Electric Transmission 301

WIRES and the Environmental and Energy Study Institute (EESI) held a briefing about the key challenges and opportunities facing electric transmission infrastructure development. In light of Super Storm Sandy, the attack on the Metcalf Substation in California, and growing cyber threats to the grid, transmission owners, planners, and operators are devising new approaches to ensure high levels of reliability and grid security. Second, the magnitude of the current need to ensure efficient power markets and access to diverse energy resources makes development of robust transmission infrastructure a national priority. The shale gas revolution provides an additional reason to strategically plan the expansion and modernization of the grid while addressing pipeline constraints and access to renewable resources. Finally, these developments are being dealt with in a more competitive bulk power environment, including competition to own, build, and construct important new transmission facilities. New entities and joint ventures are emerging to augment the historical role of incumbent load-serving entities with respect to strengthening the grid regionally and inter-regionally.

This program followed our "Transmission 201” in March and was held in conjunction with the forthcoming briefing by EESI and the National Electrical Manufacturers Association (NEMA) on June 18. WIRES is a national non-profit association of investor-, cooperatively-, and publicly-owned companies that promote investment in the high-voltage electric transmission system, to ensure reliable, reasonably priced electricity, access to diverse resources, and competitive markets (www.wiresgroup.com).

 

Briefing Highlights

• James Hoecker, Counsel to WIRES at Husch Blackwell LLP and former FERC Chairman, explained that the high-voltage grid is one of the foundational aspects of the U.S. economy and can be thought of as the world’s biggest machine.
• Hoecker said the briefing would consider three important topics. First, how cyber attacks, extreme weather and coordinated terrorist attacks are threatening traditional transmission models and the grid’s reliability. Second, what needs to be done to coordinate the natural gas and electricity networks, which are increasingly interconnected. And third, the new business models that are emerging in the transmission industry.
• Hoecker emphasized that more high voltage electric transmission is necessary to make the system more resilient and able to accommodate new energy sources, such as shale gas and renewable energy resources.
• Charles Berardesco, Senior Vice President and General Counsel at the North American Electric Reliability Corporation (NERC), covered the history of NERC and the work that it does. Established in the 1960s, NERC is certified by the federal government to carry out the development and enforcement of standards relating to grid reliability.
• Berardesco explained that the electric industry is moving away from coal and nuclear-based generation to natural gas and renewable energy. This changing resource mix has a profound impact on how the industry approaches reliability.
• Berardesco reviewed the major threats to grid reliability, including the effect of storms and extreme weather, cyber-attacks, and physical attacks. The recently released Critical Infrastructure Protection Standards version 5 is the nation’s only enforceable cyber-security standard. NERC has also filed standards to address physical security concerns, which are awaiting approval from the Federal Energy Regulatory Commission.
• NERC works with both the public and private sectors to enforce its standards. It conducts periodic assessments and performance analyses of the grid.
• Harry Vidas, Vice President at ICF International Energy Advisory and Solutions, focused on the topic of coordinating natural gas and electricity operations. He said that natural gas has become critical for electric operations because the growth in gas-fired capacity has been robust (natural gas is expected to continue to play a growing role in power generation) and natural gas is seen as a “firming fuel” for renewable energy.
• In developing a reliable electric system using natural gas, there are three key issues to be considered: firm pipeline capacity, operational differences between the gas and electricity markets, and reliability assessments.
• Natural gas and electricity integration issues have received the attention of many industry participants, and many regional studies have been undertaken. However, there is still space for improvement in this area, such as improvement in scheduling and coordination, efforts to address generators’ ability to pay for firm gas pipeline capacity through changes in market design and other mechanisms, and efforts to generate effective policies.
• Anne George, Vice President of External Affairs and Corporate Communications at ISO-New England, specifically covered gas and electricity coordination in New England.
• George pointed out that there has been a dramatic change in power generation in New England. Natural gas, which accounted for 18 percent of total system capacity in 2000, now accounts for 43 percent, while coal now only accounts for 7 percent.
• New England’s increasing dependency on natural gas is creating challenges. An unusually cold winter, combined with supply bottlenecks, lead to a price spike this winter. The region went from an all-time low electricity price in 2012 to an all-time high price this past winter (2014). George also explained that another challenge is the different operating schedules of the gas and electricity markets. These are among the challenges that ISO-New England and the New England state governments are working to overcome.
• Steven Burtch, Senior Vice President of Business Development at Altalink, examined the new models for building transmission from the perspective of a company in the electricity industry.
• Competitive transmission procurement is a well-established model in parts of Latin America. Brazil successfully implemented this model in the late 1990s to respond to power shortages in major cities. Chile has implemented the model since 2005 to increase competition in its energy sector.
• Developed countries are also testing competitive transmission procurement, but compared to Brazil and Chile, their approach is highly fragmented. The United Kingdom implemented competitive procurement in 2009 for offshore wind projects in the North and Irish Seas; the United States is in the process of implementing the model in different markets; and two Canadian provinces, Alberta and Ontario, are testing the new model. Each implementation has its own specificities.
• Cary J. Kottler, General Counsel of Clean Line Energy Partners, said that the U.S. grid was not designed to work with today’s changing energy resources. With new economic, resiliency, and environmental goals in mind, we are asking the grid to do more than it ever has in the past.
• To create more transmission and improve existing transmission, we need to embrace new business models, such as joint ventures, better public-private partnerships, independent transmission companies, merchant transmission, and new passive/financial investment. There is a lot of capital available to meet the demand for new transmission, but it must be tapped in novel ways.
• Clean Line Energy Partners is working on a major project to connect the abundant wind resources in the middle of the country to load centers in the East and West.
• James Hoecker concluded the panel by reviewing the key questions that must be considered as we plan for the future of the grid: how to get new renewable energy resources to the market, how to manage the dependency on natural gas for power generation, how to increase physical and cyber security through the development of new standards, and how to increase competitiveness in the field.