Electricity Transmission Infrastructure Development in New England NPCC Governmental/Regulatory Affairs Advisory Group Paul G. Afonso March 4, 2008
Transmission Infrastructure is Playing An Increasingly Important Role in Competitive Markets Traditional role to provide reliable delivery of an essential energy source Increased to incorporate new mandated standards imposed by NERC and other reliability organizations Now must also allow for effective and efficient trading as well as delivery of a commodity Ability of suppliers to have fair access to the transmission system Adequacy to deliver electricity to where it is needed Buyers to be able to choose the least expensive wholesale electricity available The competitive wholesale marketplace requires a substantially more integrated and upgraded managed transmission infrastructure
Several Challenges are Limiting the Grid s Capability to Efficiently and Economically Transmit Electricity Age and Size: system consists of aging, lower-capacity lines, that are undersized for amounts of electricity transmitted High Electricity Demand: peak demand increased 28% since 200X and is expected to increase another 20% over next decade Infrastructure Underinvestment: $9B was spent on new generating facilities since restructuring, <$1B on transmission Transactions: more than 300 companies participate in $11B in buying/selling transactions annually system not designed for this heavy or type of use
70% of System is Still Composed of Lower Capacity Lines --- More Upgrading Needed 230 kv 6% 69 kv 5% 345 kv 22% 115 kv 67% Source: ISO New England, Pool Transmission Facilities as of January 1, 2007.
Lag in Post Restructuring Transmission Investment has Led Consumers to Pay >$600M in Congestion Costs 160 140 120 100 Millions of $ 80 60 40 20 0 Q1 2003 Q3 2003 Q1 2004 Q3 2004 Q1 2005 Q3 2005 Q1 2006 Q3 2006 Source: ISO New England, 2006 Annual Markets Report, June 2007.
Congestion is Not Unique to New England and Effects States Differently DOE has Designated parts of New York and PJM as being critical congestion areas : PJM: congestion costs of $2B in 2005 NY: congestion costs of $900M in 2005 Even after accounting for the difference in size, these two ISO regions have substantially higher congestion costs than does New England In New England congestion is localized, which can introduce parochial political positions In 2006 there was a $10.41/MWh price differential between Maine and Connecticut
Transmission Driven RMR Contracts Needed in Boston Area and SW CT Have Cost Consumers $1B $482 M $180 M $240 M $40 M $84 M 2002 2003 2004 2005 2006 Source: ISO New England, 2006 Annual Markets Report, June 2007.
New England has an Established Comprehensive Transmission Planning Process New England Reliability Transmission Projects (underway according to ISO New England as of 10/07) Project Status Total Number Estimated Cost Conceptual 81 $0.4B Proposed 164 $1.2B Planned 62 $0.5B Under Construction 47 $2.3B Total 354 $4.4B Source: ISO New England, Regional System Plan Transmission Projects, October 2007 Update.
Major Investment is Underway/Planned for the Next Few Years --- Significant Reliability Enhancement $1,800 $1,600 $1,400 $1,200 Costs of Projects Projected Costs Qty: 66 Note: Numbers above bars represent project quantities. $1,000 $ millions $800 Qty: 73 $1,700 $600 $400 $200 $0 Qty: 7 $18 Qty: 26 Qty: 30 Qty: 51 $79 $107 $141 Qty: 51 Qty: 37 $490 $200 $150 $1,000 Qty: 43 $400 2002 2003 2004 2005 2006 2007 2008 2009 2010 (1) Source: ISO New England, Regional Transmission Project Update, October 2007. (1) Costs as of October 2007
Transmission Provides Economic & Environmental Value (Plus Increased Market Competition) SW CT Phase I Transmission Project Compared to Supply and Demand Resource Alternatives $343M $356M (2) $260M (3) Cost (one-time capital expenditure) SW CT Phase 1 New Generation (600 MW) Mandated Region-wide Energy Efficiency Estimated Consumer Savings (per year) $100+M (4) $100+M (4) $93M (5) SW CT Phase 1 New Generation (600 MW) Mandated Region-wide Energy Efficiency 330,000 tons (6) Estimated CO 2 Emission Savings (per year) Not Available Not Available SW CT Phase 1 New Generation (600 MW) Mandated Region-wide Energy Efficiency
Transmission Provides Economic & Environmental Value (Plus Increased Market Competition) NSTAR 345kV Transmission Project Compared to Supply and Demand Resource Alternatives $594M (2) Cost (one-time capital expenditure) $220M $260M (3) NSTAR 345 kv (Phase I) New Generation (1,000 MW) Mandated Region-wide Energy Efficiency $260M (4) $260M (4) Estimated Consumer Savings (per year) $93M (5) NSTAR 345 kv (Phase I) New Generation (1,000 MW) Mandated Region-wide Energy Efficiency 245,000+ tons (6) 245,000+ tons (6) 330,000 tons (7) Estimated CO 2 Emission Savings (per year) NSTAR 345 kv (Phase I) New Generation (1,000 MW) Mandated Region-wide Energy Efficiency
The Small Cost of Transmission on a Typical Bill Belies its Economic/Environmental Value and Necessity in Assuring Reliability and Competition - System Benefit Charge, <3% - Transmission, <6% - Distribution, <21% Typical 500 kwh Residential Consumer in New England - Energy Supply, <70% Source: Transmission Adequacy The Path to Successful Markets, National Grid, Annual NECPUC Conference, June 25, 2007.
Key New England Transmission Issues Must be Addressed by State and Federal Policy Makers Transmission projects that provide benefits other than reliability face hurdles in demonstrating need Planning processes do not account for fuel diversification or RGGI/RPS Compliance Siting/approval processes are lengthy and subject to local actions that can be detrimental to entire region FERC-approved cost allocation New England Stakeholders continue discussions (settled but controversial?)