New transmission can prevent power outages during extreme weather — and save tons of money

Transmission could have paid for itself in savings during big Texas blackout, a new report finds. But capturing that value is tricky.

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Lack of new transmission capacity isn’t just holding back U.S. clean energy growth. It’s also leaving large parts of the country more susceptible to extreme weather-driven grid outages, at the cost of billions of dollars in economic damages.

That’s the finding of a report released Thursday. It calculates that more transmission could have reduced the impact of winter storm power outages that ravaged Texas this February, as well as similar, if far less dire, winter and summer grid emergencies over the past decade.

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In the case of February’s Winter Storm Uri, the analysis shows that every additional gigawatt of hypothetical transmission serving Texas grid operator ERCOT could have prevented nearly a billion dollars in economic damages. Those savings would have been enough to fully cover the cost of building new transmission, which the report estimated at $700 million per gigawatt of capacity.

The report comes as the Biden administration, federal regulators and Democratic lawmakers are seeking to reform the policies and economic structures that have held back transmission growth over the past decade. Multiple studies have identified expanding the country’s transmission capacity as vital to achieving clean energy growth at the scale needed to combat climate change.

Whether the goal is to increase wind and solar capacity or provide resiliency against winter storms and summer heat waves, the key value of transmission is making the grid bigger than the weather,” said Michael Goggin, vice president of Grid Strategies and lead author of the report.

Weather systems can be large, but they’re not that large,” he said in a Thursday presentation hosted by the report sponsor, the American Council on Renewable Energy (ACORE). If you make the grid large enough and strong enough, you can use imports from other regions” to ease shortages in the worst-affected areas.

Winter Storm Uri: A snapshot of transmission’s value

That was certainly the case for Winter Storm Uri, Goggin said. ERCOT only has about 800 megawatts of high-voltage interconnection to the rest of the country, an outgrowth of a decades-old policy to limit integration with the broader national grid to avoid federal regulatory oversight. It was forced to initiate blackouts affecting up to 20 million people for days on end due to widespread generation failures that couldn’t be made up for by imports from beyond its borders.

Every gigawatt of power can supply about 200,000 homes, which means that had ERCOT had stronger transmission ties to other regions, particularly the Southeast, it could have significantly reduced the damages and kept the light and heat on for hundreds of thousands of Texans,” Goggin said.

The toll of the Texas blackouts included hundreds of deaths due to loss of power and heat, at least $38 billion in excess electricity costs, and an estimated $200 billion in economic damages, Alison Silverstein, a former senior adviser at the Federal Energy Regulatory Commission and the Public Utility Commission of Texas, noted during Thursday’s event.

If we had two to five or more [gigawatt] interconnections to other regions, I know we would not have been able to import enough power to prevent the outages entirely, but we could have reduced them,” she said. The same interconnections could have allowed ERCOT to restore power more quickly to more people, and avoided the death and suffering and property damage that occurred during the latter days of the outages.”

The neighboring grid of the Midcontinent Independent System Operator (MISO), which was able to import about 13 gigawatts of power from grid systems to the east, saw far smaller and shorter outages by contrast, Goggin said. So did the grid operated by the Southwest Power Pool (SPP) to MISO’s west, which was able to access about 5 gigawatts of imports from its neighbor.

The value of additional gigawatts of transmission capacity to reduce the impacts to MISO and SPP are lower than those for ERCOT during the February storms since the impacts weren’t as bad to begin with, he said.

Image credit: Grid Strategies

Other grid emergencies, such as the August 2019 Texas heat wave, the bomb cyclone that hit the Northeast in December 2017 and January 2018, and the Northeast polar vortex event of early 2014, also saw lower benefits from increased transmission capacity.

Still, multiple studies show that transmission pays for itself many times over in lower power costs,” by enabling power flows from lower-cost to higher-cost regions, and by allowing interconnection of ever-cheaper renewable energy, Goggin said.

A recent study of 22 shovel-ready” transmission projects across the country found that they could spur about $100 billion in new renewable energy development and support nearly 1.2 million jobs. One of those projects, the proposed Southern Cross intertie from Texas to Louisiana and Mississippi, could also have provided nearly $2 billion in value to ERCOT during February’s emergency, well exceeding the $1.4 billion estimated cost for the project, Goggin said.

Even more transmission — particularly between the seams” separating the multistate grid regions of MISO and SPP, as well as eastern grid operator PJM and the transmission network serving the U.S. Southeast — could have provided even greater relief, he said. This map of power prices highlights how cheap electricity from PJM was unable to relieve high prices in MISO at the peak of the storm.

Image credit: Grid Strategies

In light of these multiple benefits, relieving the impacts of extreme weather is icing on the cake of what transmission supplies,” he said. It’s impossible to predict what the value will be to different customers, particularly with extreme weather events like this.” Even so, I think that needs to be reflected in how we plan and pay for transmission.”

The barriers to building new transmission

Earlier this month, the Federal Energy Regulatory Commission, which oversees interstate electricity markets and transmission policy, initiated a process to consider major changes to the existing web of regulations that govern the country’s transmission development processes.

As FERC Chair Richard Glick and Commissioner Allison Clements said in a joint statement, we believe that the status quo approach to planning and allocating the costs of transmission facilities may lead to an inefficient, piecemeal expansion of the transmission grid,” one that would ultimately be far more expensive for customers than a more forward-looking, holistic approach that proactively plans for the transmission needs of the changing resource mix.”

Over the past two decades, only a handful of grid operators have taken on the complicated process of aligning multiple states and utilities to build regional transmission capacity. Instead, most transmission has been built on a relatively small scale.

There are several reasons for this lack of large-scale transmission developments, but cost allocation in the MISO space is the problem” today, Jennifer Curran, MISO’s vice president of system planning and chief compliance officer, said during Thursday’s event.

Today, individual projects are planned and their costs and benefits are considered in light of how they could help solve specific problems, whether that’s to reduce existing grid congestion, increase the reliability of the system or allow new renewable energy projects to be interconnected.

But that type of siloed cost-benefit analysis doesn’t capture the need for changes to the grid, and additions to the grid, to meet the needs of a future that’s going to be vastly different for a number of reasons,” Curran said.

Those changes include a massive growth of renewable energy from state mandates, utility resource plans and corporate clean energy procurements, growing and shifting electricity demand to come from electric vehicles and building heating, and of course, the increasing risk of climate-change-induced weather disruptions to the grid.

In 2011, MISO’s Multi-Value Projects effort was able to build consensus across multiple utilities and its 15 member states to build 17 transmission projects worth an estimated $5.2 billion, an investment that’s enabled more than 20 gigawatts of wind farms to be interconnected since then. Goggin highlighted MISO’s success on this front, along with similar collaborative efforts in ERCOT and SPP territory, as models for how MISO’s current Long-Range Transmission Plan, as well as other regional collaborations, could break open bottlenecks in transmission growth.

Neil Chatterjee, a FERC commissioner whose term expired last month, said at Thursday’s event that he’d like to see FERC’s newly initiated proceeding investigating this kind of approach, where a transmission line to a renewable-rich area can be identified and built, if developers make financial commitments to a region,” thus reducing the need to allocate costs to captive customers. It’s not clear whether FERC could mandate such an approach, but it’s possible there’s a way for the commission to at least facilitate it.”

That kind of transmission growth will be vital to unblocking gigawatts’ worth of wind and solar projects that are languishing in grid interconnection queues, Chatterjee said. MISO’s western region has seen nearly all of the 5 gigawatts of renewable energy projects in its queue drop out in the past two years, under the pressure of cost-allocation rules that force them to bear heavy grid upgrade costs and years-long wait times to be studied for interconnection.

Similar interconnection delays and grid upgrade costs are slowing the growth of wind and solar projects that make up about 90 percent of the estimated 670 GW of new generation seeking interconnection in the country, according to a Lawrence Berkeley National Laboratory study of seven transmission grid operators and 35 utilities representing 85 percent of U.S. electricity load. That’s more than half the renewable energy capacity needed to bring the country to zero-carbon electricity by 2035, a goal of the Biden administration.

Getting grid disaster resilience into transmission cost-benefit analysis

How to value the extreme weather resiliency impact of this expanded transmission and renewable energy capacity is a tricky issue, however, panelists on Thursday’s webinar agreed.

We’ll need to estimate these benefits in a reasonable and objective way, and ideally in a nonpolitical and bipartisan manner,” Chatterjee said. If we were to consider resilience benefits in transmission planning, it would make cost allocation, which is already so difficult and complicated, even more complicated.”

Curran noted that much of the transmission built through MISO’s Multi-Value Projects process, which was designed to carry wind power from west to east, ended up supporting east-to-west power flows during Winter Storm Uri. That’s something we never envisioned” when assigning benefits to the projects, she said.

At the same time, you don’t want to go down the road of building for every problem that might occur, because the costs would be prohibitive,” she said. Because most new transmission is paid for by assessing rates on the customers of utilities that are deemed to be gaining benefits from the new projects, is it OK to share costs with everybody, because these are big backbone projects, or do we need to be more granular?”

In terms of the political challenges that arise when trying to get multiple parties to agree to bear the costs of new projects, the right answer is the one that most people can agree on,” she said.

Reducing those costs through incentives could help on the margins, as is the goal of a bill proposed in Congress to provide an investment tax credit for large-scale transmission projects. Some parties are proposing an even more involved role for the federal government. The Macro Grid Initiative, a collaboration of ACORE and Americans for a Clean Energy Grid, is lobbying for policies to build cross-country high-voltage direct-current (HVDC) lines to enable massive wind and solar growth in the parts of the country where they would be most productive.

Transmission backbone investments are massive and long term, and we never capture them entirely when we do the initial math,” said Silverstein, a proponent of the macro grid concept. For that reason, I think we should be justifying a massive taxpayer investment…rather than using this participant funding mythology to justify doing nothing, which I think is what’s happening.”

(Article image courtesy of Grid Strategies)

Jeff St. John is the editor-in-chief of Canary Media. He covers the technology, economic and regulatory issues influencing the global transition to low-carbon energy. He served as managing editor and senior grid edge editor of Greentech Media.