Western states look to regional transmission organizations to boost clean energy’s pathways to market

Bills in Nevada and Colorado would set a 2030 target for utilities to join regional transmission organizations.

  • Link copied to clipboard

The Western U.S. is a hotbed for renewable power development. What it lacks are the regional regulatory and economic structures to build the transmission lines needed to move that clean power to far-off population centers and share it across a region facing increasing grid-reliability challenges driven by climate change.

But legislation across multiple Western states is giving proponents of expanding wholesale energy markets new hope for a breakthrough on this front — even if it comes with a 2030 deadline, given the ponderous nature of regional energy policy consensus-building, not to mention the decade-long timelines for building transmission projects.

Subscribe to receive Canary's latest news

Take Senate Bill 448, approved by Nevada lawmakers this week. The sprawling energy bill has won bipartisan support and the backing of NV Energy, the state’s biggest investor-owned utility. It takes many steps to boost the state’s progress toward its goal of 100 percent carbon-free energy by 2050, from $100 million in electric vehicle charging infrastructure to expanding roles for rooftop solar, energy storage and energy efficiency.

But the bill now awaiting Governor Steve Sisolak’s signature also puts NV Energy on a course to win state regulator approval for $2.5 billion in new transmission grid capacity that it’s already planning to build to expand the state’s already fast-growing supply of renewable energy. In the longer term, it sets two new 2030 goals for state energy policy: to get to 80 percent renewable energy, up from 50 percent target today, and to explore the possibility of ordering the state’s utilities to join a regional transmission organization (RTO).

That RTO provision has the support of renewables developers including Enel, EDF Renewables and Pattern, as well as Google — an avid shopper for renewable energy that is working on geothermal power in Nevada — and Ceres, a nonprofit investor network that pushes companies to take action on climate change.

That’s because joining a regional market could expand clean energy benefits both inside and outside the state’s borders, said Sarah Steinberg, a policy principal at Advanced Energy Economy, an industry group that’s been leading the charge on expanding RTOs across the country.

Support for SB 448 ranges from environmental and labor groups, with amendments accepted by the state’s massive gambling and hospitality industries, she noted. They see the benefits in terms of lower [energy] rates and economic development,” she said.

Large energy users want to stay in areas that have RTOs because it offers more energy purchasing options,” she added. While NV Energy has been boosting its share of renewable energy, major customers including MGM Resorts International have paid to exit the utility’s service and set up shop with independent energy suppliers.

A transmission plan that utilities and renewable energy developers can support

Steinberg noted the importance of NV Energy’s support for SB 448 in this context. The bill will provide key legal support to the utility’s Greenlink Nevada transmission projects, two high-voltage lines that will connect the cities of Las Vegas in the south and Reno in the north, and open up about 5 GW of renewable energy projects across the state.

The Public Utilities Commission of Nevada approved most of this transmission plan in March, but it held back its final approval for portions of the project over concern for the costs they would impose on NV Energy ratepayers. SB 448 will order NV Energy to submit a new transmission plan this year as an amendment to its integrated resource plan filed this week to propose the rest of the links in the region needed to spur economic development,” Steinberg said.

NV Energy is already part of the Energy Imbalance Market, a real-time energy trading market operated by California grid operator CAISO which includes more than a dozen utilities across the Western U.S. EIM has yielded about $1.2 billion in cumulative benefits over the past six years, largely by creating more fluid markets for trading the region’s growing share of wind and solar power that would have otherwise been curtailed.

But this real-time energy trading doesn’t incorporate the transmission planning and cost-sharing mechanisms that are a big part of the role played by the federally regulated RTOs and independent system operators that manage transmission grids across much of the country.

Absent such regional transmission planning constructs, the Western U.S. is largely dependent on merchant transmission developers taking on the risk of building projects and lining up power suppliers and offtakers for their energy, or on utilities winning approval from multiple state regulators to pass on the costs of building new transmission to their ratepayers.

Finding ways to expand the cost-sharing for such projects could help speed their development and expand renewables development, according to Christina Hayes, vice president of federal regulatory affairs for Berkshire Hathaway Energy, the parent company of NV Energy.

To only allocate that [cost] to customers in Nevada is very difficult, especially as the benefits are spread more broadly,” Hayes said in an April press conference with other groups promoting a federal investment tax credit for transmission projects.

Nevada’s solar, wind and geothermal resources have the potential to serve markets outside the state’s borders, primarily in California, but also across the region, Steinberg said.

The state sees itself as able to become a net exporter, and the transmission development that needs to happen, which will also facilitate an RTO, is going to enable a lot more renewables to come online,” she said. There are some pretty significant geographic constraints right now.”

Boosting the state’s 2030 clean energy targets to 80 percent also heightens pressure to expand its transmission capacity beyond its borders, said Cameron Dyer, Nevada staff attorney for clean energy advocacy group Western Resource Advocates.

That ties into transmission really well,” he said. If we’re part of an RTO, and we can import and export renewables relatively easily, then maybe 80 percent is a lot easier to achieve than it was before.”

More states looking to RTOs to solve transmission needs

Nevada isn’t the only state looking at these potential RTO benefits. In Colorado, Senate Bill 72 is proposing a similar path by setting up an independent transmission authority that could require all the state’s investor-owned utilities to join an RTO by 2030. (UPDATE: SB 72 passed the Colorado House on Wednesday afternoon and awaits the signature of Gov. Jared Polis.) 

Colorado’s primary investor-owned utility, Xcel Energy, has expressed opposition to SB 72, saying that it could undermine existing efforts set in place by a 2019 law to explore options for creating an energy market structure in the state. The study ordered by that law is set to be released later this year.

Xcel’s Colorado utility has joined CAISO’s Energy Imbalance Market, and several other Colorado utilities have joined a similar real-time energy trading market operated by Southwest Power Pool, the grid operator covering 17 states from the Dakotas to Oklahoma. On the transmission front, Xcel has proposed a $1.7 billion expansion to unlock renewable energy capacity and meet its goals of 80 percent renewables by 2030. It has also said that existing planning processes will enable that build-out.

But Amisha Rai, managing director of Advanced Energy Economy, sees Colorado’s SB 72 as an important step to align multiple Western states on a common path to integrate their energy market and transmission plans.

This is an issue that all states are looking at in the West,” Rai said. We’re seeing states like Nevada and Colorado really stepping up and making a statement that creating a Western RTO is a priority for their states, and that it’s essential not only to meet their clean energy goals, but to ensure that electricity rates are affordable into the future.”

Oregon lawmakers are exploring a bill that would study the benefits of an RTO, she noted. Utah has no such legislation at present, but in 2019 it commissioned a study of its transmission system that found future renewable energy development could lead to congestion on its existing transmission system.

RTOs are not a panacea for the challenges of building the transmission systems to grow renewable energy and secure a reliable grid. Texas grid operator ERCOT was forced to call for massive power outages in February amid winter storms that revealed the flaws of its energy-only market construct for securing adequate generation capacity to withstand below-freezing temperatures.

The transmission planning and cost-allocation structures of grid operator Midcontinent Independent System Operator have held back gigawatts’ worth of new wind power capacity from coming online, according to critics demanding reforms to those processes. Mid-Atlantic grid operator PJM is facing massive backlogs that have slowed the interconnection of a $2.5 billion merchant transmission project.

To Rai, these problems with other regional transmission organizations point to the need for the Western U.S. to think about the RTO of the future,” one that can help spur the doubling or tripling of nationwide transmission capacity that multiple studies say is needed to meet the clean energy mandates being set by a growing number of states, as well as by the Biden administration.

We really do need to be thinking about what can serve this region best, given the climate impacts, the drought conditions, the clean energy on the books, and all of the challenges we’re grappling with,” she said. The sooner we get moving on it, the better it will be for ratepayers and for getting this energy online as soon as possible.”

(Article image courtesy of Raivis Razgals)

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.