect my conclusion, I’m convinced that the “smart grid” is not smart and even dumb. It diverts attention from what is a more important objective–a strong grid. And it politicizes in the very area where we need more consumer-driven, free-market incentives.

Following the Northeast grid collapse of 2003, the Electric Power Research Institute (EPRI) popped out the smart grid concept, largely the brainchild of then EPRI’s CEO Kurt Yeager. The blueprint was for an interconnected intelligent network reaching from the generating station to your toaster, able to talk up-and-down the line, matching supply and demand seamlessly.

Sounds cool, but doesn’t stand up to analysis in my judgment.

Where Did ‘Smart Grid’ Come From?

The idea of a smart grid has been laying around in bits and pieces for many years. I recall visiting Southern California Edison (SEC) in the 1980s where a group of us energy reporters visited the utility’s “smart house.” It kinda reminded me of the Betty Furness advertisements for Westinghouse kitchens when I grew up in Pittsburgh in the 1950s and 1960s. SCE assured us that the smart house, connected to the utility over phone lines (this was pre-World Wide Web) and through radio signals, would dominate home construction in the coming years. (Enron would have a ‘smart house’ a decade later to awe visitors to 1400 Smith Street in Houston, but that’s another story.) [Read more →]

June 19, 2009   6 Comments