News Roundup for the Week of Monday, July 22 – Sunday, July 28

News Roundup for the Week of Monday, July 22 – Sunday, July 28

Edison Electric Institute (EEI) Urges Federal Energy Regulatory Commission …

The National Law Review

On June 6, 2013, the Edison Electric Institute (EEI) issued a white paper urging the Federal Energy Regulatory Commission (FERC) to reevaluate the method it uses to establish returns on equity (ROEs) for transmission investments. EEI urges FERC to reaffirm its commitment to transmission investment by making necessary adjustments in its approach to setting a just and reasonable ROE for transmission investment. EEI’s white paper is certain to be controversial, since customer groups have been arguing for lower ROEs for many months.

FERC approves changes in ancillary service sales, reporting

HydroWorld

FERC said its final rules (RM11-24) are to enhance the ability of ancillary services providers to compete for sale of services to public utility transmission providers. FERC said its final rules (RM11-24) are to enhance the ability of ancillary services providers to compete for sale of services to public utility transmission providers.

Innovation Leader: MISO Uses Real-Time Synchrophasor …

Sacramento Bee

MISO recently became one of the first grid operators across the country to utilize new synchrophasor technology in MISO’s Real-Time System Operations for grid monitoring and analysis.

Renewable energy transmission projects create tension among greens

High Country News (blog)

You’ve got your grid-oriented greens on the one hand, who believe that the only way to slow or reverse climate change is by attacking it on a large scale, with big wind farms, big solar plants and big power lines to ship it across long distances. And on the other, the grassroots groups who feel that sacrificing local ecosystems to fight climate change isn’t the answer.

BLM unveils preferred power line routes through Utah

Salt Lake Tribune

The BLM this week identified its preferred alignment for PacifiCorp’s proposed Gateway South transmission line, connecting Wyoming renewable energy sources to a future substation in Juab County. Earlier this month the BLM released a draft Environmental Impact Statement (EIS) on the right of way for the project. This line would move up to 1,500 megawatts more than 400 miles from the planned Aeolus Substation in south central Wyoming to the planned Clover Substation near Mona.

NARUC Says FERC Rules Unfairly Snub State Authority

Law360

The National Association of Regulatory Utility Commissioners approved a resolution Wednesday strongly criticizing the Federal Energy Regulatory Commission, saying the agency’s implementation of a rule governing transmission planning “inappropriately infringes” on states’ authority over the electric grid.

Unneeded Power Line Would Scar New Hampshire

Hartford Courant

The Northern Pass Transmission Project — a proposed $1.4 billion electricity transmission project that would bring 1,200 megawatts of energy from Hydro-Quebec’s hydroelectric plants in Canada to southern New England — is one of the hottest issues this summer here in New Hampshire.

The five most important names in renewable energy that you’ve never heard of

Grist

Despite the well-documented value that transmission investments deliver to ratepayers and the environment, FERC has been hearing complaints recently that ROEs for transmission projects are too high, and that ratepayers need relief. These complaints are misguided, and their timing could not be worse. Never in our history has so much depended on expanding and modernizing our electric transmission system.

All Eyes on Connecticut: Microgrid Pilot Program Gets Underway

UPDATE: a version of this article appeared on the WorldWatch Institute’s ReVolt Blog, and can be accessed here: http://blogs.worldwatch.org/revolt/all-eyes-on-connecticut-microgrid-pilot-program-gets-underway/

One of the more interesting and underreported stories in the energy industry today is Connecticut’s ambitious electricity system pilot project—one that could have a widespread ripple effect across the country. On Wednesday, July 24, government officials announced plans for nine microgrid projects, as part of the state’s Micgrogrid Pilot Program aimed at ensuring electricity grid resilience and reliability during severe weather events.

“Microgrids” are essentially small-scale electricity generation and distribution systems integrating various distributed energy resources (DER) that can be managed locally and completely independently from the main grid. Fossil-fuel generator microgrids are common in many developing countries such as Haiti, India, and Brazil, and some U.S. universities and military bases have also implemented their own systems in order to insulate their operations from main grid outages. However, the concept of connecting already-electrified communities with microgrids is being touted as a means to encourage more renewable distributed generation (DG), relieve congestion from the main grid, and increase reliability in the process. (not to mention, a way to ensure humanity’s survival during the zombie apocalypse).

Prompted by the protracted blackouts that crippled Connecticut and much of the east coast during hurricane Irene and other storms, state lawmakers charged the Department of Energy and Environmental Protection (DEEP) with implementing a microgrid pilot program. The momentum behind this endeavor only strengthened after hurricane Sandy swept across the region. Late last year, DEEP opened up the application process and nearly three dozen Connecticut cities, towns, universities, hospitals, and companies applied to participate in the $18 million Microgrid Pilot Program. Once complete, renewable, fuel-cell, and fossil-fuel power will be delivered to the project areas on a 24/7 basis, without being integrated into the larger grid.

The nine applications that were ultimately selected represent a cross-section of the important resources that the state wants to safeguard during severe weather storms: police stations, supermarkets, university dormitories, city halls, senior centers, fire departments, gas stations, cell towers and shelters. Construction of the projects will be underway soon, with several coming to completion by the end of 2013. Governor Malloy has appropriated another $30 million for additional microgrid projects over the next two years.

A micro idea with macro potential for developers

The energy industry will be watching Connecticut’s progress closely because this pilot program could outline the path forward for the many potential microgrid sites around the country — nearly 24,000 in the estimation of one microgrid development company. Ideally, these grids would not all just operate small cogeneration plants (CHP), but would instead harness the best in renewable energy technology, advanced metering infrastructure, and electricity storage to form an independent and self-healing system. They could be grid-connected to provide more generation capacity and stability, and also “islandable” at a moment’s notice if severe weather or some other emergency require transmission operators to shed load from the main grid.

Waiting in the wings are big developers like General Electric, ABB, Siemens, SAIC, Schneider Electric, Boeing, Honeywell and Lockheed, along with boutique technology firms such as Spirae, Integral Analytics and Power Analytics (formerly EDSA). Many of these companies have already gotten a big boost from the Department of Defense’s massive multi-state investment in microgrid projects, as well as from several university microgrid endeavors. If the Connecticut project proves successful and lawmakers look for other microgrid opportunities, these companies stand to profit handsomely. Indeed, some analysts already forecast that the global microgrid market could be valued as high as $40 billion by 2020.

A micro idea presenting macro challenges for utilities

Despite all the buzz and momentum behind microgrids, one major industry group—investor-owned utilities (IOUs)—has not yet decided whether to embrace or shun this new technology. Microgrids present a dual challenge to these utilities. First, IOUs prefer to invest in tried-and-true technology because they are tasked with keeping the lights on and the system reliable. Second, IOUs stand to lose “market share” with every kilowatt generated by a customer or saved through an energy efficiency program. Under the traditional regulatory model, IOU revenue is determined by a PUC-approved calculation that amortizes the cost of utility assets and a reasonable rate of return across all the utility’s ratepayers over a period of years—a regulatory model that rewards large capital investments and increasing energy consumption.

Microgrids strike to the heart of this business model by presenting customers with the real option of one day being able to exit the utility’s service area entirely. If IOUs compensate for this lost revenue by raising rates on remaining customers, that could perpetuate yet more departures and eventually trigger a “cascading natural deregulation” of the whole utility industry.

Perhaps seeing the writing on the wall, some utilities have begun engaging with microgrid and smart grid technology. Thanks to a $10 million grant from the Department of Energy and the California Energy Commission, San Diego Gas & Electric (SDG&E) recently completed a complex project in Borrego Springs, California that integrates many microgrid elements including smart meters, distributed generation, and storage. A few other utilities, including some municipal utilities like Austin Energy and SMUD, are also moving forward with smart grid and microgrid-like projects. Although a step in the right direction, it remains to be seen how these projects will surmount the traditional IOU “business as usual” regulatory model.

It is difficult to say what the role of utilities will be as microgrids advance, especially after Connecticut’s pilot program. Many commentators have argued that the rise of distributed generation and demand-side management is driving the old utility model into extinction. In order to survive, utilities will have to make room for a more active and dynamic customer, one that expects advanced pricing and demand-response mechanisms along with other consumer-oriented services. Nonetheless, IOUs are arguing that—as the owners of nearly 66% of the country’s transmission and distribution system—the low-carbon economy of the future will have to make room for them too.

DOE Releases Report on U.S. Energy Sector Vulnerabilities

As the summer sets in around the country, many Americans are cranking up their fans and air conditioning units to escape the record-high heat. Especially in the West, rising temperatures are increasing electricity demand to the point where some experts argue that by 2050, 34 gigawatts of new generating capacity will be required — the equivalent of 100 power plants and a $40 billion bill for consumers. According to a new report from the Department of Energy (DOE) released yesterday, this is just one example of the many vulnerabilities facing the nation’s energy sector as a result of climate change.

The DOE report catalogs the various threats facing America’s energy infrastructure due to rising average annual temperatures, which have increased approximately 1.5°F (0.8°C) since the start of the 20th century. In particular, the energy sector will have to confront:

  • “Increasing air and water temperatures,
  • Decreasing water availability in some regions and seasons, and
  • Increasing intensity and frequency of storm events, flooding, and sea level rise.”

These climate trends have already had a devastating ripple effect throughout our country: the Southwest suffered through a record-setting drought, the West endured nearly unparalleled wildfires, and Hurricane Sandy pummeled the East coast, causing billions of dollars in damage and one of the worst blackouts in history. And that was just in 2012.

A snapshot of 10 years worth of vulnerabilities in the nation’s energy sector. To read more about these events, click on the picture and you should be directed to an interactive version of this map on DOEs website. (credit: Department of Energy)

These trends are expected to intensify in the years to come, which will adversely affect the stability of the U.S. energy sector. For instance, rising air and water temperatures will continue to increase power demand for air conditioning while simultaneously reducing the rainfall and mountain snowpack levels necessary to produce adequate hydropower in California, the Pacific Northwest, and the Southeast. Drought-induced water scarcity will also limit opportunities for continued hydraulic fracturing natural gas development. Sea level rise and intensifying storms will put more energy assets and infrastructure at risk, especially along the coastlines. In addition, any disruptions in the electricity system — through flooding and wildfires, for example — could compound these problems further by making entire regions vulnerable to blackouts and brownouts.

Due to our hundred-year history of carbon emissions, most of these climate trends are inevitable, at least in the short-term. However, the DOE report points out some promising technology and policy opportunities to help the energy sector mitigate these harsh realities. For instance, commercially available condensing technology would allow steam-electric power generating stations (running on nuclear, natural gas, or concentrated solar power, etc.) to dramatically cut their fresh water usage by converting steam back into water for a closed-loop process. Structural improvements, especially for the energy assets along the East and Gulf Coasts, could make this infrastructure more storm-resilient. Governments at all levels could also institute more energy efficiency policies. New York City, for example, has cut energy consumption by 2-3% in some parts of the city by planting more trees and installing green roofs on many buildings. One study cited by the DOE report projected that retrofitting 80% of the country’s conditioned commercial buildings could realize savings of $735 million per year.

In a final call to action reminiscent of the adaptation measures outlined in President Obama’s recent Climate Action Plan, the DOE report calls for a “comprehensive and accelerated approach” to implementing adaptation and mitigation efforts. From instituting improved technologies, initiating prudent policymaking, and engaging with stakeholders, building greater climate resilience in our energy sector will ultimately require a host of solutions working in concert together. DOE officials hope that this report will be used as a starting point for such problem-solving.
For more reporting on this issue see:

Cost allocation elaboration: Illinois Commerce Commission v. FERC, Case Nos. 11-3421 (7th Cir. 2013)

On June 7, 2013, the Seventh Circuit Court of Appeals upheld the Federal Energy Regulatory Commission’s approval of a Midwest ISO (MISO) tariff revision that allocates transmission costs for certain projects in the ISO’s service area. The court also remanded a separate issue to FERC for further consideration — the following blog posts from Troutman Sanders and Davis Wright Tremaine breakdown this and some of the other questions addressed by the court in Illinois Commerce Commission v. FERC, Case Nos. 11-3421 (7th Cir. 2013), so this post will look more closely at the primary issue: cost allocation.

The case centers around two sets of plaintiffs: regulators and utilities from Illinois and Michigan, referred to simply as “Illinois” and “Michigan,” respectively. Both groups took issue with how MISO calculated and allocated the transmission costs for the 16 “multi-value projects” (MVPs) that are proposed for construction in the ISO. These projects consist of extensive high-voltage transmission lines and are designed to improve overall transmission system reliability, help MISO utilities meet state renewable portfolio standards, and provide other economic benefits to transmission users. Illinois and Michigan argued that they should be exempt from the MVP surcharge because the projects would only benefit a few utilities. Furthermore, they asserted that even if they benefited from a particular project, MISO’s cost allocation scheme (the basis for its MVP surcharge) is too “crude” to fairly calculate these benefits and assign costs accordingly.

Both FERC — and later, the Seventh Circuit — disagreed. First, the court noted that MISO allocated the costs for the MVPs not based on proximity to the transmission project (as was the ISO’s practice prior to 2010), but rather to all utilities on the grid in proportion to their wholesale use. MISO and FERC argue that the MVPs will be primarily transmitting renewable energy from sparsely populated rural areas in amounts that vastly exceed the consumption needs and financial wherewithal of these areas. This renewable energy will be ferried across the entire MISO grid, relieving congestion and stabilizing the system in the process. Second, in recognition of these system-wide benefits, FERC felt justified in allowing MISO to impose the surcharge against each MISO utility according to how much energy they take from the entire grid. Although “crude,” this cost allocation scheme was nonetheless sufficient to warrant approval from FERC and the Seventh Circuit.

This second point requires further discussion because it has wider implications for other entities looking to challenge transmission cost allocation schemes. The Seventh Circuit is no stranger to cost allocation issues. In fact, it was the court’s decision in Illinois Commerce Commission v. FERC, 576 F.3d 470, 476 (7th Cir. 2009) that set out the standard FERC adopted for its landmark Order 1000. In that decision, the court rejected FERC’s approval of a PJM cost allocation scheme for want of a more equitable cost-benefit ratio. Recognizing that precise cost and benefit determinations for transmission projects are difficult to calculate, the court simply required FERC to have “articulable and plausible reasons to believe that the benefits [that a utility receives from a transmission project] are at least roughly commensurate” with the costs allocated to the utility.

By recognizing that MISO and FERC’s “crude” cost-benefit analysis was enough to pass the “roughly commensurate” standard, this case suggests that other courts (certainly the Seventh circuit) will give FERC similar deference. The court also puts the onus on challengers to show proof that cost-benefit analyses do not meet the “roughly commensurate” standard. It is not enough to simply say that the cost allocation mechanism is unfair; rather, the court said that the Illinois and Michigan parties needed to present “evidence of [an] imbalance of costs and benefits.” Parties challenging cost allocation schemes would be wise to heed this warning and come armed with data and other allocation alternatives for FERC and the courts to consider.

Dicta:

In dispatching one of Michigan’s arguments against the MVP, the court alluded to potential constitutional deficiencies with Michigan’s renewable portfolio standard (RPS). Michigan’s RPS requires utilities to acquire ten percent of their energy procurement from renewable sources by 2015. The court noted that by prohibiting in-state utilities from crediting out of state wind energy toward their RPS requirement, Michigan’s RPS law discriminates against interstate commerce in violation of the commerce clause. Although this constitutional aside can be safely relegated as dicta for purposes of the court’s decision, it nonetheless could add fodder to the pending constitutional challenges to RPS’s around the country. For more information on brewing dormant commerce clause challenges to state RPS laws see Daniel K. Lee & Timothy P. Duane, Putting the Dormant Commerce Clause Back to Sleep: Adapting the Doctrine to Support State Renewable Portfolio Standards, 43 Envtl. L. 295 (2013); Steven Ferrey, Threading the Constitutional Needle with Care: The Commerce Clause Threat to the New Infrastructure of Renewable Power, 7 Texas J. Oil, Gas & Energy Law 59 (2012).

As mentioned on the “About TransMissives” page, this site, and this post, are just for informational purposes, and nothing herein should be considered legal advice. 

 

TransWest Project Inches Closer to Construction

Late last week, federal agencies announced the long-awaited arrival of the Draft Environmental Impact Statement for the TransWest Express Transmission Project — a major multi-state transmission  project aimed at increasing grid integrity and  renewable energy integration in Wyoming and the Southwest.

Co-authored by the Bureau of Land Management (BLM) and Western Area Power Administration (Western), the draft EIS represents the culmination of several years of environmental analyses, public comments, and inter-agency planning. Once completed, the project is expected to transmit about 3,000 MW (enough to power almost 1 million homes), cost about $3 billion, and stretch 725 miles through Wyoming, Colorado, Utah, and Nevada. From now through September, BLM and Western will hold stakeholder meetings throughout the project area, and solicit comments or suggestions to include in the final EIS prior to beginning the year-long construction process sometime in 2014.

TransWest Map

Although the final project path will not be determined until the completion of the EIS process, the dotted line represents the current proposed route for the TransWest project.

A main project objective is to connect Wyoming’s wind energy resources — such as the 1,000 turbine Chokecherry and Sierra Madre Wind Energy Project currently under construction — to Las Vegas and Southern California energy consumers. In addition, proponents point out that having the extra grid capacity will alleviate congestion constraints all across the West’s transmission system. However, environmentalists are concerned that the proposed route would run right through important habitats for the sage grouse in Wyoming and Utah, and the desert tortoise in Nevada. To be sure, although the TransWest project is ambitious in both its size, capacity, and jurisdictional cross-over,  most of the planning process has been devoted to the kinds of environmental analyses and alternatives considerations that would address these wildlife concerns. 

Time will tell when construction will  commence, and what the ultimate transmission route will look like, but one thing is clear, with the Draft EIS out of the way, TransWest cleared its most significant and cumbersome hurdle.

For more info:

U.S. Department of the Interior, Bureau of Land Management, TransWest Express Transmission Line Project, http://www.blm.gov/wy/st/en/info/NEPA/documents/hdd/transwest.html

The Winderness Society, TransWest Express Transmission, wilderness.org/article/transwest-express-transmission

http://www.transwestexpress.net/