Economic analysis of La Crosse-Madison shows up to $840m in net benefits – ATC and Xcel Energy

The 345-kV La Crosse-Madison transmission line, also known as Badger Coulee, may result in up to $841m in net economic benefits over 40 years.

American Transmission Company (ATC) and Xcel Energy (NYSE:XEL), which are jointly developing the project, on Aug. 5 submitted to the Public Service Commission of Wisconsin (PSCW) a 40-year economic analysis of the benefits the project would deliver under six different economic scenarios: robust, green, slow growth, regional wind, limited investment and carbon constrained. 

The project is estimated to cost between $510m and $550m, depending on which of the two routes is chosen.

Under a robust economy, the net present value of the project would be $841m; under a green economy, $804m; under regional wind, $708m; under carbon-constrained, $612m; under limited investment, $497m; and under slow growth, $259m. These different futures include specific assumptions about the key factors or drivers of the electric industry in the 2020 and 2026 study years.

ATC and Xcel Energy submitted the analysis to the PSCW early, so as to give the commission time to review it before they file their application for a certificate of public convenience and necessity in the fall, a spokesperson told TransmissionHub.

Including the drafting of the environmental impact statement, the regulatory process is expected to take 12 to 18 months, with a PSCW decision in 2015, construction beginning in 2016 and the project entering service in 2018.

ATC and Xcel Energy developed the six scenarios to coordinate with the Midcontinent ISO’s (MISO) futures development that was occurring at the same time, the companies said in the planning analysis. The six futures were designed to be different enough from each other that they would capture a wide range of plausible economic outcomes.

“ATC built up the futures by identifying the variables or drivers that would most impact the results of the Badger Coulee analysis and determining how those drivers would behave in each scenario,” according to the analysis.

Futures were specified for 2020 and 2026. “Plausible futures” were designed to describe the possible market conditions that could exist in 2020 and 2026, ATC said.

The drivers identified include load growth inside and outside of the ATC footprint; total small coal retirements or conversions to natural gas within the ATC footprint; expected generation additions within the ATC footprint; the amount and source of renewable energy consumed in Wisconsin; natural gas, coal and fuel oil prices; environmental regulations; applicable renewable portfolio standards in Wisconsin and regionally; nearby extra high voltage transmission projects and regional transmission overlays and expected generation additions outside the ATC footprint.

Xcel Energy and ATC in 2012 disputed ownership and development rights over the MISO multi-value project, which FERC in July 2012 ruled on, ordering the companies to share joint ownership and development of the line.

The companies have proposed a northern and a southern route for the project, which is located entirely within Wisconsin’s borders.

The southern end point of the 345-kV line will be the North Madison substation in Vienna. From there the line will continue to the Cardinal substation in Middleton. The western end point of the line will be Xcel Energy’s new Briggs Road substation near Holmen.

Six future descriptions

A robust economy assumes high energy and peak-demand rates of growth “because the economy recovers and expands vigorously due to increased capital investment, employment and consumer spending,” according to the analysis. As a result, new generation would be needed.

Under this scenario, no additional small coal plants in Wisconsin would be retired or converted to natural gas.

Under the green economy future, there is increased investment and growth due to policy initiatives like enhanced renewable energy usage; a shift away from fossil fuels due to carbon regulation; smart grid with improved real-time demand-response by customers; additional off-peak demand due to factors like off-peak charging of electric and plug-in hybrid vehicles; and increased energy-efficiency measures like improved building standards, according to the analysis.

“Energy and peak-demand grow within ATC and MISO because of increased economic activity in the new green manufacturing and construction sectors, aided by federal and state incentive programs,” according to the analysis. “However, demand growth increases less than energy growth, due to the peak-shifting effects of demand-response programs, and increased off-peak usage due to lower electric rates during these hours and new factors like off-peak charging of electric and plug-in hybrid vehicles.”

More generation is retired under this scenario, due to stricter regulation of carbon and other emissions. Demand needs are met by “considerable” additional wind power inside and outside ATC, allowing Wisconsin to reach 25% renewable energy usage by 2020/2026, the companies said in the analysis.

Under the slow growth future, regional wind development is slow, an enhanced renewable portfolio standard does not materialize, and lower demand causes some older coal-fired plants to close.

“The combination of lower energy demand and no carbon regulation results in lower costs for natural gas,” the companies said. “For the same reasons, coal plants serve proportionately more of the need, resulting in continuing demand for coal, and the cost of coal increases as projected.”

Under the regional wind future, the Upper Midwest realizes its full wind energy potential. Peak demand growth is at higher levels, and older and smaller coal-fired units retire.

“Additional generation capacity is needed in Wisconsin to meet the higher peak-demand growth rate,” the companies said. “Steady demand for natural gas results in projected cost levels. Less coal-fired generation is needed because of the additional wind power, reducing the demand and cost for coal.”

Under the long-term investment future, there is reduced investment in new energy infrastructure, especially new baseload generation, as peak-demand growth is modest. 

“In this future, credit markets do not provide easy access to investment capital, thus increasing the cost and transaction time for major projects,” the companies said. “Regulatory proceedings for new, large generating facilities and major transmission facilities are also lengthy and uncertain due to public opposition, concern for rate impacts, and new environmental requirements.”

Under a carbon-constrained future, energy and peak-demand growth are low because demand reduction and energy efficiency become effective means of reducing carbon emissions.

“The pace of retirement of smaller, older coal plants within ATC increases to its highest feasible level,” the companies said. “Generator additions within ATC are mainly additional wind facilities. The percentage of energy generated within the ATC footprint from renewable resources is at its highest plausible level, since renewable-energy usage increases in Wisconsin and new renewable generation within ATC is another means of reducing carbon emissions.”



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.