Utilities plan over $51.1 billion in transmission development

Growth in renewable electricity production will drive significant upgrades to the U.S. electric transmission grid, according to a study released by the Edison Electric Institute.  EEI's seventh annual "Transmission Projects: At a Glance" identifies over 150 transmission projects planned by EEI member utilities for development over the next decade.  According to the report, these projects entail investments of at least $51.1 billion through 2023.  While the transmission projects may advance multiple goals, the majority of the projected investments will be for projects supporting the integration of renewable resources into the grid.

EEI is a trade association composed of investor-owned electric utilities.  Its members represent approximately 70 percent of the U.S. electric power industry.  EEI tracks transmission investment by its members.  According to the report, annual transmission investment is increasing, from 11.1 billion in 2011 to approximately $15.1 billion in 2013.  At the same time, EEI has revised its total future projection downward.  In 2012, EEI members reported $64 billion in planned transmission over the next decade, but changing projections of system needs have revised that number downward to $51.1 billion.

Under federal laws including the Energy Policy Act of 2005, utilities are given incentives to develop transmission lines and related assets.  These incentives are designed to ensuring a safe and reliable electric grid, but also reward utilities for developing projects to integrate renewable resources like wind farms into the grid.  Because ratepayers ultimately bear the cost of transmission infrastructure, the Federal Energy Regulatory Commission and state public utilities commission regulate utility proposals to expand the grid. 

According to EEI, most proposed transmission projects advance multiple goals.  The study shows that 76% of projects (approximately $38.7 billion) are pitched as supporting the integration of renewable resources. In the aggregate, these projects entail the addition or upgrade of 13,300 miles of transmission lines.  Similarly, most projects are designed to enable electricity to flow across state lines; 52% ($26.5 billion) represent large interstate transmission projects spanning multiple states.

Whether each project identified in the EEI report will be built remains to be seen.  As demand for electricity shifts -- whether due to energy efficiency improvements, a declining economy, or newly proposed generating projects -- the need for any given transmission line may diminish.  For example, last year the $2 billion Potomac Appalachian Transmission Highline (PATH) project was canceled after it was deemed unnecessary.  The proposed Northern Pass transmission project connecting Quebec to New Hampshire is facing significant opposition due to the siting of its planned route, as well as on environmental and economic grounds.  Nevertheless, the significant transmission development projected by EEI remains likely to occur in the aggregate.

Transmission costs up, energy costs down

The cost of electric transmission and distribution service in Maine is going up, at the same time that the cost of electric energy is going down.  What this means has implications not only for Maine but for all societies seeking to reduce the cost of electricity.

The cost of electricity to consumers can generally be broken down into two categories: energy and transmission and distribution service.  Electric energy charges represent the cost of the useable electricity that flows through an end-user's meter.  Transmission and distribution service charges, sometimes called "wires charges" or "delivery charges", represent the cost of delivering that amount of energy to the consumer.

In many states, vertically-integrated utilities both generate and deliver the energy.  Other states have restructured or deregulated their electric generation business; in these states, electric utilities deliver energy produced by non-utility generators.  Consumers in restructured states are usually free to select their own competitive electricity provider, whose energy will be delivered over the wires operated by the monopolistic local utility.  Because utilities continue to have a duty to serve all customers, if a consumer doesn't choose a competitive generation source, the utility will provide energy through a default service or "standard offer".

Maine is an example of a restructured state.  The state Public Utilities Commission regulates transmission and distribution utilities and their rates.  Effective July 1, the wires charges for Maine's two largest utilities -- Central Maine Power Co. (CMP) and Bangor Hydro Electric Company (BHE) -- went up.  On average, CMP customers' rates show an increase of 7.1% for the delivery portion of the bill; BHE customers' delivery rates increased 4.5%.  According to the Maine PUC's press release, the major driving force behind these increases are significant increases in the utilities' federally regulated transmission rates: a 19.6% increase for CMP and a 12% increase for BHE.  These transmission rate increases are in turn driven by multi-billion dollar expansions of and upgrades to the New England transmission grid.

At the same time, average energy prices in New England decreased by 7% between 2010 and 2011, largely as a result of cheaper natural gas supplies and reduced demand for electricity.  These energy price declines translated into decreases in the standard offer service delivered by these two utilities, about 25% to 35% lower than prices one year ago.

These twin forces -- increased investment in the transmission grid and reduced electric energy costs -- are not unique to Maine, but exert themselves in a number of regions of the United States.  One net result of these changes is a shifting of consumer costs away from energy and onto wires charges.  The cost of transmission and distribution service thus plays an increasing role in driving customers' electricity costs.  Given this shift, efforts to reduce the cost of electricity to consumers may find the most fertile ground in ensuring that transmission development is efficient, and that utility developers earn a rate of return on their investment that is fair, or in federal regulators' terms, "just and reasonable".

Maine PUC considers offshore wind, tidal

Petit Manan Light, several miles off the Maine coast.

Today the Maine Public Utilities Commission considers a term sheet for a long-term contract with the developer of a deepwater offshore wind or tidal energy project.  If the Commission ultimately approves the contract, it could represent Maine utilities' first offshore wind or tidal power purchase agreement.

In recent years, coastal states have become excited by the possibility of developing offshore wind and tidal energy resources.  Proponents hope that technological advances will enable both cost-effective energy production and economic development as the offshore wind sector gains a foothold.  In 2010, following record oil prices, the Maine Legislature enacted a law directing the Public Utilities Commission to hold a competitive solicitation for offshore wind proposals.  The law, P.L. 2009, ch. 615, requires the PUC to solicit proposals for long-term contracts to supply installed capacity and associated renewable energy and renewable energy credits from one or more deep-water offshore wind energy pilot projects or tidal energy demonstration projects.  Projects must employ one or more floating wind energy turbines in the Gulf of Maine, in water at least 300 feet deep and no less than 10 nautical miles offshore, and must be connected to the mainland grid.  The program may also include proposals by small-scale tidal power projects for similar long-term power purchase agreements.

In September 2010, the Maine PUC issued a request for proposals under the program.  Multiple bidders may have responded, although a subsidiary of Norwegian energy company Statoil may be the only entity to publicly announce its interest in developing a floating offshore wind project off Maine.

The Public Utilities Commission has placed the offshore wind contract docket on its agenda for today's deliberations as "Consideration of Long Term Contract Term Sheet".  The Maine PUC has not previously deliberated any long-term power purchase agreements for offshore wind or tidal power, but its past practice for land-based renewable projects suggests a possible procedural path.  If the Commission finds the terms of the proposal to be satisfactory and compliant with law, it may approve the term sheet and direct the bidder to negotiate a final contract with one or more Maine utilities.  Alternatively, the Commission could reject the term sheet and invite the bidder to negotiate more favorable terms.

Deliberations start at 10:00 a.m.  Will the Maine PUC show interest in the deepwater offshore wind or tidal power proposal before it today?

August 3, 2010 - Horsetooth Reservoir; Maine wind; firewood

If you're feeling the heat today, perhaps you'll take comfort in this wintry picture from last January.  You're looking west across Horsetooth Reservoir outside Fort Collins, Colorado.  Horsetooth Reservoir is part of the Colorado-Big Thompson Project, which includes water diversion from the west slope to feed the more populous Front Range area of Colorado.  Horsetooth Reservoir also provides water storage for hydroelectric generation.

The Maine Forest Service is reminding people that there is a ban on using out-of-state firewood in Maine, due to concerns over invasive species including insects and fungal pathogens.  Firewood is a major source of energy in Maine, but pests like the Asian Longhorned Beetle threaten to severely damage Maine's valuable forests.  The Asian Longhorned Beetle is already present in Massachusetts, but has not officially been documented in Maine. Today brings more coverage of yesterday's nomination of David Littell to fill the vacancy on the Maine Public Utilities Commission. Here's an editorial by Norman Kalloch in the Lewiston Sun Journal criticizing what the author sees as hype over wind energy.  He compares current tropes like "Maine is the Saudi Arabia of wind" to past busts, like nuclear power being perceived as "too cheap to meter.  (This isn't Mr. Kalloch's first such editorial; here's one he wrote this spring.)  Here's the punchline: "In reality, commercial wind power is an unreliable, environmentally degrading, overpriced form of power generation. Nothing short of massive amounts of public money can make those projects happen, because no developer in his right mind would undertake a project without public money." We're in for a blast of solar radiation tonight, as ions thrown off by the Sun during Sunday's coronal mass ejection. How about energy efficient street lighting?  The town of Lexington, Massachusetts, has approved a $930,000 plan to replace existing bulbs with compact fluorescent lights (CFLs).  Lexington's 3,400 streetlights have consumed nearly 2 million kilowatt-hours per year; this project will save 1.3 million kWh per year, totalling almost $190,000 annually.  This project is projected to pay for itself within 3.6 years, thanks in part to a $237,724 grant from utility NStar.

June 14, 2010 - Maine roundup: offshore wind, and changes at the PUC

Maine Public Utilities Commission chair Sharon Reishus will be stepping down effective July 12, 2010.  Governor Baldacci will name Commissioner Jack Cashman as Acting Commission Chairman.  In a press release, the Governor said he expects to nominate a new PUC Commissioner to be confirmed by the Legislature during a Special Session to be held later this summer.

Federal Secretary of Energy Steven Chu is visiting Maine today. He is touring the University of Maine's Advanced Structures and Composites Center, where Habib Dagher and company are design and testing floating deep-water wind turbine platforms.  This work will be supported by the $11 million bond Maine voters approved last week.