In evaluating potentially beneficial transmission projects, it would be helpful for regions and individual planners to look beyond their own boundaries and review the experience of neighboring regions, Johannes Pfeifenberger, principal with The Brattle Group, said during a July 31 webinar.
“Obviously, every region is special and there [are] certain considerations that apply only to particular regions, but with respect to the type of economic benefits that transmission can provide, … the boundaries that we draw on paper really aren’t too relevant,” he said during the WIRES webinar hosted by TransmissionHub. “We can take advantage of experience from other regions and we should take advantage of [the] experience from other regions, and I hope our report facilitates that.”
The report Pfeifenberger referenced is, “The benefits of electric transmission: Identifying and analyzing the value of investments,” by The Brattle Group and commissioned by WIRES.
As reported, The Brattle Group conducted a three-fold study to document the broad range of transmission benefits and how they can be identified and estimated for specific transmission investments; discuss the experiences of RTOs and non-RTOs in analyzing the economic, public policy and other benefits that new or upgraded transmission can provide; and catalogue the range of potential benefits offered by transmission investments, and summarize the experience with the estimation of those benefits.
The Brattle Group developed a checklist of benefits to be used during conceptualization efforts to help planners identify potentially beneficial projects and their associated benefits. The firm also made a series of recommendations when considering benefits, including that near- and long-term uncertainties be evaluated.
Judy Chang, principal with The Brattle Group and, like Pfeifenberger, one of the report’s authors, said during the webinar: “[T]he primary consideration we’d like all of you to have is to be more comprehensive when evaluating potential transmission projects. We would like policymakers and practitioners to use the checklist.”
As noted in the report, the checklist divides transmission benefits into benefit categories. For instance, the transmission benefits of increased competition and increased market liquidity are paired with the category of market benefits, while the transmission benefits of reduced emissions of air pollutants and improved utilization of transmission corridors are paired with the category of environmental benefits.
Chang noted that the comprehensive checklist “is really targeted for both policymakers and practitioners to consider whenever they’re thinking about and evaluating proposed transmission projects.”
She noted that The Brattle Group also proposed a framework of how to, in some ways, begin the process of evaluating potentially beneficial transmission projects by a four-step process.
“[W]e would like planners to focus on the benefits without being hampered by the available metrics or available tools or even … the limitations of certain guidelines,” she said. “The idea is go into a room to think about potential beneficial projects in a more open-arms way and allow creativity in thinking about transmission benefits.”
She also noted that while the report is about transmission benefits, “we are not saying that all proposed transmission projects can, or even should, be justified economically. … What we’re saying is that, let’s first look at potentially beneficial projects, but don’t underestimate the potential benefits because by doing so, you’re effectively allowing customers to pay extra costs into the future because you’re underestimating the potential benefits of reducing their costs by adding transmission.”
Pfeifenberger said that there has been “a big evolution” recently in how planners and regulators have recognized the importance of considering a wide range of benefits, with some RTOs such as the Southwest Power Pool (SPP), the Midcontinent ISO (MISO) and California ISO (Cal-ISO), expanding their transmission planning beyond addressing reliability or load-serving customers to include not just production cost savings and economic analysis but other benefits as well.
“It’s really the physics of transmission and power that create these benefits and while, of course, there will be different market structures, there will be different market prices, there will be different fuel mixes and so on, these benefits [included in the report] really apply universally and just because some RTOs do not consider them in their planning processes doesn’t necessarily mean that these benefits aren’t there,” he said.
Pfeifenberger noted that there is a downside to being overly conservative on estimating transmission benefits because that means “you’re being overly conservative about estimating what future costs to customers might be.”
He continued, “If you flip it around, you can say this project has a benefit, but you could say, what is the cost that customers would be exposed to if we don’t build this project, and if you ask yourself that way, you really don’t want to underestimate the cost.”
In discussing the framework, Chang said the first step is to have system planners and stakeholders identify potentially valuable transmission projects in a way that can be considered a brainstorming session.
“The reason this is an important step is that we recognize, while working with many planners, that planners intrinsically know, especially the ones that have worked with their systems for many years, what are the potential needs, where are the congested areas, where are the troubled spots … [and] we don’t want to hamper that knowledge by limiting the idea stage,” she said.
The second step is to perform an unbiased evaluation using as many of the benefits provided in the checklist. The third step is to determine whether the project, overall, would be beneficial from an economy-wide or societal basis.
Chang also said that cost allocation is addressed in the fourth and final step. “We intentionally leave cost allocation last, so that a portfolio, or portfolios, of beneficial projects can be presented as a group,” she said. “[W]e believe that in providing a way to propose portfolios of projects, that would reduce the incentive for individual participants to try to second-guess how much benefit they might incur and, therefore, how much cost might be allocated.”
The proposed framework does not aim to completely sidestep cost allocation, but to minimize allowing the cost allocation trap, so to speak, from preventing creative proposed transmission projects, especially beneficial projects, she said.
Among other things, she said that the report recommended that, with regard to interregional planning in response to FERC Order 1000, two interconnecting regions, for instance, should consider all of the benefit metrics comprehensively, “both through our checklist, but also across the seam, and this will minimize the risk of what we call this least common denominator.”
That is, if ‘Region A’ uses five different benefits and “Region B” uses a separate set of benefits but only two overlap and both regions consider only the overlapping ones, that essentially discounts all the other benefits of potentially very valuable interregional projects, she said.