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 Transmission
Planning - Returning to Fundamentals
September 2005
By R. Austria, Pterra Consulting
There are major challenges facing transmission planning today. William
Hogan (Harvard) says that "markets should produce better
choices than ... the central planner." Of the many methods for transmission planning, the emerging one
seems to be the "wait-and-see" method --- wait and see how
the generation resources locate so as to relieve transmission
constraints. Many have pointed out that the prevalence of
interconnection studies are today's version of transmission planning.
Two
initial points. (1) Until we have a reliable energy source
that is compact, safe and portable, we will be dependent on centralized
power stations that require transmission to deliver to customers.
(2) Transmission requires infrastructure that, like roads, will be in
our environment for many years. These two facts
imply the need for transmission planning in the form that looks at
optimal use and allocation over a period covering an appreciable
lifetime of transmission equipment.
 So, select a horizon year, say 10 years into the future. Then
develop scenarios on generation allocation, electric demand, even
industry structuring and regulatory environment, sufficient to paint a
picture of the possible futures. Assign probabilities, if
you want. Develop a transmission plan or plans for each future.
Optimize it in accordance with any objective function you would
like to apply, such as minimize costs including investment, losses and
congestion costs, subject to conditions such as reliability
criteria or range of nodal prices. Stage the plans; i.e.,
determine how and when each component of each plan will be implemented.
From all the separate plans, identify the specific projects that would
maximize transmission utilization going into the future. (The
alternate way of viewing this is to find the projects that would
minimize the possibility of underutilizing the transmission system.)
The characteristics we are looking for as we try to integrate the set
of disaggregated plans are:
- Robustness - transmission
projects that will be needed in the most probable, if not all,
future.
- Flexibility - projects that
are dependent on other decisions such as the construction of new
power plants or other transmission projects, or projects to
undertake once the path to a set of futures requiring the same
projects becomes more certain.
And so we have a transmission plan. It could take a lot of
work, so it makes sense to have a planning entity, not
necessarily centralized, but at least transparent to the market.
And if we don't like the plan, we can start all over again with a new
set of objectives and assumptions, but the two initial points remain and
provide the imperative to do the planning.
Interconnection studies that do not look beyond the initial year of
operation of proposed power plants nor consider alternative futures,
would not afford us the clear choice of robust and flexible transmission
projects. They are thus not consistent with the fundamental
form of planning described above.
Incentives
Although not really a traditional part of transmission planning, it
is necessary to address the mechanism of funding transmission
development since the absence of such seems to be a disincentive to
perform transmission planning.
A common method is to collect transmission use fees,
especially congestion fees, to create a fund from which transmission
investments can be made. This is a socialized cost that is
not popular amongst generation providers who may rightly or wrongly
believe they are not responsible for supporting the reinforcements to
the grid caused by others. Also, before sufficient funds are
collected, the markets tend to adjust and compensate via pricing
mechanisms, leading to the "wait-and-see" planning result.
Another common method, used in US markets, is to have the
transmission providers develop plans using similar fundamentals as
described above and apply with regulatory agencies to have these
projects approved and added to their rate base. The
transmission providers are then responsible for obtaining funding for
approved projects. Today's transmission providers, unbundled from
the cash rich generation side, face the challenge of raising enough
financing to undertake all the desired projects.
For a while, transmission projects were embedded in the
interconnection process for new power plants. But without a
broader base for funding, the most that can be expected here are
incremental capacity transmission projects that individual power
projects can support. Anything more leads to the unwanted
characterization of "gold-plated" plans.
A more proactive approach seems to be to have a planning entity
publish transmission plans developed under the fundamentals described
earlier in this article and open the component projects to
participant funding. This approach is applied in international
markets such as Argentina and Brazil. As a last
 resort, the
national government would step in to provide additional funding.
This may be a good model to consider for US markets with the
transmission providers taking the role of the investor of last resort.
Conclusion
To
close, there is too much at stake not to perform a fundamental level of
transmission planning. To implement transmission reinforcements
that would be useful for only the first year of operation of power
plants is wasteful and ultimately more costly to the consumers. To
wait for generation markets to adjust would be tantamount to shaking the
dog to make it wag its tail. Transmission is, after all, but a small fraction
of generation investment cost.
References:
Some reference material for some of the ideas and concepts included
in this article:
- William W. Hogan, "Resource Adequacy & Electricity Markets,"
EnergyBiz, Vol. 2, Issue 5, Sept-Oct 2005, pp. 26-28.
- Yakout Mansour, presentation at panel session on Transmission
Matters, Conference on Electricity Market Design Imperative, Oct.
5-6, 2003, Chicago, IL.
-
Ricardo Austria, et al,
“Transmission Planning Today: A Challenging Undertaking”, Electricity
Journal, May, 2004.
For questions, comments and further discussion, contact us at
mailto:info@pterra.us
© 2005. All rights reserved.
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