Study shows Californians could save up to $1bn in annual generation costs if new DC line connects state’s grid to Wyoming’s wind

The economic benefits of developing a Wyoming-to-California transmission corridor exceed the costs under an array of future conditions tested in an economic analysis sponsored by the Wyoming Infrastructure Authority and produced by the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL).

The analysis shows Californians will benefit and save up to $1bn in annual generation costs if a new DC transmission line connects the California grid to Wyoming’s high-capacity wind energy resources, the authority said on March 24.

The authority said that as part of the study work, NREL analysts along with a technical review committee of transmission experts from California and across the West reviewed multiple previous studies to examine how California plans to supply the 32,000 GWh of new renewable energy in order to meet the state’s renewable portfolio standard of having 33% of all electricity come from renewable sources by 2020.

Also, NREL reviewed a previous study done by the Western Electricity Coordinating Council in 2011 that found that Wyoming wind delivered by a DC transmission line provided the lowest-cost regional alternative to using only California-based renewable resources and would save California’s ratepayers $600m annually.

NREL then built scenarios in which 12,000 GWh of Wyoming wind – the “change case” – was compared to a “base case” reflecting different combinations of various types of California renewables: those already contracted to meet the 2020 goal, those needing to be built to meet that goal, or those needing to be contracted to reach a higher 35% goal. Analysts considered various potential federal tax incentives for wind and solar, and they considered how much it could cost to build transmission to the newly built renewable energy resources within California and to Wyoming.

According to the study, “California-Wyoming Grid Integration Study Phase 1 – Economic Analysis,” benefit to cost ratios range from 1.62 to 3.62 depending on assumptions about federal tax incentives in 2017, and depending on assumptions about the future costs of different renewable energy technologies. The study added that where outcomes fall within that range depends on:

  • Expectations about future technology costs. If large-scale solar photovoltaic (PV) costs fall significantly faster than the cost of wind power, the ratios will tend toward the lower end of the ranges reported here.
  • Expectations about future federal tax incentives. Reductions in the production tax credit (PTC) and investment tax credit (ITC) tend to favor developing the corridor, particularly if the reductions are even across all benefiting renewable technologies. If the changes significantly benefit solar and geothermal without benefiting wind, the ratios will tend toward the lower end of the ranges reported here.
  • Avoided transmission build-out in California. The ratios tend toward the higher end of the ranges when including the economic benefit of avoided transmission build-out in California, regardless of expectations about future generator costs and future federal tax incentives.

“The ultimate cost of each kilowatt of renewable electricity – a cost that is wholly passed along to California consumers – depends on the technology that utilities choose, the quality and capacity of the resources captured, and the transmission needed to access those resources,” Loyd Drain, executive director of the authority, said in the statement. “By sourcing just a portion of Wyoming’s high-capacity wind, the NREL study notes that ‘annual generator cost savings range from around $500m to around $1bn.’ Over a 50-year transmission lifespan, that equates to billions of savings in utility costs for California.”

The study noted that it does not offer recommendations about what one should assume regarding future costs, future incentives and avoided transmission build-out. Instead, the aim is to test the extent to which the corridor constitutes a “least regrets” proposition for major infrastructure development and its long-term benefits, anticipating how some of the most crucial variables could change by 2017.

The analysis tested four renewable resource portfolios and their likely characteristics in 2017, the study added, noting that modeling conducted by the California Public Utilities Commission (CPUC) provided the basis for defining the portfolios. That modeling identified a number of “net short” procurement scenarios for CPUC-jurisdictional utilities. The study begins with the resources selected in the commercial interest portfolio, which gave weight to projects with power purchase agreements and for which permitting applications were substantially complete.

Two portfolios would result in meeting 33% of retail sales with renewable resources:

  • 32,184 GWh/year selected in the commercial interest portfolio (CA33%)
  • 20,184 GWh/year of the commercial interest portfolio, and 12,000 GWh/year of Wyoming wind power (CA/WY33%); this portfolio excludes generic projects with no specifically demonstrated commercial interest, and assumes that some future in-state projects for which developers currently have indicated commercial interest will not meet their expected in-service dates.

Two other portfolios would result in meeting 35% of retail sales with renewable resources:

  • The commercial interest portfolio, plus another 4,433 GWh/year of new California resources (CA35%).
  • 24,617 GWh/year of the commercial interest portfolio; and 12,000 GWh/year of Wyoming wind power (CA/WY35%); this portfolio excludes generic projects with no specifically demonstrated commercial interest, and assumes that all future in-state projects for which developers currently have indicated commercial interest will meet their expected in-service dates.

A number of major transmission projects in advanced planning would provide an energy pathway along the Wyoming-California corridor.

The study used information from the proposed TransWest Express Project to characterize the economics of new transmission along the corridor, the study added, noting that the project would include a 600-kV HVDC line from south central Wyoming to southern Nevada’s Eldorado Valley, with interconnection into the California ISO (Cal-ISO) balancing authority.

The assumed transfer capability of the transmission corridor is 3,000 MW, which in the analysis is assigned entirely to Wyoming wind power. Updated resource information on renewable energy zones indicates that wind power facilities near the Wyoming terminus of the TransWest Express Project would have a likely annual capacity factor of about 46%, assuming the use of Type 1 wind turbines at a hub height of 80 meters.

Referencing case capital costs for transmission are assumed to be $3bn, and total project costs are assumed to be 145% of capital costs. Factoring in line losses, annualized transmission costs under those assumptions amount to about $29 per MWh delivered.

The study also noted that the ability to connect 12,000 GWh/year of Wyoming wind power could affect the need for two new lines and two transmission upgrades in California that would enable additional renewable resources. Because treatment of avoided transmission build-out is not straightforward, the analysis calculates two sets of benefit/cost ratios: one that includes the benefit of avoided transmission build-out and one that does not.

The analysis of generator costs relies on three simplifying assumptions, the study said:

  • A generator’s levelized cost of energy sufficiently represents the fixed-cost revenue requirements of a resource with no fuel costs and little variable operating costs.
  • The stock of generating equipment is replaced at the end of its economic life (assumed to be 20 years) with a new stock of comparable equipment at comparable cost.
  • Generator costs projected to 2017 sufficiently represent the resources examined in the analysis.

The study also noted that the capital cost of the renewable energy technologies required to generate 12,000 GWh of electricity in 2017 is a major uncertainty. Another uncertainty is what federal incentives might exist in 2017 and later. Current law limits the PTC to wind and other eligible technologies for which construction began before Dec. 31, 2013, the study added, noting that the ITC is set to fall to 10% from its current 30% for solar and other eligible technologies placed in service after Dec. 31, 2016. However, both incentives have a history of last-minute extensions by Congress, the study said.

Among other things, the study noted that the difference in generator costs – for instance, the capital investment required to generate 12,000 GWh/year – makes up the largest share of overall benefits. Large-scale solar PV and geothermal power are expected to be the two primary renewable resources available for new development in California after 2017, but on a dollar/MWh basis, they are both more expensive than Wyoming wind. Additionally, the study said, Wyoming wind power generally has a higher capacity factor than does California wind power, resulting in more energy per dollar of capital investment.

About Corina Rivera-Linares 3286 Articles
Corina Rivera-Linares was TransmissionHub’s chief editor until August 2021, as well as part of the team that established TransmissionHub in 2011. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial from 2005 to 2011. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines.