TODAY’S STUDY: How To Build The Transmission New Energy Needs
Planning and CapX2020 Building trust to build regional transmission systems
Marta C. Monti, Stephen Rose, Kimberley A. Mullins, Elizabeth J. Wilson, April 2016 (Humphrey School of Public Affairs, University of Minnesota and Minnesota Center for Science, Technology, and Environmental Policy)
This report tells the story of how CapX2020, a group of 11 utilities that serve load in several Upper Midwest states, worked together to plan, develop, and build $2.1 billion worth of new high-voltage transmission lines spanning nearly 800 miles in Minnesota, Wisconsin, North Dakota, and South Dakota. These coordinated efforts were at the forefront of changing energy system planning in the United States, and have ushered in a new era of multi-state transmission planning and development that is re-shaping the electric power industry.
In 1999, the Federal Energy Regulatory Commission (FERC) issued Order 2000, which required utilities and states to create regional transmission plans. This was a departure from standard industry practice: previously, pairs of utilities had partnered to build single lines connecting them. However, collaborative regional planning requires more coordination and trust because it involves many more stakeholders. For instance, there was significant regulatory risk because state policymakers and utilities were figuring out how to navigate the changing rules and regulations. The CapX2020 partnership was the first instance of a large group of utilities working collaboratively to address the transmission needs of an entire region.
In the early 2000s, the electricity transmission infrastructure of the Upper Midwest needed to be upgraded. The aging grid was struggling with reliability issues and having difficulty supporting growing electricity demands. At the same time, new renewable energy generators, predominantly wind, were connecting to the grid to meet state-level Renewable Portfolio Standards (now known as Renewable Energy Standards). The last new high-voltage transmission in the Upper Midwest was built in the late 1970s, and some of those additions had been fraught with controversy.
The CapX2020 group (short for “Capacity Expansion Needed by 2020”) was formed in 2004 to build the necessary high-voltage transmission lines. CapX2020 achieved success by building a strong coalition of 11 utilities that had the resources to finance and manage large-scale projects, and the political influence to ally with a broad range of stakeholders to change laws and influence regulations. The relationships the CapX2020 group cultivated coevolved with their work, allowing each utility to: (1) understand the challenge they faced of working together to build high-voltage transmission, (2) work with each other to develop a process through technical studies and engagement with industry stakeholders, and (3) make decisions about which rules of conduct were the most significant through governance and project agreements. CapX2020 developed a shared vision and aligned around a common goal, created a win-win situation for all participants, fostered deep relationships, developed a system of group governance to operationalize their work, and engaged with stakeholders with openness and transparency. These aspects parallel Kania and Kramer’s Collective Impact Theory, which states the commitment of a group of important actors from different sectors to a common agenda enables them to work together to solve a specific social problem (Kania & Kramer, 2011).
Regional planning that took heroic efforts from the CapX2020 group has become easier as markets and regulations have matured. The group came together to collectively identify risks, mitigate them ahead of time, and develop a realistic approach to upgrading the high-voltage transmission system in the Upper Midwest. The CapX2020 project created an organization that will continue to exist for decades to operate and maintain the transmission lines, and may collaborate in a similar capacity on projects in the future. It also created an example that other utilities can and should emulate as they cooperate on regional projects. To this end, CapX2020 accomplished several remarkable feats and simultaneously mundane activities that changed how transmission planning is done in the Midwest and United States:
• They performed technical studies necessary to show that new high-voltage transmission lines were needed.
• They changed laws and regulations in Minnesota in 2005 to enable the suite of projects to move forward.
• They engaged to an unparalleled degree with landowners, town, city, and county administrators, state utility Commissioners, legislatures, and regulators throughout the planning process to bring a new era of transparency and civic engagement to transmission planning, citing, and construction of new high-voltage transmission lines.
• They planned and managed projects with unprecedented levels of regulatory, logistic, and financial complexity.
The five sections of this report are organized as follows:
Section 1 describes the current transmission system in the United States and the Upper Midwest and outlines the decade-long process of building new high-voltage transmission lines. This section also reviews the contentious history of transmission development in Minnesota, especially the events of the late 1970s that have influenced how utilities and policy makers approached new development.
Section 2 outlines the work of the CapX2020 group between 2004 and 2007. It describes how the CapX2020 group was formed, determined its collective goals, performed coordinated technical studies, engaged with a wide variety of stakeholders, and changed Minnesota regulations that govern transmission planning to enable the projects to move forward.
Section 3 describes the roles that regulators, state agencies, and the public played in the development and approval of the new CapX2020 high-voltage transmission lines.
Section 4 examines how CapX2020 constructed the new lines. It examines both the internal organizational and project management structure of CapX2020, and discusses the challenges of coordinating the simultaneous construction of five distinct projects.
Section 5 explores the legacy of CapX2020 by examining what the new transmission lines mean for the future of energy system planning, how they support new regional energy generation and the critical role of public engagement for stakeholders and public buy-in for new high-voltage transmission lines.
To create this report, we reviewed over 100 documents including technical studies, government reports and laws, newspapers, and websites about the CapX2020 project and supplemented this archival research with 32 interviews with individuals who were directly involved in the CapX2020 project. Our discussions with utility employees, state and federal utility regulatory commissioners, industry representatives, lawyers, and landowners helped us better understand the social processes involved in creating and implementing CapX2020. We transcribed over 50 hours of participant interviews resulting in over 400 pages of documentation (see Appendix B). The investigation of this report was developed collaboratively with electricity industry practitioners to fact check and to gain a deeper understanding of localized knowledge that influenced the CapX2020 initiative.
Energy industry professionals and policymakers will find this report valuable because it describes the evolution of processes for coordinated development, permitting, and construction of multiple new high-voltage transmission lines. Given the new federal and state policy and regulatory demands, understanding how change is happening in practice can strengthen the processes utilities, regulators and policymakers engage in to create the next-generation energy system. Policymakers and the general public will find this report valuable because it makes transparent the decisions and processes in building critical societal infrastructure like highvoltage transmission lines and discusses how the public can become engaged and involved…
Discussion and Conclusion
5.1 Characteristics That Made the CapX2020 Partnership Successful
As of Spring 2016, the CapX2020 group is on track to complete five new high-voltage transmission lines. Spanning nearly 800 miles at a cost of $2.1 billion, all projects are on time and on budget. That alone is a significant achievement. It is even more impressive given that the last large high-voltage transmission line projects in Minnesota were built in the 1970s. Kent Larson, Executive Vice President and Group President of Operations at Xcel Energy noted, “This thing started more than 10 years ago. If you think about a project of this size and magnitude and complexity, you could think of a lot of reasons for it not to happen. It’s easy to kill a project, but it’s much more difficult to make it happen, and this group came together and made it happen.” (Larson, 2015)
This was a significant accomplishment to the utilities and regulators involved, yet it went almost completely unnoticed by the general public except for the people whose backyards the lines went through. Al Juhnke, former State Agriculture and Energy Advisor to Minnesota Senator Al Franken noted, “As far as public pizzazz and excitement goes, transmission projects rank just above sewer and water, and just behind road overlay projects. So, you know, the public doesn’t see this going on.” (Juhnke, 2015)
CapX2020 achieved success by building a strong coalition of 11 utilities that had the resources to finance and manage large-scale projects, and the political influence to ally with a broad range of stakeholders to change laws and influence regulations. The relationships the CapX2020 group cultivated coevolved with their work, allowing each utility to: (1) understand the challenge they faced of working together to build high-voltage transmission, (2) work with each other to develop a process through technical studies and engagement with industry stakeholders, and (3) make decisions about which rules of conduct were the most significant through governance and project agreements. Specifically, five key characteristics led to the group’s success:
1. Common goals
2. Creating a win-win situation
3. Building relationships
4. Group governance
5. Transparency and open communication
These aspects parallel Kania and Kramer’s Collective Impact Theory, which states the commitment of a group of important actors from different sectors to a common agenda can work together to solve a specific social problem (Kania & Kramer, 2011). Public utilities furnish the everyday necessity of reliable electricity to the public at large, operating at arm’s length from government. As such, they have a duty and responsibility to figure out what kind of infrastructure is needed to support the array of needs that they are chartered to serve, and proceed in a way that is timely. The CapX2020 partnership and work exemplifies collective impact theory because, “At its core, collective impact is about creating and implementing coordinated strategy among aligned stakeholders” (Kania & Kramer, 2013). This framework offers a template to utilities for building a successful coalition to collaborate on large projects…
Locational and Temporal Factors that Enabled CapX2020’s Success
The approach the CapX2020 group used sets the standard for how to collaborate on largescale, multi-state, multi-jurisdictional infrastructure transmission projects. However, certain factors that contributed to the project’s success were temporal and not replicable. Specific conditions shaped the economic and regulatory environment in the early 2000s…
The Legacy of CapX2020: Enabling Future Projects and Replicability
CapX2020 has made it easier for utilities in Minnesota and the Upper Midwest to work together. They set an example of how differently structured utilities (IOU, municipal, cooperative; large and small) can collaborate on large-scale infrastructure projects. Much of this approach can serve as a template and can be replicated. The CapX2020 group has a model of cooperation and successful project execution to work from, which makes it easier for members to work together in the future. Many participants from the group talked about examples that illustrate the benefits of their collaboration…
The CapX2020 project operated in the midst of a paradigm shift in the electricity industry.
The CapX2020 group upgraded the transmission backbone of the Upper Midwest through a series of simultaneously remarkable feats and mundane activities. In the early 2000s after three decades without any new high-voltage transmission development, the region was becoming desperate for additional capacity. Existing transmission lines were becoming congested as load grew and new renewable generators were installed to meet state RESs. FERC Order 2000 encouraged regional transmission planning through the establishment of ISOs, which were established to coordinate, control, and monitor the operation of the electrical grid. These factors created the necessary, but not sufficient conditions to encourage a regional transmission planning partnerships. However, no regional groups had emerged to plan new transmission in the five years between FERC Order 2000 and the initiation of CapX2020. It took visionary leaders and leadership to create the CapX2020 group to address the barriers that prevented a group of utilities to address regional transmission needs together.
CapX2020 was at the vanguard of regional transmission planning.
The time was ripe for action and the right actors came together in Minnesota and beyond with the social capital needed to form durable, long-lasting relationships. CapX2020 participants felt their working relationships, personal connections, and the comradery they developed were vital to seeing the project through to the end. The collaboration parallels the collective impact theory in that five key characteristics lead to the group’s success. They developed a shared vision and aligned around a common goal, created a win-win situation for all participants, fostered deep relationships, developed system of group governance to operationalize their work, and engaged with stakeholders with openness and transparency. Regional planning that took heroic efforts from the CapX2020 group has become easier as markets and regulations have matured.
As changes to the electricity industry continue, this culture of collaboration will be the new normal, and utilities will need to follow suit to remain competitive in the world of transmission development.
Over time, processes and coordinating structures become institutionalized, no longer seen as “new” but simply part of the way work is accomplished. As ISOs continue to develop their markets, as the effects of FERC Orders are felt, and as new legislation is implemented, coordinated transmission planning will continue to become the new normal, and utilities will need to follow suit to remain competitive in the world of transmission development.
The work of the CapX2020 group set a precedent for the way coordinated development, permitting, and construction of new high-voltage transmission lines should be done. As multistate transmission planning becomes increasingly common, it will serve as a successful example that other regional groups can follow.