TRANSMISSION

Renewables 'hit a wall' in saturated Upper Midwest grid

In August, two wind farm developers quietly withdrew their requests to tie into the Midwest power grid.

NextEra Energy Inc. and Southern Power Co. filed the notices with regulators in Minnesota and North Dakota, respectively. The documents didn't draw much attention. Developers routinely enter the Midcontinent Independent System Operator's (MISO) interconnection queue and later drop out if projects aren't feasible.

But renewable energy advocates in the region say the projects belong to a much larger group of wind and solar developments that have also dropped requests to plug into MISO's system. And the reason they surrendered their place in line — grid congestion — is a red flag for thousands of megawatts of projects still waiting for a chance to connect.

The Clean Grid Alliance — which includes renewable developers, environmental groups, turbine maker Vestas Wind Systems A/S and Google LLC — says transmission congestion threatens to dramatically slow renewable energy development. And that could have a ripple effect that goes far beyond keeping the lights on.

"I think there's extreme urgency," said Allen Gleckner, senior director of energy markets and regulatory affairs at St. Paul, Minn.-based Fresh Energy, a clean energy advocacy group and member of the Clean Grid Alliance. "It's getting to a crisis point."

Wind farms have provided revenue for farmers and other landowners who get lease payments from hosting turbines, and local governments have reaped millions from property taxes and benefited from new jobs, said Beth Soholt, the alliance's executive director.

Longer term, a slowdown in renewable development could also have implications for efforts by state and local governments, utilities, and companies seeking to meet increasingly ambitious carbon reduction goals.

Gleckner and Soholt agree there are ways to more efficiently use existing transmission capacity and ease the current crunch. But MISO and its members should still begin planning for grid upgrades, they say.

"There's no getting around the fact that we're going to need serious transmission expansion," Gleckner said.

That need was driven home in recent months as high transmission upgrade costs forced developers to pull projects out of the MISO interconnection queue.

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Of 5,000 megawatts of wind and solar projects in MISO's western region that were part of a group being studied for interconnection, all but 250 MW had withdrawn as of Dec. 1, according to the alliance. And it's unlikely those projects will move forward because they would require $100 million in transmission upgrades, the group said.

Soholt said grid congestion has been a growing concern in MISO's western region that includes Minnesota, Iowa, parts of the Dakotas and western Wisconsin — a windy area where renewable energy development has flourished over the last decade.

But the withdrawal of projects that were part of this group has highlighted the need to begin working on both shorter- and longer-term solutions, she said, especially because some developers already had contracts in place to sell the output.

"This last group of projects was the straw that broke the camel's back," Soholt said. "We just finally hit a wall."

The group of projects included Southern Power's 200-MW Ruso wind farm in North Dakota. The company withdrew from the MISO queue after an engineering study showed the project, estimated to cost $250 million, would require $500 million in transmission upgrades.

Southern Power, a unit of Atlanta-based utility holding company Southern Co., told the North Dakota Public Service Commission that it is looking for a new interconnection point for the project.

NextEra likewise is looking for an alternative connection point for its 200-MW Dodge County wind project in south-central Minnesota. For now, the project and its related 23 miles of transmission are on hold.

Unlike the Ruso project, which didn't yet have a power purchase agreement in place to sell the output, the Dodge County project was already contracted to a group of Minnesota municipal utilities, according to filings with the Minnesota Public Utilities Commission.

No one disputes that transmission capacity is becoming constrained in MISO's western region, even after factoring in a planned multibillion-dollar build-out of new high-voltage lines. The issue is what to do about it.

Large transmission lines are typically too costly for developers of a single wind or solar project to justify. And there's currently no process within MISO to evaluate how to share costs for major projects among renewable developers and utilities, which would also benefit from improved reliability and grid efficiency.

Any proposal that allocates costs and benefits among MISO members would also likely ignite a battle among states, utilities and consumer groups over who pays and how much.

That was the case with the last big MISO transmission build-out, which was approved before the grid operator expanded its footprint to include parts of Arkansas, Mississippi, Louisiana and Texas.

Feeling the squeeze

MISO spokeswoman Allison Bermudez acknowledged that transmission capacity in the grid operator's western region is "limited" and that costs of interconnecting new generation have gone up.

"Faced with high upgrade costs, most developers choose to drop out instead of proceeding," she said in an emailed response to questions. "This should not be a surprise, typically about 20% of projects that enter go all the way through."

Officials for the Carmel, Ind.-based grid operator declined interview requests.

Asked if there's a need for MISO to reform its transmission study process to allow for cost sharing for large new lines, Bermudez said, "We are currently looking into this."

Utilities and regulators, too, have acknowledged the transmission squeeze.

Julie Pierce, vice president of strategy and planning for Minnesota Power, said the grid in Western MISO states is undergoing a significant transformation as coal plants shut down, replaced by cleaner energy sources that often require transmission.

"The grid is now getting full, and we're seeing those pinch points," Pierce said, noting that transmission upgrade costs seen by project developers are a signal that more transmission capacity is needed.

Minnesota Power is among the utilities in the region overhauling their generating fleets to cut carbon emissions.

The Duluth, Minn.-based utility plans to get 50% of its energy from renewable resources by 2021 from about the current 30%.

A key part of those plans is the Great Northern Transmission Line, a 225-mile, 500-kilovolt transmission project that will carry Canadian hydropower from the Minnesota-Manitoba border to near Grand Rapids, Minn.

The utility also repurposed a transmission line formerly used to move electricity from coal-fired power plants in North Dakota to Minnesota to instead carry wind energy from new wind farms, Pierce said.

While Minnesota Power doesn't have carbon or renewable energy goals beyond 2021, other utilities do, and they will undoubtedly require more transmission.

For instance, in its long-range plan filed with the Minnesota PUC earlier this year, Xcel Energy Inc. cited "a clear need for more collaboration to enable transmission capability to ... facilitate carbon free objectives."

'Doable' changes

MISO's Western states have some of the nation's best wind resources, helping spur thousands of megawatts of wind energy development over the past decade.

The wind boom has been enabled by an unprecedented build-out of new transmission over the same period.

A group of 11 utilities from Minnesota, Wisconsin and the Dakotas completed a $2.1 billion portfolio of new transmission projects just two years ago. The initiative, dubbed CapX2020, added 800 miles of high-voltage transmission.

MISO is in the final stages of completing its $6.6 billion "multi-value" transmission expansion across the grid operator's northern and central states — a portfolio of 17 projects that enabled 25,000 MW of new wind development to come online, bolstering reliability and facilitating state economic and public policy objectives.

Construction of the last of those projects — the 100-mile Cardinal-Hickory Creek line across southwest Wisconsin to Iowa — has yet to begin and already renewable developers are feeling the pressure of grid congestion.

Today, there are 156 projects representing 23.6 gigawatts of new generation waiting to tie into MISO's western planning area. Much of it is wind, but there's nearly as much solar generation in the queue.

How many of those projects come online, though, ultimately depends on new transmission capacity.

"There is tremendous support for additional renewable energy development, both at the local and the state level, and we are confident in future demand for these low-cost projects, both from the utility sector as well from the commercial and industrial sector," Chris Kunkle, senior manager of government and regulatory affairs for Charlottesville, Va.-based Apex Clean Energy, said in an email.

"Unfortunately, without expanding the transmission grid, the opportunity for utility-scale renewable projects is quite limited in the region," he said.

Apex and other developers and advocates, including the Clean Grid Alliance and the American Wind Energy Association, said they're working to raise awareness with state policymakers, including the Midwestern Governors Association, which has made transmission planning a priority issue.

The same 11 Upper Midwest utilities that partnered on the CapX2020 expansion have reunited to look at what grid improvements are needed to accommodate longer-term carbon goals. The CapX2050 study, expected early next year, won't prescribe specific transmission projects but will try to better define system constraints that may inhibit carbon-free resources over the next few decades.

And MISO itself has begun modeling more aggressive renewable energy adoption scenarios as part of its existing transmission planning process — a vision more closely aligned with utility goals and corporate demand.

Ultimately, advocates said the issue comes down to a matter of will and leadership among MISO and its membership.

"It's hard but doable," Soholt said. "You just need someone who can lead through and map out how do we accommodate all of these technical, political, economic issues."

Twitter: @jefftomichEmail: jtomich@eenews.net

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