How could expanding transmission infrastructure and wind capacity in the PJM Interconnection region affect consumer prices for electricity? During today's OnPoint, John Jimison, managing director of the Energy Future Coalition, discusses a new report released by Americans for a Clean Energy Grid, focused on the impact of improved transmission infrastructure and wind capacity in the PJM Interconnection on energy prices. He also discusses his expectations for Congressional and Federal Energy Regulatory Commission (FERC) action on transmission.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi, joining me today is John Jimison, Managing Director of the Energy Future Coalition. John, thanks for coming on the show.
John Jimison: A great pleasure.
Monica Trauzzi: John, your organization, as part of the Americans for a Clean Energy Grid, has just released a study on transmission infrastructure, specifically dealing with wind capacity and PJM. How much money will expanding transmission and wind capacity in this area cost consumers?
John Jimison: Well, the point of the study is that it doesn't cost consumers. That you can double the amount of wind capacity called for by the existing renewable portfolio standards of the states in PJM, 13 states, provide that capacity with wind, and build the transmission and save those consumers a net $7 billion per year in 2026, and somewhat more and less in the years before and after that.
Monica Trauzzi: So there's savings on the back end, who pays for the up front costs?
John Jimison: The model that was used builds the capacity costs into the modeling, so the investors in the wind energy and the investors in the transmission, whoever that is, are recovering their investments from the cost of the wind in the market, and consumers are still saving because that cost comes in below the alternatives.
Monica Trauzzi: What do the folks at PJM think about this, and why specifically did the study focus on this region?
John Jimison: We actually had a meeting yesterday with Terry Boston, and he said, "If you were telling me it was 90 percent renewable energy I might have some heartburn, but we're going to meet our 11 percent now, and you double to 22 percent, that's not something that I don't think we can manage." And their own studies show the price suppression effect that creates the savings. This is our second study. We actually did one last year of the MISO region, Midwest Independent System Operator. Had the same effect. PJM is the biggest organized electricity market in the world and it's sort of the Big Kahuna among electricity markets in the U.S., and it's one of the most modern and developing. So we wanted to test the hypothesis for PJM, and that's why we did the study.
Monica Trauzzi: So is your strategy here to go essentially region by region in the U.S. and sort of find out how much it's going to cost consumers? Can we expect another report?
John Jimison: I just learned this week that the New England ISO did a report that suggests a billion dollars in savings there from the same kind of thing. I don't know that we're going to try and do a report for every region, but what we do want to emphasize is that the conventional wisdom that increasing renewable energy costs consumers money is simply wrong. It saves them money.
Monica Trauzzi: We've had the wind energy folks on the show, very recently in fact, and they've said that the continuing uncertainty surrounding tax incentives is making it difficult to make long-term investments. Do you see it that way as well, and how do you think that that uncertainty might impact the numbers that you used in this study?
John Jimison: Well, yes, I certainly think that an on-again, off-again, one-year extensions of a tax incentive would make it tough for any industry to do long-term planning, and the wind industry is no exception. The study assumes, and I didn't do the study, Synapse Energy Economics did the study, and my understanding is that the study assumed the current structure of the law including the PTC extension, and the study is focused on the year 2026. So by then I don't think there's an assumption of a PTC still in effect.
Monica Trauzzi: The House Energy and Commerce Committee recently held a hearing on grid reliability and sort of the shifting landscape on transmission. So what are the key decisions that lie ahead for Congress and then also for FERC on the transmission issue?
John Jimison: Well, FERC, of course, is in the middle of its Order 1000 implementation process, and that's a very complex process, region by region, and we would like to see that play out. FERC is doing a very constructive job in doing that. There are certainly issues that Congress will be reviewing, as it should, in clean energy and in transmission, but we don't see a basis for immediate congressional action in the face of what FERC's doing.
Monica Trauzzi: So the political instability, as some might call it, that exists currently in Congress, you don't think that will have any material impact on the future of transmission?
John Jimison: Well, it has a material impact on everything, and certainly we would like to see better bipartisan support. We have very strong bipartisan support for clean energy transmission. One of our strongest supporters is Governor Brownback of Kansas, you don't find conservative Republicans more than that. And we also have democratic support throughout. So we don't think we are a partisan issue, and we would not want to get caught up in partisan politics, and that's a lot of what we do see now.
Monica Trauzzi: All right, we will end it right there. Thank you for coming on the show, nice to see you.
John Jimison: My pleasure.
Monica Trauzzi: And thanks for watching, we'll see you back here tomorrow.
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