smith - review of energy infrastructure
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JT Smith
Transmission Planning in
an RTO Environment
9/16/2011
2
$322-$482
$546-$604$34-$42
$605-$673 ($254)
$1,253-1,634
$648-$874
0
200
400
600
800
1000
1200
1400
1600
Improved Reliability Market Commitment and Dispatch
Wind Integration Benefits Driven by Load / Supply
Balance
Midwest ISO Cost Structure
Total Net Benefits Adjusted Total Net Benefits
Benefit by Value Driver1
(in $ millions)
1Figures shown reflect annual benefits and costs for 2010
The continuing growth of the MISO’s value proposition
depends on transmission expansion
MISO Cost
Structure
3
• Make the benefits of an economically efficient energy market
available to customers by providing access to the lowest electric
energy costs
• Provide a transmission infrastructure that safeguards local and
regional reliability and supports interconnection-wide reliability
• Support state and federal energy policy objectives by planning for
access to a changing resource mix
• Provide an appropriate cost mechanism that ensures the
realization of benefits over time is commensurate with the
allocation of costs
• Develop transmission system scenario models and make them
available to state and federal energy policy makers to provide
context and inform the choices they face
MISO
Board of
Director
Planning
Principles*
Fundamental
Goal
The development of a comprehensive expansion plan that meets
reliability needs, policy needs, and economic needs
MISO Planning Objectives
* As modified and approved by MISO Board of Directors System Planning Committee
5/16/2011; pending full board approval
MISO’s transmission planning process is focused on minimizing
the total cost of delivered power to consumers: energy, capacity
and transmission
Minimum Total Cost:
Energy, Capacity and
Transmission
High Capacity Cost
Low Transmission Cost
Goal
High Transmission Cost
Low Capacity Cost
Total
Cost ($)
Capacity Cost
Transmission Cost
H
L
L
H
Planning Model Evolution
5
Reliability-Based Model
• Focused primarily on grid
reliability
• Typically considers a short time
horizon
• Seeks to minimize transmission
build
Value-Based Model
• Focused on value while maintaining
reliability
• Reflects appropriate project time
scales
• Seeks to identify transmission
infrastructure that maximizes value
• Identification of the comprehensive
value of projects
In order to achieve its planning objectives, MISO
has transformed its transmission expansion planning model;
this process will continue to mature as experience is gained
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• The MTEP is the culmination of all
planning efforts performed by
MISO during a given planning
cycle
• This planning process is
consistent with the Board of
Directors Planning Principles
• Each of the four pillars of the
MISO Planning Approach informs
the other, resulting in a fully
integrated view of project value
inclusive of reliability, market
efficiency, public policy, and other
value drivers across all planning
horizons
Top Down Planning
Inter-connection
Queue
Bottom Up Planning
Policy Assessment
MISO Transmission Expansion Plan (MTEP)
MTEP
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• Objective of value based
planning is to develop a
wide range of future
scenarios
– The “best” transmission plan
may be different in each
policy-based future scenario
– The transmission plan that is
the best-fit (most robust)
against all these scenarios
should offer the most future
value in supporting the future
resource mix
MISO Value Based Planning
STEP 6: EVALUATE
CONCEPTUAL TRANSMISSION
FOR RELIABILITY
STEP 5: CONSOLIDATE &
SEQUENCE TRANSMISSION
PLANS
STEP 7: COST ALLOCATION
ANALYSIS
STEP 4: TEST CONCEPTUAL
TRANSMISSION FOR
ROBUSTNESS
STEP 3: DESIGN CONCEPTUAL
TRANSMISSION OVERLAYS BY
FUTURE IF NECESSARY
STEP 2: SITE-GENERATION
AND PLACE IN POWERFLOW
MODEL
STEP 1: MULTI-FUTURE
REGIONAL RESOURCE
FORECASTING
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• Comparability
• Dispute Resolution
• Regional Participation
• Congestion Studies
• Coordination
• Openness
• Transparency
• Information Exchange
Stakeholder Process
• FERC Order 890 Provides for Open and Transparent Planning
• Order 890 Planning Principles:
Conditions Precedent to Increased
Transmission Build
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• Renewable Portfolio Standards passed by all MISO states except Kentucky
• Proposed federal legislation would drive additional homogeneity around resource requirements
– Possible National Renewable Portfolio Standard of 15 - 20%
– Carbon Reductions
• Increasing number of states with demand response and energy efficiency programs
Required: Policy Consensus
Current State Renewable Portfolio Standards As of 07/27/2011
Planned and Existing Wind as of 3/28/3011
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Required: Cost Allocation and Recovery Mechanism
• Reliability (RECB I)
• Market Efficiency (RECB II)
• Generator Interconnection
Projects
• Other Direct Assigned
Projects
Multi Value Projects
Regional
Local
The cost allocation goal is
– A fair system
– Get transmission built to
address a wide variety of
goals
– Maintain the MISO Value
Proposition
State participation in the
process reduces recovery
risk to the extent
– Investments are deemed
to be in the public interest
and
– The cost allocation is seen
as “fair”
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Required: Robust Business Case
• The following slides will walk through the RGOS/MVP process that utilized the MISO Value Based Planning Process as a framework for transmission development
As an increasing number of renewable energy mandates were
passed by MISO states, analyses were performed to determine a
least cost generation siting methodology
The least-cost approach to generation siting, when both
generation and transmission capital costs are considered, is
a combination of local and regional generation locations. 13
Energy Zone Siting Approaches and Costs
This methodology resulted in a set of energy zones
which were used as the locations for incremental
generation in continuing analyses
14
These energy zones were created by balancing relative wind
capacities along with distances from natural gas pipelines and
existing transmission infrastructure
Incremental Energy Zones
Native Voltage Alternative
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765 kV Voltage Alternative
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How Do You Decide On a Strategy?
• Robustness testing
– How does an alternative perform in a variety of future scenarios?
– Are significantly greater economic benefits projected in one case
over the other?
• Faith based scenario evaluation
– What would you have to believe?
– Actively test important assumptions
• Delay choosing as long as possible
– Without jeopardizing legal requirements
– Without risking wasted investment
17
What Would You Have To Believe…
• For the higher mileage lower voltage strategy to be
superior ?
• Energy policies will not expand beyond the current laws, thus the
actual construction will “most likely” stop short of full
implementation
• For the higher voltage lower mileage strategy to be
superior?
• Increasingly aggressive Energy Policy objectives will significantly
expand the objective and thus providing a more robust system
up front leads to significant flexibility and saved time
18
Should We Wait to Build Until Consensus
on Strategy is Achieved?
• No - we can delay decision – for a bit
- by making a set of investments with
relatively low risk/reward ratio
• Multi Value Project portfolio
candidates would meet criteria such
as the following:
– Support renewable integration at
a level likely to still be required
under future policy shifts
– Retain the flexibility to support
the choice of 345 kV or 765 kV
as the overall strategy
– Provide sufficient value to be in
the public interest on a stand
alone basis
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765 345Candidate
MVP
Portfolio
Benefits of Candidate MVP Portfolio• Evaluation of first Candidate MVP Portfolio is nearing completion
including business case development to document the value provided
by the portfolio.
• Goals of Multi Value Projects
– facilitate the integration of large amounts of location constrained
resources, including renewable generation resources
– support MISO member and customer compliance with evolving state and
federal energy policy requirements
– enable MISO to address multiple reliability needs and provide economic
opportunities through regional transmission development
• Benefits include reducing costs associated with: congestion and fuel,
operating reserves, system planning reserves, transmission line
losses; wind turbine investment, etc…
• Benefit of the portfolio as a whole is generally greater than the sum of
the benefits of its parts; looking at one element in isolation gives an
incomplete picture of the total benefits
20
These evaluations culminated in the
recommendation of the 2011 MVP Portfolio
• The 2011 MVP Portfolio
Analysis is the culmination of
MISO’s planning efforts to
meet the public policy
mandates of the MISO states,
while simultaneously
minimizing the total cost of
delivered power to consumers
• This analysis serves to justify
and demonstrate the value of
a regional portfolio of projects,
which brings multiple benefits
to stakeholders throughout the
MISO footprint.
• B/C of 1.7/1 to 2.7/1 with
sensitivity cases as high as
5.4/1
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CapX 2020
22
• Participants• Central MN Municipal Power Agency
• Dairyland Power Cooperative
• Great River Energy
• Minnesota Power
• Minnkota Power Cooperative
• Missouri River Energy Services
• Otter Tail Power Company
• Rochester Public Utilities
• Southern MN Municipal Power Agency
• WPPI Energy
• Xcel Energy
• Nearly 700 miles of transmission
• Costs estimated to be $1.9 billion
• Projects support local reliability and
regional transfer of energy
• Projects are a core assumption in the
MISO MVP development
Information source: http://www.capx2020.com/
Eastern Interconnect Planning Collaborative (EIPC)
• DOE Objective
– Facilitate the development / strengthening of capabilities to
prepare analyses of transmission requirements under a broad
range of alternative futures and develop long-term
interconnection-wide transmission expansion plans.
• DOE Expectations
– Improved
• Regional, inter-regional, and interconnection-level coordination on long-term
electricity policy and planning
• Quality of information available to state and federal policymakers and
regulators
• Understanding by stakeholders of Long-term transmission requirements
under a wide range of futures
– Facilitation and acceleration of development of renewable or
other low-carbon generation capacity
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EIPC - Approach
• Establishment of a Multi-Constituency Stakeholder
Process
• Roll Up and Analysis of Approved Regional Plans
• Development of Inter-Regional Resource
Expansion Scenarios
• Development of Inter-Regional Transmission
Expansion Options
• Prepare/Submit Reports to DOE
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Continuing Evolution: FERC Order 1000 -
Transmission Planning and Cost Allocation
• FERC issued Order 1000 on new transmission planning
and cost allocation requirements to build on the
principles identified in Order 890– Coordination; Openness; Transparency; Information Exchange;
Comparability; Dispute Resolution; Regional Participation; Economic
Planning Studies and Cost Allocation
• The new rules address:
– Participation in a regional planning process
– Planning for public policy requirements, such as renewable mandates
– Coordinated planning and improved cost sharing for interregional
facilities
– Elimination of federal “right of first refusal” for projects identified in a
regional planning process with regional cost allocation
– Principles for regional and interregional cost allocation
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Appendix
26
MTEP Activities
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Top Down
Planning
Bottom Up
Planning
Interconnection
Queue
Policy
Assessment
Description •Develop solutions for
outstanding needs,
•Test effectiveness of
input plans and seek
efficiencies
Ensure plans identified
by the member
Transmission Owners
are sufficient to address
reliability standards and
form an efficient set of
expansions to meet
identified needs
Evaluate specific
interconnection requests
and Place resulting
upgrades in base
expansion model
Analyze the impacts of
changes in state or
federal policy on the
MISO system
Examples Regional Generator
Outlet Study, Candidate
MVP Portfolio, MTEP
economic analysis, Long
Term Assessment
MTEP reliability analysis Interconnection Studies,
System Planning and
Analysis, Detailed
Planning Phase
EPA Regulations study,
Eastern Wind Integration
Transmission Study
Tools Production Cost models
(PROMOD), Generation
Expansion (EGEAS),
Loss of Load (MARS)
Load flow models
(PSS/E)
Load flow models
(PSS/E)
All
MISO Cost Allocation Overview
Allocation Category Driver(s) Allocation Overview
Baseline Reliability
Project
NERC Reliability Criteria Primarily shared locally through Line
Outage Distribution Factor
Methodology; 345 kV and above 20%
postage stamp to load
Generator
Interconnection
Project
Interconnection Request Paid for by requestor; 345 kV and
above 10% postage stamp to load
Market Efficiency
Project1Reduce market congestion
when benefits are 1.2 to 3
times in excess of cost
Distribute to planning regions
commensurate with expected benefit;
345 kV and above 20% postage stamp
to load
Multi Value Project Address energy policy laws
and/or provide widespread
benefits across footprint
100% postage stamp to load
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1. Market Efficiency Project cost allocation
methodology currently under review at the
RECBTF
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