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Thinking Twice About Transmission (and its alternatives)

Thinking Twice About Transmission (and its alternatives). NEDRI Participants meeting June 4, 2002 Richard Cowart. Wholesale barriers to load management and efficiency. Supply-only bidding Load profiling by pools and RTOs Reliability rules and practices excluding demand-side resources

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Thinking Twice About Transmission (and its alternatives)

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  1. Thinking Twice About Transmission(and its alternatives) NEDRI Participants meeting June 4, 2002 Richard Cowart

  2. Wholesale barriers toload managementandefficiency • Supply-only bidding • Load profiling by pools and RTOs • Reliability rules and practices excluding demand-side resources • Subsidies for wires and turbines • Transmission pricing and expansion policies can undercut low-cost demand-side resources

  3. Starting points: How much transmission do we need? • Compared to what? • Consumers don’t purchase transmission • Transmission is a service with substitutes • Load center resources of all kinds: G,DG,DR,EE • Transmission bottlenecks: reduced options, thinner markets (market breadth as an issue) • Demand-side bottlenecks: reduced options, thinner markets (depth as an option) • Challenge: how much geographic breadth is needed, and how much market depth?

  4. Load Densities - Southern New England

  5. Congestion and Reliability • Congestion statistics: • increase in TLRs • higher costs for load pocket power • how much is real? • Is congestion a reliability problem, or an economic signal? • A signal of what? Too little transmission, or too little load management? Surplus power for export? Too much remote generation, not enough in the load center? • What is the efficient level of congestion?

  6. Pricing and Socializing - No Big Deal? • “It’s Only 10%” • “Tasty Treats for Transmission” • The Transmission Policy Barbell: • Competitive effects on different generators • Effects on the market value of load-side resources • Remote generation and “coal by wire” • Dynamic effects - signals to investors • Dynamic effects - logrolling on the wires

  7. Balanced Grid Management Five options to consider • 1. First, fix the underlying power markets • 2. Cost-based transmission rates • 3. Broad-based transmission planning process really examines alternatives • 4. Efficient Reliability Standard for costs proposed to be rolled-in or socialized • 5. “Open Season” to test planning outcomes in the market

  8. My screensaver Year 2000

  9. (1) Improving power markets • Locational pricing, demand response, and time-based wholesale costing are foundation stones for transmission needs analysis • Market abuses and sham transactions are no basis for need determinations

  10. (2) Transmission Rates • Market lesson: The cost of electricity varies by time and location. • Why (a) deaverage powerprices by time and location, while (b) moving to postage-stamp transmission rates across times and locations? • Should expensive new facilities be averaged in with low-cost facilities and recovered on a rolled-in basis? • Does this affect the viability of non-transmission alternatives? • Highway metaphors for disk drives

  11. (3)The Challenge of Transmission Planning • FERC:RTO has Transmission planning responsibility • NTGS: “Regional planning processes must consider transmission and non-transmission alternatives when trying to eliminate bottlenecks.” • Challenges: (a) integrated analysis in a de-integrated industry (b) transmission system is regional, but siting decisions and transmission alternatives are local • How can the ISOs weigh alternatives?

  12. (4) Efficient Reliability Decision Rule • Before “socializing” the costs of a proposed reliability-enhancing investment through uplift or tariff, ISO-NE (and PUCs and FERC) should require a showing: • that the relevant market is fully open to demand-side as well as supply resources; • that the proposed investment is the lowest cost, reasonably-available measure to correct a remaining market failure; and • that benefits will be widespread, and thus appropriate for broad-based funding.

  13. (5) Open Season for Transmission and Alternatives • NTGS: “...opportunities for customers to reduce their electricity demands voluntarily, and targeted energy-efficiency and distributed generation, should be coordinated within regional markets.” • How to test the preferred alternative in transmission planning? • One answer: Put it out to bid • Essential component: Winning bid has the same security of payment as the transmission proposal would have.

  14. Questions for discussion • Should New England’s transmission tariffs be reviewed for effects on competitiveness of load-center supply and demand resources? • How can the region create a balanced transmission planning process? • Should we adopt an “efficient reliability” screening process for socialized costs? • Should socialized solutions be put out to bid? • What are the roles of states, ISO, and FERC in all of the above?

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