With the Biden Administration’s target of achieving a net zero emissions economy by 2050, energy transition is gathering speed in the US. Therefore, to meet the climate change and decarbonisation goals, adequate investment in transmission infrastructure becomes top priority for the nation.
Substantial investment is needed to integrate large-scale renewable energy, boost grid resiliency to manage weather adversities and cybersecurity threats, and for greater participation of distributed energy resources. Currently, policymakers and federal and state regulators are actively working to formulate policies for boosting the transmission sector. The Department of Energy’s (DoE) Loan Programs Office (LPO) has USD40 billion in loan authority available to support large-scale clean energy infrastructure projects in the US.
With this background, Global Transmission Report organised a two-day virtual conference on Transmission Infrastructure Investment on July 28-29, 2021. The objective of the conference was to explore the issues that impact transmission investment and discuss how to finance the needed infrastructure. To this end, there were detailed discussions with policymakers, regulators, utilities, investors and technology providers to determine what is needed to build a decarbonised, resilient and modern electricity grid in the US.
The conference highlighted the transmission planning processes of leading utilities, and the priorities and perspectives of regional transmission operators (RTOs)/independent system operators (ISOs). The conference also highlighted the experience with competitive bidding. The latest innovations, grid-enhancing technologies (GETs) and digital solutions for building a modern grid were also shared by sector stakeholders.
The key takeaways from the conference are presented below.
Transmission investment – needs and challenges
Rob Gramlich, President, Grid Strategies LLC, started the first session by stressing the importance of interregional transmission links, post the Texas grid failure. He mentioned that it will be cheaper for consumers if large-scale transmission projects are built. To this end, he shared that during the February 2021 winter storm Uri, the well-connected Midcontinent Independent System Operator (MISO) was able to import 13 GW of power, while the somewhat isolated Electric Reliability Council of Texas (ERCOT) was able to import only 0.8 GW.
Looking at the decarbonisation goals, he stated that a large quantum of power is required to be transmitted, hence new infrastructure, GETs and storage are required. Furthermore, Mr Gramlich mentioned that to move power across states at reasonable rates, the use of GETs such as dynamic line ratings, topology optimisation, storage-as-transmission (SAT) and power flow control should be increased. Further, to use the unused capacity and to optimally utilise power from the ambitious generation targets, more and more transmission lines should be established in the US.
Figure 1: Higher voltage transmission lines for low-cost developments
Source: Presentation by Rob Gramlich, President, Grid Strategies LLC
Hudson Gilmer, CEO, LineVision, Inc., shared that a huge amount of new transmission infrastructure and the upgrade of existing transmission infrastructure is required to meet the ambitious goals of the energy transition. Further, he stated that grid capacity needed to double by 2035.
In this backdrop, GETs will play an important role and could double the amount of power being transmitted through the grid. He elaborated that based on projects in the interconnection queues, planned generation retirements and transmission expansion in Kansas and Oklahoma, the 2025 base case scenario can support 2.6 GW of new wind and solar generation using traditional planning approaches while with GETs this capacity can be enhanced to 5.2 GW. He emphasised that the industry has the opportunity to build traditional transmission projects and use GETs to meet the aggressive goal of energy transition.
Figure 2: Benefits of using LineVision’s GETs
Source: Presentation by Hudson Gilmer, CEO, LineVision, Inc.
Michael Skelly, CEO and Founder, Grid United, shared that initially the industry was unsure about the resources that would comprise the country’s energy mix, but the issue has now been resolved with Biden’s long-term targets, which in turn will help identify the nation’s grid requirements. He further stated that while some RTOs have picked up the planning process, other RTOs are taking it slow. Therefore, the federal agencies will play a major role in boosting the industry. As per Skelly, since the energy transition targets have now been put in place, the planning process is expected to soon follow.
Policies and regulations
Genevieve Shiroma, Commissioner, California Public Utilities Commission (PUC), stated that the 100-year-old public utility’s transmission planning process is focused on reducing greenhouse gas (GHG) emissions economy-wide. The new transmission developments will be more strategic and aim to reach GHG reductions goals, maintain reliability and keep costs reasonable. She iterated that transmission development is necessary to accommodate the large amount of energy expected to come online in the next 10 to 20 years to meet state goals.
Figure 3: California PUC’s IRP and transmission planning process
Source: Presentation by Genevieve Shiroma, Commissioner, California PUC
Ms Shiroma highlighted that California PUC and other stakeholders have pursued greater transparency measures and stakeholder processes over these self-approved transmission capital projects under the auspices of the Federal Energy Regulatory Commission’s (FERC) Order 890, which creates oversight of local, regional and interregional planning to ensure the appropriate and cost-effective projects to modernise the grid by supporting advanced technologies.
She shared that the stakeholder process aims to contain transmission costs, which are negotiated as part of the FERC rate cast settlements to reign in these costs while supporting strategic modernisation of the transmission system. She shared that the processes are fairly new and are being developed to ensure transparent and cost-effective transmission planning.
Carrie Zalewski, Chairman, Illinois Commerce Commission, shared that the Commission is deliberating on developing a transmission plan that reflects the shift in generation towards more renewable resources. Future generation projects will be incorporated into Long Range Transmission Plan (LRTP) and Midcontinent Independent System Operator (MISO) Transmission Expansions Plan (MTEP) cycles. However, the plan raises questions about transmission cost allocation.
She highlighted that future transmission system plans will also depend on the planned ambitious offshore wind targets and will require significant investment.
Briefly comparing PJM and MISO’s planning processes, she highlighted that while both the RTOs engage in transmission planning that involves modelling, addressing stakeholder concerns and cost allocation, both are addressing the changing resource mix in different ways.
Innovation and technology
Linnet Casey, Director, Power Systems Development, Siemens Energy, discussed the latest innovations in transmission technology, especially for clean energy projects. These technologies include flexible alternating current transmission systems (FACTS) and ester transformers.
Figure 4: Siemens Blue Portfolio- Clean Air technology
Source: Linnet Casey, Director, Power Systems Development, Siemens Energy
Dave Bryant, Director of Technology, CTC Global, spoke about how high-performance conductors are improving the efficiency, capacity, reliability and resilience of the grid network. Mr Bryant shared that in the US (as per EIA), around 200 million MWh are lost per year due to grid inefficiencies, which translates to nearly 23,000 MW of generation assets that are completely wasted. He said that by using modern powerline conductors, grid inefficiencies could be reduced by 30 per cent or more.
In addition to improving grid efficiency, modern powerline conductors (such as aluminium conductor composite core, ACCC®) can also double the capacity of the existing grid using existing structures, increase clearances to underbuilt structures and vegetation to reduce the risk of power outages and fires, and improve grid reliability and resilience.
Figure 5: Project executed by CTC Global
Source: Presentation by Dave Bryant, Director of Technology, CTC Global
Michelle L. Manary, Acting Deputy Assistant Secretary, Energy Resilience Division, Office of Electricity (OE), DoE, mentioned that the 2035 target of a carbon pollution-free electricity sector is one the focus areas of the OE, and the corresponding carbon-free transmission infrastructure also holds great importance.
Ms Manary shared that it is their motto to fully utilise the existing infrastructure and further accelerate the deployment of new clean energy transmission projects in an environmentally stable manner.
As per Ms Manary, currently, the key trends driving electricity system operations are achieving the Biden Administration’s clean energy goals, which will require significant investment and expansion in transmission system and storage; information revolution in the grid; electrification of transportation and buildings, which will require distribution modernisation; increasing grid resiliency and reliability; and evolving markets, which is creating operational and planning complexity.
She also emphasised that the regulators and policymakers should focus on building interregional transmission links wherever possible.
Investing in grid-enhancing technologies and solutions
As per John D. McDonald, Smart Grid Business Development Leader, GE Grid Solutions, policy is the strongest component that incentivises the use of any technology. Hence, the industry must invest a significant amount of their time with relevant policymakers to formulate policies around this.
One of the key reasons why GETs has not been able to take off in the US is the policy structure, which does not incentivise the use of these technologies. Currently, utilities that own and operate the transmission infrastructure focus on rate of return (RoR) from the capital cost involved and not on how efficiently the grid infrastructure operates. In addition, utilities are very conservative in pushing their boundaries to run their systems.
Ahmed Mousa, T&D Manager – Utility of the Future, PSE&G, emphasised that the future focus will be on adding cleaner energy to meet the 2050 target and further building a resilient and reliable grid network to support the upcoming renewable energy. He elaborated that aggressive generation targets need a robust transmission system. Looking at weather conditions worldwide, opting for cleaner energy seems inevitable. To this end, sophisticated load forecasting systems are also required.
Mr Mousa also observed that the transmission sector impacts the distribution sector and vice-versa, hence investments are also required in the distribution sector. In future, electric vehicles (EVs) will be a major investment area, therefore a robust T&D network is required.
Taking a lesson from the Texas grid failure, asset life cycle should also be kept in mind. In this regard, he said that looking at the big picture, which is meeting the net-zero 2050 target, preparations will be made to meet it by adding the required GETs and building a robust T&D network.
Michael Reed, Director, Technical and Project Management Division, Loan Programs Office (LPO), DoE, elaborated that DoE’s loan programme supports clean energy project developers with debt-capital support that private lenders cannot provide. Furthermore, LPO can provide flexible custom financing that helps meet the specific needs of the borrowers, and typically includes providing finance for more than 80 per cent of the project cost at a lower rate of interest up to 30 years.
LPO has issued over USD35 billion worth of loan guarantees for more than 30 clean energy projects related to transforming existing infrastructure, reviving nuclear plants, solar and wind projects and the first five EV projects in the US. Mr Reed mentioned that the programme provided initial financing to TESLA, Nissan, Ford, etc.
Further, LPO is actively supporting the clean energy revolution, and now considering the Biden Administration’s 2035 goals under the clean energy project portfolio, the authority’s focus will be on projects related to renewable energy, new transmission lines, energy storage and reducing grid congestion issues. Under the transmission segment, the goal is to deploy cutting-edge technology.
He shared an important fact—that LPO still has USD40 billion of remaining loan authority to support clean energy infrastructure projects and that it is willing to support more and more clean energy projects in line with the nation’s 2050 goals.
RTO/ISO outlook
Craig Glazer, Vice President, Federal Government Policy, PJM Interconnection, stated that currently, there was a great deal of activity happening on the policy front pertaining to the energy sector. He shared that PJM has three primary focus areas—reliability of grid operations, supply/demand balance, transmission monitoring; regional planning (15-year outlook); and market operation, and that all three have to work together.
Mr Glazer described the two elements that comprised the PJM planning process ─ baseline planning and generator interconnection. He also briefly discussed the Advance Notice of Proposed Rulemaking (ANOPR) issued by FERC in July 2021, which challenges each of the fundamental design elements of the planning process, puts a focus on relieving renewable developers of upgrade costs, addresses concerns regarding barriers to entry, tests the “build it and they will come” approach to renewable development, and considers an independent monitor overseeing transmission processes.
Figure 6: PJM’s key statistics
Source: Presentation by Craig Glazer, Vice President, Federal Government Policy, PJM Interconnection
Jeffery Billinton, Director of Transmission Infrastructure Planning, California ISO, discussed the new 20-year transmission planning outlook initiative. Generally, the ISO has a 10-year planning horizon, but the 20-year horizon will provide a less structured framework for open discussion outside of the tariff-based 10-year transmission plan.
The 20-year initiative will consider long-term load forecasts such as an emphasis on the potential impact of increased electrification in other sectors, broader ranges of resource transitions including potentially more aggressive gas-fired generation fleet retirement, and increased emphasis on interregional opportunities.
Mr Billinton shared that in the last decade, California ISO received an average of 113 queue cluster interconnection requests per year. During April 2021, Cluster 14 surpassed all previous levels with 363 interconnection requests (almost 2.5 times last year) aggregating 106 GW.
Figure 7: California ISO’s process for establishing a transmission plan
Source: Presentation by Jeffery Billinton, Director of Transmission Infrastructure Planning, California ISO
Boosting competition in transmission
Stuart Nachmias, President and CEO, Con Edison Transmission, and Sharon K. Segner, Vice President, LS Power Development, jointly shared thoughts about their experience with competitive bidding in the transmission sector, and the policy and regulatory measures required to boost competition.
Mr Nachmias shared that in many regions, states play an important role in approval, hence these states can play a major role in supporting transmission projects by providing timely approval. Ms Segner added that at every step of building a transmission line from site selection to cost of the project, the states should be more involved as they also bring the consumer voice to the table.
Mr Nachmias shared that competition in transmission brings innovation and cost effectiveness. Innovation helps in solving issues and developing projects that provide more benefits at a better price point. He also shared that when collaboration occurs, different entities bring together different solutions to a problem.
Ms Segner mentioned that capital containment is the main concern in the financial aspect of any project. And, with increasing competition, a lot of financial innovation is being noticed.
As per Mr Nachmias, the sector must accept that large transmission lines that require huge investment are needed to meet the energy transition goals, and these projects will ultimately provide benefits to consumers. While competition in the long-distance high voltage lines is worthwhile, as it brings on board several partners, local suppliers and innovation for building lines, 138 kV and below transmission lines should continue to be built by local utilities due to their lower complexities. As energy transition and electrification of vehicles are taking place simultaneously, and demand for electricity will increase in the future, a lot of large-scale transmission infrastructure will be required, which could be built though the competitive route.
Energy Transition: Technology Investment Trends
Mr Gary Rackliffe, Vice President, Market Development and Innovation, Hitachi ABB Power Grids, talked about the challenges and needs for future investment in transmission infrastructure. While increasing renewable generation is the key to reaching the 100 per cent carbon-free target by 2035, it also poses several challenges. To resolve the anticipated challenges, investment is being made in smarter solutions and grid modernisation.
As per Mr Rackliffe, the industry has reached a point where the future of grid asset performance can be predicted with the help of real-time monitoring and assessment. This technological transition has aided the planning processes and future investment goals of many utilities.
According to current predictions, the investment in transmission will reach USD27 billion in 2021 and might go up to USD30 billion by 2022. Future investments might be focused on further digitising substations, improving high voltage direct current (HVDC) technology and formulating solutions that aid in the issues of storage, decoupling and dispatch load of renewables.
Figure 8: Capital expenditure projections by Edison Electric Institute
Source: Presentation by Mr Gary Rackliffe, Vice President, Market Development and Innovation, Hitachi ABB Power Grids
Utility plans and priorities
Shawn E. Schukar, Chairman and President, Ameren Transmission Company of Illinois, highlighted the drivers, challenges and opportunities associated with transmission expansion. The current drivers for transmission investment are the need for higher levels of reliability, a lower carbon footprint and higher levels of resiliency. The utility, which is undertaking transmission network expansion in the Midwest, believes that timeline in transmission planning is of the essence and the continuous uncertainty in renewable generation expansion plans poses an issue for transmission developers. In addition, permitting stages, stakeholder cost concerns and RTO processes cause further challenges.
According to Mr Schukar, establishing common goals with interested stakeholders and progressing the development process simultaneously could solve some of the aforementioned issues, which also means undertaking regional and interregional planning with transmission and generation synched-up. On the cost allocation front, flexibility and introduction of investment tax credit (ITC) for transmission could provide great benefits and opportunities to utilities.
Nina Plaushin, Vice President, Federal and Regulatory Affairs, ITC Holding Corp, talked about the current scenario of the generation interconnection process, taking into account the carbon-free shift of the industry. According to the data provided by MISO, there is over 680 GW of proposed zero-carbon generation waiting in interconnection queues nationwide and not enough planned transmission to support it. FERC can address this backlog by proactively planning regional and interregional transmission at scale.
Further, as the deployment of distributed generation increases, the rapid electrification of the US economy and associated load growth will require significant investments in transmission. Electrification-driven shifts in the magnitude and timing of demand peaks require infrastructure development, namely, intra- and interregional transmission, to leverage geographic diversity during adverse conditions. As per Ms Plaushin, holistic planning of generation and transmission is the key for a better and more resilient grid.
Policies and regulations
Eric Blank, Chairman, Colorado Public Utilities Commission, shared that the state currently has a robust resource planning process for the evaluation and acquisition of a portfolio of new resources that includes review of transmission upgrades and interconnections. It is believed that utilities in Colorado may gain benefits from participating in organised wholesale markets of approximately 4 to 5 per cent per year.
He also shared that Colorado has a nationally recognised resource planning process in place that includes awarding scarce interconnection rights to winners based on a competitive process. It provides resource adequacy protection and ensures that most of the benefits from renewable energy and other low-cost generating sources reach the end-users. He believes Colorado’s utilities should continue to explore market options while preserving the best practices of the Colorado regulatory structure but still take advantage of the coordination and other benefits of greater participation in regional wholesale markets.
Megan Decker, Chair, Oregon Public Utility Commission, discussed the regulatory scenario of the western transmission system in the country. According to her, while the industry is consciously moving away from an abundance of conventional sources and toward a modernised electric grid, the transmission needs are largely shaped by the resource choices made under the authority of individual states. A more comprehensive look at resource procurement across the west is necessary to evaluate the value proposition of major transmission lines that cross multiple states.
Governors and other state political leaders have a strong interest in meeting their energy, environmental and economic development goals in a timely, cost-effective and reliable manner. This can best be achieved by evolving the existing paradigm and establishing a west-wide process to inform both resource planning and transmission planning and development, resulting in more reliable, efficient and cost-effective planning across the entire footprint.
Energy storage
Dr Imre Gyuk, Director of Energy Storage Research, OE, DoE, talked about using energy storage as a buffer between variable generation and variable load over the course of a few years. Dr Gyuk elaborated on DoE’s work on some projects to illustrate the use of energy storage as an additional variable to reduce costs and wastage of transmission resources in the grid.
In principle, storage could be used both at generation and at the load end. He further elaborated with the example of a project in Nantucket Island along with National Grid―an electricity, natural gas and clean energy delivery company in the US—wherein the DoE installed a 6 MW storage system instead of laying an additional submarine cable to yield the required 91 MW peaking capacity. This not only led to a transmission deferral of USD110 million but also led to better resiliency.
Figure 9: DoE’s energy storage project in Nantucket Island
Source: Presentation by Dr Imre Gyuk, Director of Energy Storage Research, Office of Electricity, DoE
Jason Burwen, Interim CEO, US Energy Storage Association, elaborated on and emphasised the concept of storage-as-transmission (SAT), which refers to the use of an energy storage system for reliability of the transmission system. By integrating a storage resource into transmission equipment, SAT can inject or absorb electricity to facilitate power flows on transmission lines over a certain period. Used in this way, storage can enhance existing transmission lines or even serve as an alternative to building new transmission projects.
There are still a significant number of RTOs and ISOs with planning and regulatory frameworks that prohibit or inhibit storage from being considered and/or selected as a transmission solution that is eligible for the same treatment as other transmission assets. Consequently, RTOs and ISOs may fail to choose SAT, resulting in otherwise avoidable costs for electric customers. Meanwhile, storage-providing transmission services can also provide generator services, and such dual-use SATs can offer better economic benefits for customers.
Adam Nygaard, Director Regulated Renewables – Energy Storage, Microgrids, CHP Development, Duke Energy, focused on the benefit of energy storage for transmission deferral, as well as its technical and financial benefits for the utility. Mr Nygaard used a simple case study to illustrate the issue of excessive load in a transmission network, and how deployment of a storage system at the appropriate location can offer the benefits of reduced costs, load management, easier installation, a shorter upgrade timeline and lastly, huge transmission cost deferral.
Figure 10: Case study demonstrating the use of energy storage in transmission network
Source: Presentation by Adam Nygaard, Director Regulated Renewables
Additionally, Mr Nygaard shared that the utility currently has 13 storage projects with a total portfolio of 830 MW, wherein eight are under construction, four are operational and one is in the initial planning stages. Further, the utility plans on deploying 13 GW of energy storage by 2050.
Grid modernisation – challenges and solutions
Karen Wayland, CEO, GridWise Alliance, and Robert Schwartz, President and CEO, Anterix, discussed the upcoming changes in grid modernisation and the utilities’ preference for revamping the network and making it more digitised. Increased investment in carbon-free generation requires better investment in the grid and according to recent discussions on the Bipartisan bill, grid modernisation might witness an investment of about USD35 billion.
The panellists shared how utilities can reduce costs while improving connectivity with both their grid assets and their workforce by building their own private Long-Term Evolution (LTE) networks. According to common consensus, for their grid modernisation and digital transformation initiatives to be successful, utilities need secure, flexible and reliable broadband wireless connectivity.
Among the initiatives for digital transformation are those intended to enhance customer engagement. These initiatives are being rolled out because the customers want detailed, real-time information on their power usage so that they can use it to lower their energy bills.
Mr Schwartz shared that one solution to mitigate wildfires from fallen electric lines is the Anterix spectrum incorporated into a private LTE deployment combined with an automated method to de-energise falling electric lines before they hit the ground. This private LTE deployment not only mitigates wildfires but will also help facilitate the modernisation of the electric grid, including the integration of more distributed and renewable energy sources.
Cybersecurity of electricity networks – incentivising investments
Tom Alrich, Principal Consultant, Tom Alrich LLC, elaborated on the issues with and solutions for the current structure of North American Electric Reliability Corporation Critical Infrastructure Protection (NERC CIP) compliance, which is a set of requirements designed to secure the assets required for operating North America’s bulk electric system.
According to Mr Alrich, some of the major issues with NERC CIP include the timeline of formulating the standards, i.e., CIP standards are created and revised in geologic time, which might not be relevant for future scenarios. Secondly, the regulations are not risk-based.
To solve the issues with securing the grid against cyber threats, an annual plan could be mitigated for the most important cyber threats, wherein the standards could be revamped and revised each consecutive year. Each utility would have to develop an annual plan to mitigate the threats on the current list, based on the risk the utility poses to the grid.
Ben Miller, Vice President, Services and R&D, Dragos Inc., discussed cyber threats and the inability of the industry to recognise these threats in time. There is lack of asset visibility, which means 90 per cent of the utilities have almost no visibility within their operational technology environment. Data collection and analysis is often extremely limited, coordination between internal teams is lacking and the speed at which existing information-sharing programs operate denies organisations sufficient time to plan a defence or response.
Financing grid investments
Ali Amirali, Senior Vice President, Starwood Energy Group, talked about the experience and outlook of financers with regard to transmission financing. He believes in a traditional and completely regulated model for financing wherein the operationalisation of a project is completely under the ISO’s control and the financier’s job is only to provide capital/loans and obtain their share of dedicated returns. It is also important to target projects where there is line of sight for receiving permits, a revenue mechanism and a calculated approach to transmission development. By making early processes more certain for potential investors, bigger and riskier projects are more likely to attract investment.
Trey Ward, CEO, Direct Connect Development Co, LLC, talked about his experience with regard to the financing aspect of the SOO Green HVDC Link. Direct Connect is pioneering a new model for transmission development that utilises underground installation along existing transportation corridors, providing unmatched reliability and resiliency benefits. Being able to participate in the regional PJM interconnection model is a very important source of revenue, but due to the long wait time for consideration, private transmission developers usually lose that benefit. He also argued that compensating technologies like HVDC for the benefits they bring to the grid, i.e. compensation for reactive power, should be introduced.
Roman Fontes, Senior Investment Officer, Western Area Power Administration, believes that careful orchestration in defining realistic terms for an equity borrow are integral for transmission projects. The start of a project is the most expensive and certainties for regulated type transmission investment, in terms of return on equity, incentives, loan interest financing and permitting, are essential. He also mentioned that to reach the decarbonisation goals by 2035-2040, the current investment plan of USD75 billion in power and transmission infrastructure needs to be doubled.
