WGA Annual Meeting SSGWI Studies

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SSG-WI Transmission Study Transmission Issues
Group Meeting September 4, 2003
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Overview

• SSG-WI
• SSG-WI Studies
• Methodology
• Assumptions
• Results
• Sub-Regional Studies
• Northwest Power Pool
• Rocky Mt.
• Why isnt sufficient expansion being done?

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Why SSG-WI?

• SSG-WI Formed by the Three RTOs to facilitate
  development of a seamless Western Market
• SSG-WI Goal is to facilitate the development of
  electric infrastructure necessary to support
  competitive wholesale electricity markets.
• Focuses on economic transmission needs, economic
  considerations influencing future generation/load
  patterns, flows congestion
• WECC Studies Focuses on Reliability, Adequacy

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• Goals Objectives
• Facilitate development of a flexible, cost
  effective, robust west-wide transmission network
  to facilitate competitive wholesale electricity
  markets.
• Identifies future congestion and bottlenecks that
  impact cost effective and efficient service
• Provides developers, load serving entities, and
  Transmission Owners information on economic
  transmission needs, locational impacts of
  generation and load additions, cost/benefits of
  new transmission additions.
• Provides a forum for parties and consortiums to
  identify common transmission additions to
  implement

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SSG-WI Studies
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• Studies
• Time frame for expansion options of 5-10 years in
  the future beyond already committed projects
• Studies use transmission ratings and cost
  estimates from reliability based analysis
• Studies use production cost techniques (market
  simulation tool) as surrogate for estimating
  future dispatch, load and generation patterns,
  and operational effects as influenced by
  economics, and given reliability
• Understood to be conservative floor on estimates
• Given unit commitment, assumes transparency and
  ample scheduler time to make best dispatch
• Studies use Regional Economic Planning Database
• Partnership with WECC CREPC, Coordinated
• Development validation efforts equitably shared
• Portable Usable on various models
• Visible Typical data, not confidential,
  encumbered, or proprietary, publicly available
• Transparent No Black Boxes, expansion info
  available to all
• User Improved

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Methodology
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Assessing New Transmission Benefits

• VOM Reduction Reduction of Variable OM costs
  from reducing bottlenecks and allowing lower cost
  generation through system
• Net Benefit Method

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Net Transmission Benefits with added Transmission
Consumers
Consumer surplus (benefit) increases in A, prices
fall

Price Falls
Area A
(Cheaper Imports)
Transmission Addition

Producer surplus (benefit) decreases in B, prices
rise
Area B
Price Rises

Net Benefits method adds price effects of
increasing consumer surplus and decreasing
producer surplus
Producers
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Evaluating Transmission Projects

• Conduct simulations with and without a
  transmission upgrade
• Track change in fuel costs, VOM
• Track estimated market energy prices at load and
  generation
• Compare consumer surplus and producer surplus to
  calculate economic benefit of an upgrade
• How to value producer surplus is a policy issue
• Compare cost of transmission upgrade to economic
  benefits
• Develop cost-effective projects
• Compare common expansion elements
• To various Generation Scenarios
• To various consortium, cluster, or party
  interests
• To policies and societal goals
• Develop consensus on plan

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Economic Benefits From Transmission

• Reduce overall operational costs
• Improve Access and Flexibility to lower cost
  power and portfolio diversity
• Improve market access and market operation
• Hedge against price spikes and market power
• Capture fuel diversity
• Reduce losses
• Accomplish energy policies
• Increase Reliability

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What is not Modeled Yet

• Bidding behavior
• Contracts
• Wheeling costs
• Generation fixed costs

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Modeling and Database Status

• Not done yet
• Bidding behavior
• Contracts
• Wheeling costs
• Generation fixed costs

• Yet to Come
• Granularity
• Hydro shaping and hourly model
• Zone Changes
• Ownership and Schedules
• Load Diversity
• Pricing Pancakes
• Operational Characteristics
• Storage Issues
• Hydro
• Emission Allowances
• Fuel Delivery
• Wind Variability
• Bidding Behavior
• Forced Outages
• Losses

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Assumptions

• Two years (2008 2013) were chosen to identify
  short-term and longer-term potential transmission
  needs
• In 2013 -three scenarios with different
  generation types intended as bookend measures
  were chosen to bracket the potential
  transmission needs
• Gas scenario - new generation (2008 - 2013) adds
  18,000 MW, of gas fired combined cycle, located
  near load centers
• Coal scenario - displaces 16,000 MW of the Gas
  scenario generation and requires transmission to
  serve load
• Renewable scenario - adds 25,000 MW of renewable,
  displacing 9,000 MW of of the Gas scenario
  generation, predominately located in remote areas
  and requiring transmission to serve load

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Path Expansion 2013 (Value Rank) - 2008
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(No Transcript)
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2008 Results

• SSG-WI Study focused on 2013 generation scenarios
  but provided other information.
• With Expected Transmission and Generation, there
  are Transmission Constraints not being addressed
• Study includes six of BPAs Infrastructure
  Projects and still have Significant Congestion
• NWPP Sub-Regional Planning Effort will follow up
  the SSG-WI work with incremental and more
  detailed studies, focused on the Northwest

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Results Summary 2008

• Existing WECC Transmission Costs
• WECC 2008 Case shows some bottle-necked
  inexpensive resources - 110 million VOM
  savings, and 600 million net benefit
• Resource Development
• New resources are mostly gas-fired CCCTs
• Capacity by fuel type is shifting toward gas, the
  change in energy is greater than the rate of
  capacity increase
• Total VOM Cost Estimates
• More sensitive to gas scenario than hydro
  scenario
• In 2008, for every 1/MMbtu change in gas price,
  fuel costs in the Western Interconnection change
  2 billion

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2008 Shadow Prices - (2003 )
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Developing a broad regional consensus

• Different entities have different concerns
• Generation Companies
• Transmission Owners
• Permitting Agencies
• Landowners
• Environmental groups
• No common forum to Develop a common vision for
  all of these entities
• The answer is to form sub-regional groups where
  all interested parties can participate in
  developing the plan

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Sub-Regional Planning

• Local Stakeholder Involvement and Review
• Representative rep at Regional Level
• Localized and Micro Visibility of Costs and
  Benefits for facilitation of Financing and
  Implementation
• Closer to Jurisdictional, LSE, and Consortium
  Organization
• Clustering and Overcoming 888 Queing Problems
• Coordination of Sub Regional Projects Identified,
  with Regional Projects, Schedules, and Markets
• Granularity and detail

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Current Efforts

• SSG-WI results show further evidence that there
  is congestion not only with new generation
  scenarios, but also in 2008.
• NWPP Transmission Assessment Committee (NTAC) is
  scoping out its mission
• NTAC will provide further analysis of expansion
  value but will not have the authority to allocate
  costs or compel construction.
• Will this information spur transmission
  construction?

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Impediments to Transmission Construction

• High-risk, long-term investments
• Could economics of project change in next 40
  years?
• Limited access to capital
• better investments available
• Free Rider and distributed benefits Issues
• why take the risk if someone else might do it.
• Benefits are wide spread to other systems than
  those making the investment
• Uncertainty about rules for Cost Recovery and
  Rights
• - Allocation of cost/rights between States,
  Jurisdictions, Parties
• - Tariff rules 888, SMD, LGIA, ???
• Not everyone wants to remove congestion
• some congestion can improve market position.

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Improvement Areas

• Stabilize rules
• Assure revenue recovery
• Assure property rights for investments
• Remove incentive or ability to block projects
• Streamline regulatory review for multi-state
  projects

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Potential Solution

• Independent Entity Responsible for Planning and
  Expansion
• Provide justification of projects for regulatory
  approval
• Identify beneficiaries and allocate costs
• Provide dispute resolution

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