The United States has a transmission problem. Wind and solar curtailments are increasing, interconnection queues for new projects can take years to complete, reliability is eroding, and in some places we are unable to retire expensive, aging, and polluting power plants because there is no way to bring in other resources. Our transmission investment is clearly not enough. Ninety percent of new transmission is designed to solve local reliability challenges or replace existing lines, while only 10 percent is allocated to economic projects designed to improve efficiency and bulk system reliability.
But if we want to build transmission better, we need to first get better at planning transmission. Our regional planning efforts are as antiquated as the underlying infrastructure. As planners, we do not look out far enough in the future or wide enough to capture interregional opportunities. We also do not look deep enough, and instead only evaluate a fraction of the benefits transmission can bring.
Derek Stenclik
Considering the Full Range of Transmission Investments
Recognizing these limitations, Federal Energy Regulatory Commission (FERC) recently issued a Notice of Proposed Rulemaking on regional transmission planning to modernize our approach to transmission investments, including the way we quantify transmission benefits. While some regions like the Midcontinent Independent System Operator (MISO), and Southern Power Pool (SPP) have been using multi-value frameworks successfully, other regions, like the Electric Reliability Council of Texas (ERCOT) just recently received authority — and a mandate — to evaluate other value streams.
Texas is not unique in this respect. Today, in most places most of the time, new transmission investments are only evaluated against production cost savings (i.e. fuel costs). This is the de facto metric for quantifying and evaluating transmission benefits. But as our grids bring on more wind and solar, production costs inherently decrease, making the savings attributed to transmission smaller at exactly the same time the need for new transmission grows larger. Perhaps more importantly, the evaluation of transmission benefits needs to extend to the many benefits beyond production cost savings.
When we purchase a car we do not just consider the cost and the fuel economy. We consider reliability and the likelihood of things breaking down. We consider future uncertainty and potential needs a few years down the line — that third row of seats could come in handy if another kid comes along. And we think about what could happen when things go wrong. Will this car keep my family safe in an accident? If we follow this line of thinking when we buy a car, why don’t we do it when we invest in transmission?
If we do not consider a wide range of transmission benefits, at best we are leaving a lot of value on the table. At worst we are over-investing in new fossil plants, a potential stranded asset in a clean energy future, while under-investing in enabling infrastructure for a new resource mix. Even worse, we may end up with an unreliable grid, and simply watch as rolling blackouts occur, despite having neighboring systems with ample resources to share.
Using a Multi-Value Approach
The Energy Systems Integration Group convened a Transmission Benefits Task Force to propose a new framework for transmission planning. This multi-benefit approach not only helps quantify the true value that transmission brings to the system, but also helps with cost allocation — how stakeholders determine who pays, and how much, for new projects. The task force assessed a set of six benefits that transmission can bring to the system and thus should be quantified in cost-benefit analysis.
Evaluating Risk, Resource Adequacy, and Resilience
The framework also includes a different approach for evaluating future risk and uncertainty. Like all of us, grid planners do not have a crystal ball to see the future. There is significant uncertainty even in the near term, and that uncertainty is amplified by longer planning horizons. By taking a stochastic approach to account for uncertainty and volatility in key drivers like projected resource mix, fuel prices, and load growth, a wide range of potential benefits can be assessed. Moving away from a snapshot analytical framework to assessing multiple future scenarios is vital for effective planning.
Transmission’s benefits also include resource adequacy and resilience. While transmission is typically considered a way to move energy across the system, it can also provide firm capacity for reliability. This can defer the need for new generation capacity or facilitate retirements of fossil fuel–fired plants. We found, for example, that by linking two unreliable systems together, a transmission line can make both systems reliable — equivalent to adding twice the amount of fossil fuel–fired generating capacity.
And when things do go wrong, transmission can also improve the resilience of the system. A resilient grid is one that can withstand severe events with reduced stress and load shedding and avoid catastrophic failures due to unforeseen generation outages, collapsed transmission lines, or fuel supply disruptions. Whereas resource adequacy benefits reduce the number of shortfalls, resilience benefits are reductions in the magnitude of the loss-of-load events that remain. Transmission serves as a low-regrets insurance policy against macroeconomic volatility, extreme weather, and other unexpected events.
A Case Study
To illustrate this framework, the ESIG Task Force evaluated a case study of the future ERCOT grid. The multi-benefit approach was applied to two sets of projects: (1) a set of lines relieving the West Texas Export constraint, and (2) an interregional line connecting ERCOT and the Southeast. The value stacks of the six benefits for each project are shown in the charts below.
These multi-value benefit stacks quantify and sum the benefits of the six categories evaluated in the study, where the height of each segment reflects the relative value of each benefit provided by the transmission line. The total benefits can be compared against the necessary capital investment cost (red bar) to calculate the net benefits. This benefit-cost framework allows transmission planners to make key decisions on whether to invest in new transmission projects and helps them compare different projects against one another.
The results of this study showed that different types of large-scale transmission bring distinct benefits. Some transmission is intended to connect generation in renewable energy regions with load, while other transmission helps to diversify load and resource mixes. For both types, to most accurately assess the benefits of new large-scale transmission, it needs to be evaluated across a range of quantifiable benefits. This will require changes in technical methodologies and institutional change in the way we propose, plan, and allocate costs for new transmission.
To learn more about the multi-benefits framework, check out ESIG’s latest report, Multi-Value Transmission Planning for a Decarbonized Future.
Derek Stenclik
Founding Partner
Telos Energy
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