Midwest grid needs upgrades for wind power, but cost-sharing plan draws fire in Mich.

Source: Daniel Cusick, • E&E • Posted: Monday, March 12, 2012





Yet despite concerted efforts at the federal and regional levels to create an “interstate highway system” for electricity to flow across state and even national boundaries, renewable energy providers continue to face roadblocks in getting their power to market.

The problem is particularly acute in the Midwest, which has some of the nation’s best wind resources but is hamstrung by thousands of miles of old, outdated and undersized transmission lines that lack the capacity to bring large volumes of wind generation to population centers within and beyond the region.

High tension: If more power lines were built, like these that serve Detroit, the city could receive more renewable energy. But some utilities don’t want to pay for them. Photo courtesy of Flickr.

Experts gathered here this week for a regional summit on wind energy say that for wind and other renewable energy resources to succeed in replacing coal- and natural-gas-fired power across the country, wind power producers as well as rate-based utilities and transmission owners and managers will have to develop stronger transmission links between and across state lines.

The challenges cannot be solved by technical and engineering advancements alone, the experts say, but will require negotiated agreements between the federal regulators, regional grid operators such as PJM Interconnection and the Midwest Independent Transmission System Operator (MISO), and the 50 public utilities commissions that govern electricity rates at the state level.

For the 13 Midwest states whose grids are governed by MISO, the answer lies partly in 17 interstate transmission projects that, if built, would usher tens of thousands of megawatts of wind power from resource-rich states like South Dakota, Minnesota, Iowa and Illinois to load centers in Chicago, Detroit, Minneapolis-St. Paul and St. Louis.

Electricity superhighway on the drawing boards

The new 345-kilovolt lines, known as Multi-Value Projects (MVPs), will not adhere to the old model of transmission, which concentrated most of the responsibility for power line development within individual states, which in turn trusted rate-based utilities or other authorized companies to build and maintain the lines.

Rather, according to planners of the $5.2 billion MVP initiative, the new lines will serve as a kind of electricity superhighway with on-ramps and off-ramps for electricity producers to ship high-voltage power from remote generation sites to major substations, which will then “step down” the electricity for distribution to regional markets.

The new approach stems from the Federal Energy Regulatory Commission’s Order 1000, implemented last year to promote a more seamless nationwide transmission grid. Under the order, transmission owners in individual states must participate in a regional framework to help remove barriers and bottlenecks in the flow of electricity from state to state.

The FERC order is also significant in that it requires transmission projects to account for rising demand for renewable energy due to the adoption of state renewable portfolio standards (RPSs), now on the books in 29 states and the District of Columbia. Such laws require that a specific percentage of electricity sold in an RPS state be produced using renewable resources, and they establish a timeline for utilities to comply with the mandates.

Laura Rauch, a senior transmission engineer at MISO who helped develop the Multi-Value Projects program, said the concept has drawn mixed reactions from stakeholder groups. Some electric utilities and transmission owners support a unified grid, while others prefer a more traditional model that places greater authority with individual states and public utility commissions

“As an engineer, the hardest thing to do is actually prove that this transmission should be built,” Rauch told an audience of wind energy professionals gathered in Chicago for the American Wind Energy Association’s Midwest regional summit.

Nevertheless, MISO planners emerged from a contentious yearlong planning process with an approach that they believe will net long-term benefits to consumers. Among other things, the MVP approach will help drive the transition to cleaner energy while spreading the costs of transmission upgrades in such a way that those who benefit the most from the new lines pay the most.

According to Rauch, ratepayers in MISO’s territory can expect their electricity rates to rise by about $11 per year to finance the grid improvements, but they will reap an estimated $23 in benefits by virtue of having cleaner, more reliable electricity.

‘Gold-plated’ projects?

But not all MISO stakeholders are buying the Multi-Value Project idea.

In Michigan, a coalition of investor-owned utilities, politicians, industry heavyweights and nonprofits has balked at MISO’s cost allocation structure and even threatened to drop out of the regional transmission organization if MISO forces Michigan residents to pay for transmission that doesn’t directly benefit the state.

A federal lawsuit filed on behalf of the MISO Northeast Transmission Customer Coalition — which includes Attorney General Bill Schuette and rate-based utilities Detroit Edison and Consumers Energy — seeks to roll back FERC Order 1000 and MISO’s cost allocation structure until questions can be answered over whether the state is getting a fair return on its investment in a regional grid

Steve Transeth, an attorney and spokesman for the coalition and former Michigan public service commissioner, has referred to the MVP program as “gold-plated transmission projects” that could saddle Michigan ratepayers with billions of dollars in infrastructure costs with minimal benefits to the state.

In a 2011 op-ed published in The Hill newspaper, Transeth summarized FERC and MISO’s approach this way: “Basically, Michigan consumers would subsidize other states’ initiatives to develop renewable energy projects that would otherwise not be viable. This is nothing more than the federal government picking winners and losers — specifically, long-distance renewable developments over local clean energy projects.”

The outcome of the lawsuit, and Michigan’s possible withdrawal from the regional power grid, could have major implications for how the state goes about meeting current and future renewable energy targets.

Michigan is implementing a 10 percent renewable portfolio standard by 2015, a goal the state’s rate-based electric utilities support. Michigan utilities also believe they can meet the 10 percent RPS using homegrown renewable energy, mostly from wind turbines along the Great Lakes shorelines and smaller amounts of landfill gas and biomass.

At the same time, some business, labor and environmental groups are pushing for a revision of Michigan’s RPS law that would increase the renewable energy requirement for utilities to 25 percent by 2025.

The groups, organized under the heading “Michigan Energy Michigan Jobs,” argue that a more muscular RPS would drive as much as $10 billion in new investment and align Michigan with other Midwestern states like Illinois, Iowa and Minnesota, which have adopted more aggressive renewable energy targets

Paying for 30 years of deterioration

How a more muscular RPS in Michigan would affect transmission planning and siting remains unclear. But some industry leaders believe the state’s grid would benefit by stronger connections to those of neighboring states and beyond

Michigan’s largest transmission operator, ITC Holdings, views the Multi-Value Projects approach as an essential step toward helping the state build a 21st-century power grid, where energy can flow in and out of the state from myriad sources.

Gregory Ioanidis, president of ITC Michigan, which owns much of the lower peninsula’s transmission grid, said in a recent interview that Michigan’s grid had largely deteriorated between the 1970s and the early 2000s, when ITC took over its operation. Since then, the company has invested more than $1.5 billion to bring the system up to standard.

But for Michigan to fully tap the potential for renewable energy, it must tie its power lines to a regional and national supergrid. “Certainly, regions can do things within their own footprints and within their own geographies, but if you really want to extrapolate this thing further, you need to break down barriers between regions,” he said.

ITC’s position has found support among a newly organized group called the 21st Century Jobs Coalition, which last month issued the results of a poll showing that a majority of Michigan residents support upgrading Michigan’s power grid if it results in lower electricity prices and spurs job creation.

“Given the global nature of our economy these days, companies can locate facilities pretty much wherever they want,” said Fred Anderson, the coalition’s executive director. “But one thing they’re obviously going to want is a state-of-the-art power grid. They don’t want something that runs the risk of blacking out again,” as happened in 2003 when southeastern Michigan lost power in a cascading outage that affected 50 million people in the Midwest and Northeast.

But if Michigan holds firm in its opposition, the result could be a more fractured grid that impedes rather than promotes the free flow of renewable energy.

Rauch, the MISO engineer, said her agency remains “very concerned” about such an outcome, adding that her organization will continue to stress the “value of a dollar” when it comes to building new transmission.

“It’s always a tricky question when someone talks about leaving,” she said. “So we always go back to the discussion about value. We talk about the value of wind. We talk about the value of transmission. We talk about how they interrelate.”