STUDY VALIDATES NEW ENERGY/NEW TRANSMISSION INTERCONNECT

Study finds wind power economically, environmentally advantageous when coupled with grid improvements
March 12, 2009 (ITC Holdings)

SUMMARY
Transmission Super Highway: Benefits of Extra High Voltage Transmission Overlays, a hew study from The Brattle Group, finds that, with adequate extra high voltage (EHV) transmission, emissions-free wind energy-generated electricity can be cost competitive with coal.

The conclusion was reported in testimony to the U.S. Senate and Natural Resources Committee by Joseph L. Welch, chairman, president and CEO of ITC Holdings Corp., the company that commissioned the study and wants support in building the Green Power Express, a new, high voltage transmission system for the upper Midwest.

According to ITC's plan, the Green Power Express will run 3,000 miles of the most modern, EHV 765 kilovolt (kV) wires across North Dakota, South Dakota, Minnesota, Iowa, Wisconsin, Illinois and Indiana. It will likely cost ITC at least $10-to-12 billion and carry up to 12,000 megawatts of what could be largely wind energy-generated electricity to Midwest and East Coast “load centers" and potentially avoid the construction of 7 600-megawatt coal plants.

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Welch asked the Senate panel to pass rules for modernizing the grid and streamlining the process of siting new transmission so more New Energy can be put to work cutting U.S. greenhouse gas (GhG) emissions and meeting the many state Renewable Electricity Standards (RESs) requiring specific use of New Energy sources by specific dates.

It is widely expected the Obama administration and the Democratic Congress will institute a national RES as well as push through climate change legislation putting a price on GhGs. With this policy regime and falling New Energy costs, Welch believes New Energy can be price competitive with Old Energy sources by 2020 if transmission is in place to deliver it.

Welch also asked the Senate to require all power generators and grid operators to participate in regional transmission planning and to require them to aggressively develop a national interconnection plan. He affirmed the idea of developing renewable energy zones (REZs) in resource-rich areas where efforts to site and build new wires would be incentivized and emphasized. He stressed that it is important to see that the benefits from New Energy projects and transmission projects are shared throughout regions where they are built.

The report indicates no request by Mr. Welch for planners to prioritize grid access for New Energy but that would, naturally, be a necessary component of new transmission planning.

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Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM)is a powerful advocate of the recently submitted Clean Renewable Energy and Economic Development Act (S. 539) to develop a national EHV transmission system for New Energy and renewable energy zones.

COMMENTARY
Although the report is certainly good news for the wind industry, it is important to notice it was paid for by ITC Holdings Corp., the company that wants to build the new transmission.

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Many environmentalists vigorously oppose ITC’s Green Power Express and claim it is greenwashing for transmission that will primarily be used to deliver coal-generated electricity. (See No CapX 2020) Their belief is that ITC’s lines earn the same for carrying coal-generated electricity as for carrying wind-generated electricity and it is feasible to think the new transmission will only avoid the construction of 7 600-megawatt coal plants by delivering power from existing Midwestern coal plants instead of getting new Midwestern wind projects built.

One aspect of the ITC CEO’s testimony that lends credence to his opponents’ arguments is his contention that New Energy will only become price competitive by 2020 if transmission is in place. Transmission is only about 7% of the cost of U.S. power generation. There is every reason to believe new high voltage transmission is needed to connect remote, New Energy-rich regions to electricity-hungry, densely populated urban centers. But to stress the cost aspect as justification seems suspect.

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A number of the items in Welch’s testimony are not original but are nevertheless great ideas: (1) His proposal for Congress to require the 7 transmission regional planning authorities – known as regional transmission operators and independent system operators (RTO/ISO) – to aggressively develop a national transmission plan is excellent. (2) He is one of many to urge Congress to require federal agencies like the Department of Energy (DOE), the Department of the Interior (DOI) and the Federal Energy Regulatory Commission (FERC) to identify and develop REZs. In such New Energy-rich zones, there is likely to be a higher degree of assent to new transmission. Those areas are the "low-hanging fruit" of transmission development. (3) His stressing of the need to see that the benefits of new transmission go to everyone affected is insightful. Much of the Not-In-My-BackYard (NIMBY) and Build-Absolutely-Nothing-Anywhere-Near-Anything (BANANA) resistance could be overcome by adequately rewarding participation.

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QUOTES
- Welch: “Right now, the outdated laws that govern our electricity grid are standing in the way of America’s energy goals…If Congress is serious about making renewable resources available, reducing our dependence on foreign oil, meeting renewable portfolio standards, and addressing climate change and other environmental challenges, they need to start by modernizing the rules that govern the grid…Transmission, which should be the enabler, is today a roadblock to the development of the full potential of renewable resources such as wind, solar and geothermal resources…”

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- Welch: “Our country is trying to tackle 21st century energy challenges with an electric transmission grid largely built more than 30 years ago while operating under an outdated regulatory system…To put it simply, we will not meet our energy security, efficiency and environmental goals if we don’t change how we do business. We urgently need to reform how we plan, locate and pay for new transmission. This requires moving beyond the parochial interests and fractured regulatory structure that has led to decades of underinvestment in our electricity grid.”
- Welch: “A modern grid will solve our environmental and renewable energy challenges and improve reliability and associated costs to the economy…Now is the time for Congress to encourage private investment in America’s energy infrastructure.”