During the Dec. 16 TransmissionHub Quarterly Market Update presented by AZZ Galvanizing, Kent Knutson, director of Hub Services at PennWell, said that transmission projects valued at $13.7bn came online in 2015 in the United States and Canada, down considerably from the $22.3bn forecast earlier in the year.
Driven by stagnant load growth and regulatory uncertainty, the market for new larger long-haul projects has slowed, he said. Meanwhile there is a continued influx of reliability driven projects by regulated sponsored utilities, Knutson said.
Of 135 projects slated for completion in 2016, 25 cost more than $100m each; of 117 projects in 2017, 36 cost more than $100m; and of 138 projects in 2018, 60 cost more than $100m.
“[E]ach quarter we seem to find more and more projects that are suspended or pushed out to a later period, and therefore the number is a little bit less,” he said.
Knutson also said that $23.5bn of transmission investment is under construction in the United States and Canada, noting that the next two years are being seen “as pretty big spend years” given the ongoing construction, but after that, things will taper off.
As noted in his presentation, investment of planned and under construction transmission projects is forecast at $141.4bn, representing 41,260 miles, which is up slightly from TransmissionHub’s 3Q15 outlook of $140.9bn, but down significantly from the 1Q15 outlook of $160.1bn.
TransmissionHub forecasts an average investment of $20.5bn per year from 2016 to 2020.
The presentation further noted that TransmissionHub is tracking $51.1bn of HVDC projects, with $21.1bn of that being underground and underwater projects.
Knutson noted that most of the growth in project development is set to occur in PJM Interconnection, the Midcontinent ISO and ISO New England (ISO-NE), with many of those projects being sponsored by merchant or independent developers rather than regulated utilities.
Knutson noted that since last quarter, there have been many project updates, including Ameren’s (NYSE:AEE) 46-mile, 345-kV, $146m Spoon River project gaining the approval of the Illinois Commerce Commission (ICC), and 90 miles of the 153-mile, $500m CapX2020 Hampton–Rochester–La Crosse project being energized. That project, which involves Xcel Energy (NYSE:XEL) among others, is expected to come fully online in 2017, he said.
Other notable happenings, he said, include that PPL’s (NYSE:PPL) PPL Electric Utilities filed an interconnect request for the first segment of its proposed 95-mile, 345-kV, $600m Project Compass, and Tucson Electric Power (TEP) completed its 42-mile, 500-kV Pinal Central to Tortolita project.
TEP and its parent, UNS Energy, are owned by Fortis (TSX:FTS).
Additionally, Eversource Energy (NYSE:ES) has canceled its $350m Central Connecticut Reliability Project, Clean Line Energy Partners’ $2.2bn Grain Belt Express project’s application was approved by the ICC, while its Plains and Eastern project received the final environmental impact statement from the U.S. Department of Energy (DOE).
In addition, Westar Energy’s (NYSE:WR) $112.8m Elm Creek to Summit project began construction, and BC Hydro’s 153-mile, 500-kV Interior to Lower Mainland (ILM) project was energized, as were 28 miles of Bonneville Power Administration’s 500-kV Big Eddy–Knight project.
Knutson further noted that other large projects are moving forward in what is a difficult time in trying to get rights of way and permits secured.
For instance, as TransmissionHub reported, Northern Pass Transmission LLC (NPT) said Dec. 7 that the New Hampshire Site Evaluation Committee ruled that the application for the Northern Pass transmission project is complete, meaning that the year-long siting evaluation process for the line will start. The $1.6bn project is designed to move 1,090 MW of electricity from hydropower facilities in Quebec to southern New Hampshire, with Eversource partnering with Hydro-Quebec TransEnergie, a division of Hydro-Quebec, to build the line.
Also, TDI New England (TDI-NE) received the final environmental impact statement from DOE for its $1.2b Clean Power Link transmission project designed to move power from renewable resources in Canada to Vermont, TDI-NE said in a statement. The planned 154-mile project is a high voltage, direct current (HVDC) line that would be capable of delivering 1,000 MW into the ISO-NE system at a substation in Cavendish, Vermont. It includes a 97-mile underwater segment in Lake Champlain and a 57-mile underground segment in Vermont to move power from Quebec, Canada, to a converter station in Ludlow, Vermont.
As noted in Knutson’s presentation, top 2015 U.S./Canada transmission projects that have come online include:
- AltaLink Management Ltd.’s 215-mile, 500-kV HVDC Western Alberta Transmission Line
- Public Service Electric and Gas’ (PSE&G) and PPL Electric Utilities’ 150-mile, 500-kV, approximately $1.5bn Susquehanna–Roseland project
- Central Maine Power’s (CMP) 440-mile, 345-kV, approximately $1.4bn Maine Power Reliability Program, which is essentially complete, though there will be additional work ongoing for the next year
AltaLink Management Ltd. is a subsidiary of Berkshire Hathaway Inc. (NYSE:BRK/A). PSE&G is a subsidiary of Public Service Enterprise Group (NYSE:PEG). CMP is a subsidiary of Iberdrola USA, which is a subsidiary of Iberdrola S.A.
Top U.S./Canada projects scheduled to come online in 2016 that are under construction as of this month include:
- Southern California Edison’s (SCE) 250-mile, 500-kV, approximately $1.7bn Tehachapi Segments 4-11 project
- PSE&G’s 50-mile, 230-kV aboveground/underground, approximately $975m Northeast Grid Reliability Transmission Project
- Transource Energy’s and the Omaha Public Power District’s 180-mile, 345-kV, approximately $400m Midwest Transmission Project
SCE is a subsidiary of Edison International (NYSE:EIX).
Top U.S./Canada transmission projects that are scheduled to come online in 2017 include:
- Manitoba Hydro’s 858-mile, 500 x2 HVDC Bipole III Project
- Nalcor Energy’s and Emera’s 684-mile, 350-kV HVDC Labrador Island Link project
- ENL Maritime Link’s (Nalcor) 321-mile, 200-kV HVDC Maritime Transmission Link project
Noting that the Northeast region of the United States has some of the most expensive rates in the country, Knutson said that there has been a huge shift in recent years to natural gas-fueled generation, with almost all of the planning being done around natural gas as well as wind power. More coal units in the region have and continue to retire, and owners of two nuclear plants, including the Pilgrim power plant, have either retired the plants already or are planning to retire, he said.
While natural gas is cheap now, the source still becomes volatile during such events as the polar vortex or any kind of cold spell as natural gas in the Northeast is constrained by pipelines, Knutson said.
He also discussed transmission drivers going forward, which, as noted in his presentation, are:
- Aging infrastructure and reliability upgrades
- Compliance to the U.S. Environmental Protection Agency’s Clean Power Plan standards and possible regional carbon trading markets
- Continued interconnection projects for new generation driven by gas and state renewable portfolio standards
- Baseload generation retirements that create transmission development opportunities
- New transmission needed in high growth areas
Knutson noted that the final version of the Clean Power Plan extended the interim compliance period to 2022 from 2020, essentially providing the industry with a seven-year window to build infrastructure “and that was primarily put into play to extend that because of the long lead time it takes to build infrastructure, and that would include more than just transmission lines,” such as the expansion of natural gas pipelines as well.
As noted in his presentation, the plan’s 2030 goal was increased to 32% reductions in carbon emissions, and the initial deadline for the state implementation plans, or SIPs, is Sept. 6, 2016, although extensions may be available under certain circumstances.
The plan also includes a reliability safety valve and the Clean Energy Incentive Program. Knutson also noted that 27 states and special interest groups are in various levels of litigation against the plan.
His presentation also addressed electric capacity, noting that gas, wind and solar continue to dominate the new generation landscape. U.S. investment in 2016 to 2018 is expected as such:
- 93.2 GW, or 66%, of gas
- 23.2 GW, or 16%, of wind
- 18.7 GW, or 13%, of solar
Gas, wind and solar, make up 135.1 GW, or 95% of the 141.5 GW of generation investment forecast for that time period.
Knutson also discussed U.S. coal plant retirements, noting that almost 19 GW have been retired this year, and 2016 is expected to see nearly as many with 18 GW of coal expected to retire next year.
As his presentation noted, 10 GW of nuclear power generation may retire over the next several years, and old steam gas plants are on the block as well.
Of renewable energy, Knutson said that the fate of those resources hinges on the production tax credit (PTC) and investment tax credit (ITC).
As PennWell’s GenerationHub reported, Congress has voted to approve a roughly $1.1 trillion omnibus spending package that includes an extension of key tax credits for wind and solar power. Lawmakers in the House and Senate passed the package on Dec. 18, before leaving Washington, D.C., for the holidays. The Senate’s 65-33 vote approved both the $1.1 trillion catch-all spending bill and a $622bn series of tax breaks, USA Today reported. The House had already passed the measures earlier in the week and President Barack Obama is expected to sign them.
Of the PTC, for instance, Knutson noted that historically, wind energy development “almost goes hand in hand” with the extensions of the PTC, with notable drops in construction during periods when the PTC was nearing expiration. Proposed legislation calling for the phase-out of the PTC is “gaining some traction,” he said.
The ITC, which supports solar energy, is set to expire at the end of 2016, at which point it would revert to its pre-2006 level in being a 10% tax credit, as opposed to the 30% credit it is now, he said.
Knutson’s presentation noted that electric sales in the most recent 12 months ending last August, compared with the same period in 2014, are down 0.2% for residential; up 0.7% for commercial; and down 0.6% for industrial. All sales are up 0.02%, or essentially flat, he said.
Among other things, his presentation noted that diminishing incentives like lower returns on equity could stymie investment, with money going elsewhere if the risk is deemed too high; state and regional compliance to the Clean Power Plan supports opportunity for transmission development; baseload fossil and nuclear plant retirements will result in increased transmission investment; and declining and flat load growth could slow development.