DOE: Congestion costs have declined since ’09 but volatility poses uncertainty

Transmission congestion costs around the United States have declined over the past few years, but congestion itself remains volatile, David Meyer, with the U.S. Department of Energy’s Office of Electricity Delivery and Energy Reliability, said Aug. 7.

“Across most of the country, congestion costs have declined … both in terms of total dollar costs and in proportion to wholesale market transactions,” Meyer said during a webinar presenting the preliminary findings of DOE’s 2012 National Interest Electric Transmission Congestion (NIETC) study.

For the 2008 to 2011 period, congestion costs have been trending down for ISO-New England and PJM Interconnection but are flat for the New York ISO “for reasons that are not clear,” Meyer said.

Since 2009 there have been five major changes that have affected transmission usage and trends, reducing congestion and lowering costs: the recession and subsequent economic recovery; low natural gas prices; state renewable portfolio standards (RPS); environmental regulations; and new transmission projects.

“Thinking ahead now with those five changes in mind, we say, ‘Yes, congestion is lower, but it remains volatile and will it stay down as the economy recovers further and the generation fleet evolves?’” Meyer said. “Much of the transmission infrastructure is aging and will need replacement; it’s simply not a matter of replacing like with like.”

He added that the challenge of deciding what the new transmission system should look like presents the greatest uncertainty that transmission planners and decision-makers have had to contend with. “Investments to sustain very strong and flexible, adaptable transmission networks is more important than ever,” he said.

Traditionally, there are three ways to reduce congestion, often used in combination: build more generation, reduce load, or build more transmission capacity, Meyer said. “All of these strategies require capital investment, which means that mitigation of all congestion would never be economic or appropriate,” Meyer said.

Some indicators of congestion include frequent high utilization of a line and state renewable portfolio standards that result in large queues of proposed projects.

Data limitations in West and Southeast

Despite widespread agreement on the strategic value of transmission infrastructure, there is no comprehensive data nor uniform reporting requirements, Meyer said. Though substantial data are available from regions that have organized markets, much less data are available from the non-market regions, which comprise a third of the United States. 

Meyer also noted that even with organized markets, it is difficult to make comparisons between RTOs as each ISO and RTO has its own practices and formats for calculating price-related, transaction-related data.

“We want to work with FERC and the utilities to try to improve the data available from the areas without organized markets,” Meyer said. “We think that significant improvements can be made in terms of working with FERC to harmonize their conventions about reporting certain kinds of data information from the RTOs and … we think improvements can be made in terms of making interconnection queue information more consistent and readily available.”

In the West, congestion cost data are available only from the California ISO as there are no other organized markets in the Western Interconnection, Meyer noted. 

In Cal-ISO, the most frequently congested internal constraint limited trade during 8% of hours; overall, the congestion of internal constraints had a small impact on prices, he said.

For the Southeast, the available data of transmission usage and congestion was “too thin” to support a meaningful conclusion, Meyer said. The Southeast region of the United States does not have an RTO.

In the Midwest, the data indicate no significant constraints related to the development of remote renewables, nor where there areas with major reliability problems, Meyer said.

“I don’t want to say there are no reliability problems in the area; I’m sure there are some, but the point is that we don’t see any widespread kinds of problems here,” he said.

He noted the predominance of renewables in the Midwest shows a great deal of proposed capacity “well beyond the carrying capability of the existing transmission.” 

Though he said the amount of congestion occurring in the Midwest is small relative to the total cost of electricity, inconsistent practices between RTOs is a significant impediment to economically beneficial trade, and could be considered a type of congestion. For example, when a party is unable to engage in a transaction across seams and is forced to invest in a costly alternative, that is a form of congestion.

“It’s not due to physical infrastructure, or operational limits put on infrastructure; it’s due to these inconsistent market designs and practices,” Meyer said. 

The DOE will issue a draft 2012 NIETC study for public comment in the fall and will publish a final version of the study after it reviews and considers comments. The DOE may hold workshops in areas that appear to be experiencing congestion problems that adversely affect consumers. Those workshops would focus on options for congestion relief.

The study excluded ERCOT.

About Rosy Lum 525 Articles
Rosy Lum, Analyst for TransmissionHub, has been covering the U.S. energy industry since 2007. She began her career in energy journalism at SNL Financial, for which she established a New York news desk. She covered topics ranging from energy finance and renewable policies and incentives, to master limited partnerships and ETFs. Thereafter, she honed her energy and utility focus at the Financial Times' dealReporter, where she covered and broke oil and gas and utility mergers and acquisitions.