The fate of a $21 billion plan to expand electricity transmission across the Midwest is nearing a decision by the board of the Midcontinent Independent System Operator, the region’s grid operator.
But first, the largest-ever portfolio of power line projects in the United States is facing scrutiny over how MISO plans to account for carbon reductions that are high on the list of benefits to the region.
The proposal for 4,000 miles of new power lines across nine Midwestern states aims to increase access to electricity across the region and to strengthen the grid overall. In a region rich in potential wind power, the plan would make it possible to bring far more renewable energy and battery storage onto the grid.
“This [plan] is really getting at the problem we originally showed up in the room to solve,” said Sam Gomberg, transmission policy manager at the Union of Concerned Scientists.
That problem: unlocking vast amounts of wind potential in the Dakotas and Minnesota. That energy hasn’t been able to reach homes and businesses further east because of transmission constraints.
The aim of MISO’s plan goes beyond enabling more renewable energy. The goal of the so-called multi-value projects is to also improve reliability and guard against widespread outages from extreme weather.
For the past year and a half, the grid operator, utilities, consumer groups, state regulators, environmental advocates and others have debated how to measure the economic benefits of the projects. The grid operator’s tariff with the Federal Energy Regulatory Commission requires such regional projects to provide benefits that match or exceed their cost.
MISO’s analysis, released earlier this month, shows the proposed portfolio passes the test and will deliver benefits equal to at least 1.9 times the cost over the first 20 years after the lines are built. The grid operator said the power lines will provide additional value for decades beyond that.
But energy economist David Patton of Potomac Economics, who serves as MISO’s independent market monitor, contends the benefits are overstated. Utility commissions in North Dakota and Mississippi are also skeptical the price tag falls in line with state benefits.
Deciding how much transmission to build, deciding where to build and putting a dollar value on the benefits of new lines are as much an art as a science. As a result, grid operators have been sorting through complex and politically charged debates. Today, the shift to zero-carbon energy is front and center — particularly the challenge of assigning a monetary value to emissions reductions.
This collection of transmission projects is the second of three tranches of transmission projects that MISO plans for the middle swath of the country.
MISO in 2021 approved initial projects estimated to cost $10.3 billion. The grid operator expects to propose additional portfolios of projects in the Midwest and South, along with some that would better connect the Midwest and South.
In all, the price tag of the multi-phase expansion is expected to approach $100 billion.
Proponents say the consequences of not making those investments in the grid could be even more costly. The scope of transmission needs in the Midwest are in line with modeling that shows achieving net-zero emissions would require a significant transmission expansion as clean energy displaces fossil fuel plants.
Studies have also shown that more transmission would better protect consumers against the fallout from major storms. Winter Storm Elliott in 2022, for instance, forced offline gas plants in the eastern grid’s southern region. The storm caused outages and chaos on systems stretching from Tennessee to New York.
‘Benefits that aren’t real’
MISO’s analysis shows building the new transmission lines allows more wind and solar energy to access the market, reducing emissions from coal and gas generators.
The grid operator estimates the value of CO2 emissions within a range. The low end is $85 a metric ton — the value of the federal 45Q tax credit for sequestering carbon. The high end is the Minnesota utility regulator’s value for the social cost of carbon based on data from EPA: $249 a metric ton.
On both counts, Patton believes the numbers are inflated. The best figure, he said, is the federal production tax credit for renewable energy of roughly $50 a ton.
“The PTC is the most reasonable measure of the value of carbon,” Patton said in the memo to MISO. “It represents the amount that federal law mandates be paid to clean energy resources.”
“In absence of a consensus that the PTC undervalues carbon,” he said, “MISO has no authority to impose its view of the [social cost of carbon] to justify costly new transmission investment that must be borne by MISO’s customers that do not share MISO’s view.”
Patton questions the methodologies used by MISO to quantify the dollar value of several categories of transmission benefits. If corrected, he said, the 1.9 benefit-to-cost ratio shrinks to 0.5.
“I don’t think anyone wants to make decisions on costs this big based on benefits that aren’t real,” Patton said during a Sept. 13 meeting.
The market monitor, who evaluates the performance and operation of MISO’s electricity markets, doesn’t have a vote on whether the transmission plan gets approved. But he reports to and informs MISO’s board, which is expected to vote on the portfolio of projects in December.
Patton didn’t respond to messages seeking further comment.
‘There isn’t consensus’
MISO officials stuck to their guns on the value range they reached for carbon reductions.
“What we’re trying to reflect here is that there isn’t a clear consensus from a decarbonization perspective what that value should be,” Jeremiah Doner, MISO’s director of cost allocation and competitive transmission, said during a Sept. 13 meeting. “We clearly recognize that there isn’t consensus around that.”
Doner said MISO’s carbon analysis is similar to the one used three years ago for the first $10.3 billion tranche of transmission projects approved in the Midwest.
At the time, however, the value of avoided carbon emissions used by the Minnesota Public Utilities Commission was $13 a ton and the federal 45Q tax credit was $47 a ton, the high end of the range used by MISO to determine the benefit of transmission projects.
Those values have gone up since 2021. The federal Inflation Reduction Act nearly doubled the value of the 45Q tax credit, and Minnesota lawmakers redefined how the PUC calculates the social cost of carbon for energy projects in the state.
Gomberg of the Union of Concerned Scientists defended MISO’s methodology. “There is actually science behind the social cost of carbon, peer-reviewed science,” he said.
But Gomberg has his own beef with another part of MISO’s benefit analysis. He said it underestimates the value of the power lines reducing the risks of power outages during extreme weather.
The Electric Power Research Institute, through its Climate READi initiative, and New England’s grid operator, in its evaluation of winter reliability, are already doing analysis to factor in the grid-related impacts of climate change, he said.
“Refusing or trying to sidestep that science is a big mistake that ultimately is going to cost us lives,” Gomberg said.
