By Richard A Kessler in Fort Worth
Thursday, September 04 2014
Updated: Friday, September 05 2014
“The potential of this is staggering,” former US President Bill Clinton told an enthusiastic audience at his foundation where Sioux leaders made the announcement. He then listed the potential economic benefits for the tribes and said: “This is an amazing thing... if it works.”
One big reason why it may not work is an inability to move the high-quality wind energy from a thinly populated region to distant load centres in Minnesota and east of the Mississippi River.
“The state can’t afford to build the transmission. We simply don’t have the finances,” Gary Hansen, chairman of the South Dakota Public Utilities Commission (PUC), tells Recharge.
The tribes face a quandary over if, or how, they can raise additional private financing for new power lines that would link their sprawling project to the national grid.
“It’s a real challenge for anyone who wants to develop wind in South Dakota,” Hansen says, adding that the state’s small internal market could absorb only a fraction of the wind energy.
Similar problems exist across swathes of the US, where the layout of an aging transmission network and the practices used to operate it constrain the addition of renewable-energy resources. A staggering 105GW of wind projects are in a backlog waiting for interconnections.
Experts warn that without significant investment in grid infrastructure and operations, the country’s transition to a cleaner energy future could suffer. The wind sector’s ability to tap high-quality sites will partly dictate what role it plays later this decade when utilities retire up to 60GW of older coal-fired plants in response to tougher environmental regulations and low natural-gas prices.
Government officials are also heavily counting on wind to help utilities meet aggressive mandates and voluntary goals adopted by most states through 2025. Onshore wind, at least now, is the easiest and fastest clean-energy source to scale up, and the fact that so much of it remains inaccessible is frustrating for industry leaders and supporters.
“The number-one challenge is lack of transmission infrastructure in parts of the country with the best wind resource. That wind is extremely low-cost energy and stranded right now,” says Michael Goggin, research director at the American Wind Energy Association. “It would be economically advantageous for the country to put those resources to use.”
Turbines in the vast 13-state “Wind Belt” east of the Rocky Mountains can generate about 40% more energy than the US average. Not only does the wind blow harder but it also blows more often during peak load daytime hours, fetching higher power rates.
A taste of what is possible is happening now in Texas. A recently completed $6.9bn transmission build-out has sparked 11GW of wind development in the Panhandle and South Plains regions. It was among the largest US transmission projects in the past decade and more than the entire country has spent on power lines in some of the past few years.
There are other signs that the future may be brighter for the grid and wind. The Edison Electric Institute, which represents all US investor-owned power utilities, estimates that they spent about $17.5bn on power lines in 2013, up from $14.8bn a year earlier and $11.9bn in 2011. This is helping ease system congestion in the mid-Atlantic region and parts of the upper Midwest, reducing wind curtailments and enabling some transmission build-out.
Improving turbine and grid technologies are making the economics of wind more attractive to utilities and having a major impact on their bottom line, according to Jim Robo, chief executive of NextEra Energy, the largest US renewable-energy generator.
That’s a tonic for some utilities that are struggling with weak electricity demand growth and stagnating revenue and profits in some parts of the country.
Department of Energy (DOE) data shows that recent wind farms trail only combined-cycle gas on cost of energy among generation sources. This is broadening the appeal of wind beyond the biggest utilities to municipal ones and rural electricity co-operatives that are now moving to own or contract capacity.
Technology, better weather forecasting and modelling tools, and better planning, offer a glimpse into the future by enabling forward-looking utilities to add large amounts of wind and even dispatch it.
“Xcel [the US’s largest wind utility] has been able to reliably integrate much higher levels of renewable generation at lower cost than we thought possible just a few years ago. And it keeps happening,” says Drake Bartlett, a senior operations official at Public Service of Colorado, an Xcel subsidiary.
Despite a 144% surge in installations to 61.3GW since 2009, wind generates only about 4.4% of the country’s electricity. Under certain conditions, the DOE believes it is feasible to raise that to 20% by 2030.
The sector’s enormous potential is drawing deep-pocketed transmission investors, who are betting big money they can unlock a mother lode of great wind resource in remote areas of Kansas, New Mexico, Oklahoma and Wyoming. They expect demand from wind developers will exceed their proposed lines’ carrying capacity.
The payoff could be huge depending on how much pricing power they obtain from the Federal Energy Regulatory Commission (FERC), which oversees the transmission of bulk electricity across state borders.
While not immune to siting and permitting delays that can add cost and risk to interstate projects, the investors’ financial strength gives them staying power to work through the issues.
“There are certainly obstacles, but there is also a lot happening. We’re very confident that we can get this done,” says Michael Skelly, president of Clean Line Energy Partners in Houston.
Clean Line, backed by wealthy New York investors and UK-based National Grid, is planning four long-distance 600kV high-voltage direct-current (HVDC) transmission lines with about 14GW of capacity. They will export energy from the Wind Belt to power-hungry California and southeastern and mid-Atlantic states.
In Wyoming, which has wind speeds of eight metres per second in some areas — the best onshore resource in the continental US — about 14GW of transmission projects are in the works.
Grabbing the most headlines is a $3bn, 600kV HVDC line proposed by TransWest, an affiliate of Denver-based Anschutz. It would carry energy to Arizona and California generated by the largest US wind farm, Chokecherry and Sierra Madre, that another Anschutz firm, Power Company of Wyoming, has under development near Rawlins.
Only slightly less ambitious is a $3bn 500kv HVDC line tabled by a joint venture of Duke Energy and American Transmission Company (DATC) that would link the 2GW Pathfinder Zephyr Wind project, with southwestern states.
In both cases, TransWest and DATC say they could deliver wind energy much cheaper than southwestern states can produce it.
The $2bn, 500kV (AC) SunZia project, whose owners include Shell Wind Energy and Tucson Electric, will bring 3GW of new wind and solar energy from central New Mexico to Arizona for export to western markets.
Who foots the bill?
It can take three times as long to site and build an interstate transmission line than a large wind farm. Deciding who will pay often causes the biggest delays.
“This is where the rubber meets the road. How do we allocate the cost of a transmission system?” asks Hansen.
For projects within their borders, states do this by allowing utilities to recover costs for projects through rate hikes. For interstate transmission of bulk electricity, FERC oversees cost allocation, as well as planning and tariffs.
In practice, FERC’s determinations on cost sharing can get a cold reception from state regulatory officials and other stakeholders. One reason is they contend that FERC is not doing enough to balance the interest of parties, as state PUCs are required to do.
Thinly populated states with abundant wind resource, for example, feel that the wealthier states that receive the energy should pay most of the cost of new transmission.
FERC, with some success, is encouraging regional and inter-regional planning that would assign costs before a project advances.
Hansen argues that if reducing carbon emissions is in the national interest, as President Barack Obama insists, then a transmission system for renewable energy should be too. In that case, national leadership and contributions by all taxpayers is necessary to help finance and complete it, as has occurred with the Interstate Highway System since the 1950s.
Yet there is little chance that this will occur. Obama’s enthusiasm for wind and solar and his administration’s ample support have not carried over to transmission. The Republican leadership in Congress does not see build-out of power lines for wind energy as a national imperative.
That leaves the Sioux wondering when they may see new high-voltage lines on their reservations.
As Goggin says: “For renewables, we need to be moving a lot faster and doing a lot more with transmission.”
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