ITC Holdings Corp., the largest independent U.S. power transmission company, wants to build a $12 billion, 3,000-mile-long high-voltage line across seven states to bring vast amounts of wind power from the Great Plains to urban customers in the Midwest and East. But a frustrated Joseph Welch, ITC's chairman and CEO, says, "I can't get it done."
The biggest hurdle isn't the money or even the ever-present citizen opposition to new transmission projects. Welch says he can't get started because the rules for building new, cross-state transmission lines in the Midwest effectively bar projects that aren't immediately needed to assure the grid's reliability and keep the lights on. A line for future renewable power doesn't meet that test.
With the Obama administration and congressional leaders set on expanding renewable energy to deal with climate threats, the strained capacity of the nation's transmission network has become a central issue. Jon Wellinghoff, acting chairman of the Federal Energy Regulatory Commission, said that while he isn't prejudging the ITC proposal, he is concerned about Welch's general criticism of current transmission project regulations.
"We do not want to have any barriers to renewables," he said in an interview yesterday. FERC has scheduled a March 2 conference on the issue, he said, and will look at how regional planning could be improved to encourage construction of new transmission lines to carry renewable energy.
Welch's critique goes to the heart of a patchwork of state and regional regulations governing the nation's eastern and western high-voltage power line grids, separated by the Rocky Mountains.
Welch said that projects like ITC's proposed "Green Power Express" line, because they are not required for reliability, must meet a more demanding cost-benefit test than the customary incremental additions to the grid.
Market rules appear to trump green-power entry
His Novi, Mich., company is within a transmission planning region called the Midwest Independent Transmission System Operator (MISO), which is overseen by FERC. MISO acknowledges that renewable energy projects face higher hurdles. "When the cost allocation procedures were developed, renewables were not front of mind," said Jennifer Curran, MISO's transmission strategies director. A task force is about to begin reviewing the issue, she added, and MISO officials and other transmission system executives have been invited to FERC's March 2 meeting.
Welch also contends that MISO's rules that handicap renewable transmission projects favor the market positions of utility transmission owners and electricity distributing companies, which dominate MISO's industry membership. An increase in grid capacity could confront these companies with competition from outside the region.
"The [MISO] stakeholders are market participants. The people in the market are dictating through the transmission planning process who can come into the market. And that process just won't provide the answers" to expanding renewable energy, Welch said.
"I've heard that concern," said Wellinghoff. "If that market structure is inhibiting these cross-regional lines from being put together, we need to look at that."
"FERC recognizes the problem," said Welch, "but they give a lot of deference to the RTOs" -- the regional transmission coordinating organizations like MISO.
Welch's complaint comes at a time when the lineup of proposed new transmissions projects is growing. A survey last year found that utilities and power companies have planned to invest $37 billion in the transmission system between 2007 and 2010.
Grid expansion: at least a $37 billion proposition
Expanding the grid to accommodate large amounts of wind or other renewables could cost twice that amount. "One of the newer trends is the growing interest in long-haul transmission projects to move renewable energy resources from remote areas to load centers via extra high-voltage lines," noted Christine Tezak, an analyst with the Stanford Group Co., in a recent research paper. "Moreover, the enthusiasm that U.S. policymakers are showing in plug-in hybrid electric vehicle technology portends a greater reliance on the U.S. electric system."
But long-haul projects have been stymied by disputes over who should pay for the line, particularly when it is carrying renewable power that is produced in the sparsely populated Great Plains regions but is purchased for customers in Chicago, Cleveland or New York. The wind power isn't needed in the Dakotas, but under current rate treatment, their utility customers would have to pay a share of the $12 billion Green Power Express costs, Welch said.
A new rate policy is needed that spreads the costs widely, recognizing that high-voltage lines that move renewable power are creating value shared across the entire grid, Welch said. These lines help replace carbon dioxide-emitting coal generation with wind power and also reduce losses of electric power that now occur on smaller transmission lines, Welch said.
Finding routes for the new lines, with their massive transmission towers, remains a major obstacle to new long-distance projects.
The 2005 Energy Policy Act authorized the Department of Energy to designate National Interest Electric Transmission Corridors in areas where existing lines are so congested that future blackouts are potentially threatened or where shortages lead to high electricity prices. DOE has mapped two such corridors, the first a wide area from Ohio east into the mid-Atlantic region and the second from Arizona west into Southern California.
The legislation also gave FERC backstop authority to site lines if state regulators did not act within a year on a power-line proposal in a federal corridor. FERC's new clout has sparked a rebellion by some members of Congress whose constituents lie within the mid-Atlantic corridor. Tezak's report lists 14 senators who raised objections to the process, including former Delaware Sen. Joe Biden (D), now the vice president. Ten House members have tried unsuccessfully to cut off DOE's funding for the corridor program.
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