Transmission Expansion Planning

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Areas with high-quality renewable energy resources—windy and sunny areas— are often far from load centers and existing power system infrastructure. To connect these resources and achieve renewable energy goals, significant transmission system investment and expansion might be required. This page provides:

  1. A primer on transmission expansion planning

  2. Considerations for transmission planning and renewable energy scale-up

  3. Reading list and case studies to familiarize readers with approaches to transmission expansion planning to scale up renewables.

  4. Regulatory and policy examples

Fundamentals of transmission expansion planning

Transmission systems are large, interconnected networks of high-voltage—generally above 69 kilovolts (kV)—lines and associated components. They carry large quantities of electricity from utility-scale generators to low-voltage lines (i.e., distribution systems), which can then connect to load. Generators include:

  • Thermal power plants

  • Large hydropower

  • Renewables such as wind and solar

Transmitting electricity at high-voltages allows large amounts of electricity to be carried over long distances  at minimal loss, before stepping down to lower voltages that distribute electricity to load.

Transmission expansion planning is the process of identifying needed expansion and investments in transmission. It ensures that electricity can be delivered following certain requirements, such as reliability. Planning entities—such as utilities, transmission system operators, and/or regulators—conduct transmission planning to address needs for:

  • Maintaining system reliability,

  • Adding new power generation

  • Providing for increasing demand.

Every power system has specific planning requirements and processes. However, the planning entity traditionally follows an approach similar to that shown below  (Luciani, Ralph and Maggie Shober 2014).

A stakeholder process is crucial to ensuring that all power system stakeholders—including utilities, non-governmental organizations, customers and others—have opportunities to provide input and enhance the planning process. In advanced wholesale power markets, the independent system operator often conducts the stakeholder process. In areas served by vertically integrated regulated monopolies, stakeholders often intervene in the regulatory proceeding to review and approve a new transmission project.

adapted from Britton ~18/20/18
Figure. Traditional planning process

The need can be economic. The new line can reduce generation costs or avoid the need for load shedding. In some cases, however, a new line can increase reliability or eliminate stability issues. These projects can meet a reliability need even if they do not reduce generation costs. Depending on the type of need, production cost modeling and reliability analysis can provide least-cost solutions that meet both economic and reliability requirements. These studies generally include production cost and reliability analyses.

  • Production cost analysis helps planners understand the operational cost and performance of transmission expansion options and prioritize project options. Production cost analysis simulates bulk power system scheduling and estimates operational cost—typically by solving a unit commitment and economic dispatch problem.

  • Reliability analyses identify any limitations and/or contingency needs for the system to remain within acceptable system operating conditions and provide power:

    • Load-flow and contingency analysis examines the steady-state operation of the transmission system at an instant in time to ensure operational feasibility and adequacy to meet load and account for scheduled and reasonably expected, unscheduled outages.

    • Transient and dynamic-stability analysis simulates the dynamic performance (frequency and phase synchronization) of the transmission system immediately after an event (milliseconds to seconds) to examine its ability to recover to stable, steady-state operation after unexpected disturbances such as a fault(s) or loss of a generator or transmission line.

Figure. Transmission planning analyses

Cost-benefit analyses evaluate the financial prudence of proposed transmission expansion plans. Regulators often require  them when there’s primarily an economic need. The cost-benefit analysis compares the capital costs and expected benefits of  potential transmission expansion plans. This analysis employs a cost-benefit ratio that expresses the total benefits as the numerator and the total costs of the plan (in net present value) as the denominator.

new CBR image

Costs include all costs of implementing the transmission expansion plan. For example, the costs of a transmission line include the capital cost of the line, cost of right-of-way, permitting and regulatory approvals, construction costs, and financing costs. Costs are often evaluated on a net-present value basis.  As such, the initial cost of capital and the discount rate have a big impact on results.

Benefits are the economic value of all the effects attributed to the plan’s implementation. Many different benefits can be considered, provided  they can be quantified, monetized and shown to be caused by the plan’s implementation. Planners often consider benefits such as production cost savings, reduced congestion, avoided or deferred reliability investments, and/or reduced loss-of-load probability among others (O’Neill, Barbara 2016).

In any case, regulators should be involved early in the renewable energy zone (REZ) process, especially if existing transmission planning practices do not accommodate public policy interests in expanding renewable energy development. The regulator’s later review of REZ process outputs is often required for eventual plan approval. Regulators may play a role in multiple steps of the planning process; however, in the final regulatory review, the regulator is generally charged with ensuring the proposed transmission expansion plan meets specific criteria for approval. These criteria depend on the relevant regulations, but generally focus on the adequacy of the existing service (transmission), the expressed need for new service, market effects of new service, and other factors that include effects on customer rates, progress toward renewable portfolio standard (RPS) goals, and community values among others. The final regulator approval allows for budget approvals (depending on the market structure) and the implementation of transmission expansion plans.

Transmission investment cost allocation

For the interconnection of additional renewable (such as solar or wind) or non-renewable generation, planners analyze the options to connect generation to the grid. How planners address the transmission needs and allocate associated costs to interconnect generators varies depending on the applicable transmission regulations. For the allocation of costs, new transmission system components are often categorized as either connection or network assets.  

  • Connection assets are any lines, substations, or transformers used to interconnect generators to existing transmission systems; they are exclusively used by the generator.

  • Network assets include any transmission system upgrades or reinforcements, beyond the point of connection assets, that are necessary to connect the generator to the larger grid.

Transmission systems have adopted different cost allocation approaches around the globe to determine which entities—such as the generator, the transmission owner, or the load service provider—assume the investment cost of these assets. Allocation approaches typically consist of deep, shallow, or super-shallow policies or some variation.

  • Deep cost allocation places the obligation of all connection and network asset costs on the generation project developer. This may be inequitable if the ‘first mover’ is forced to bear a heavier burden than the subsequent generation project developer without being compensated.

  • Shallow cost allocation only requires the generation project developer to assume the connection asset costs. The network asset costs are assumed by the transmission system operator (TSO), owner, or other relevant entity.

  • Super-shallow cost allocation is when all network and connection asset costs are charged to the TSO or transmission line owner excluding any local enabling facilities on the connection asset site (before transmission). Costs for enabling facilities are sometime shared with the TSO.

The upfront costs necessary to connect transmission to the grid can be a significant challenge to developing renewable energy generation as projects in high-quality resource areas may be dispersed, small-scale, and distant from existing load and transmission systems. Deep and shallow cost allocation methods can significantly impact renewable energy project development feasibility due to the potential transmission cost burdens placed on developers. Super-shallow cost allocation methods are often more attractive for renewable energy project developers because they do not have to assume the network and connection costs necessary to connect generators to the grid.

For large, conventional thermal generation (such as coal or natural gas), these connection costs are generally less of a concern than for renewable energy generation. Conventional generators had more flexibility in being sited near existing load centers— requiring less-significant transmission extensions.  For example, a 25-megawatt (MW) solar photovoltaic (PV) installation in a distant location with great solar resource does not have the same economy of scale as a 500-MW, coal-powered generator located closer to load.

Transmission planning and renewable energy scale-up

The traditional approach to transmission planning described above may not align with the characteristics of renewable energy development for several reasons. Proactive transmission planning approaches have evolved to address the challenges that traditional approaches present for expediently connecting high-quality renewable energy resources. This section reviews how traditional approaches challenge the scale-up of renewables, and how proactive approaches (such as the REZ approach) can help overcome these challenges.

Traditional transmission planning approach challenges

First, transmission planning decisions need to be made well in advance of renewable-based generation development decisions. Transmission system access to windy and sunny areas—often far from load centers, but attractive for wind and solar power development—may require 5-10 years to plan and construct. This results in a timescale misalignment as wind and solar generation projects only require 1-3 years to construct.

Figure. Timescale misalignment

The timescale misalignment leads to a common circular dilemma in transmission and generation planning. Financing for remote generation projects is not available without transmission access, but transmission lines cannot be built without a demonstrated need for service and certainty for cost recovery. Siting for conventional generation (such as coal) is seldom as constrained. Renewable energy planning that does not consider transmission expansion may limit power systems to connecting to less economical  development.

attempt to blow up circular dilemma image

Figure. Circular dilemma

In addition to overcoming these challenges, planning entities should ensure other conditions for renewable energy scale-up are in place. This includes appropriate transmission connection policies and transmission tariffs. To ensure that renewable energy projects can connect to the grid, timely and affordable connection processes should be in place for project developers. Additionally, applicable transmission tariffs for delivering power to load must be competitive. Tariffs based on generator peak or nameplate capacity (MW) may result in less competitive energy costs (cost per megawatt-hour) for variable RE generators  (Luciani, Ralph and Maggie Shober 2014).

Proactive versus reactive transmission expansion planning

Proactive transmission planning approaches help to overcome challenges to scaling up  renewable energy generation in power systems. In proactive transmission expansion planning approaches (such as the REZ process), the transmission system guides generation investment to strategic locations—driving cost-effective power system development. This differs from traditional, reactive approaches that must respond with transmission to connect areas with committed generation projects.

Proactive approaches guide renewable energy generation development to zones with high-quality resources, identifying future transmission locations for developers. This allows for the timely development of integrated generation and transmission. As an example, the REZ process:

  • Assesses the highest-quality renewable energy  resources that can be feasibly developed

  • Ensures that REZs have a high probability of development (expressed commercial interest)

  • Studies transmission expansion options to connect REZs to load

  • Ensures that transmission plans comply with regulatory review criteria that may include reliability standards, economic benefits, renewable energy  goals, and/or environmental goals

  • Results in  transmission plan implementation that details how REZs will be connected along the planning horizon— allowing developers to coordinate expansion of renewable-based generation in these zones.

The following resources are provided to familiarize readers with approaches to transmission expansion planning that may support the scale-up of renewables.

Reading list and case studies

Transmission Expansion for Renewable Energy Scale-Up

The World Bank, 2012

This report reviews approaches of utilities and regulators to address challenges of expanding transmission to support renewable energy scale-up. It also offers principles that could aid in implementing specific rules for the planning, development, and pricing of transmission networks. It finds that proactive planning (such as the REZ process) and regulating of transmission networks is a leading approach to ensure efficient and effective expansion of transmission systems.

Transmission Planning White Paper

Navigant Consulting Inc., 2014

From centralized distribution systems to regional Independent System Operators, this white paper details the regulatory evolution of North America’s transmission system. Readers can gain an appreciation for the various regulatory instruments employed in the United States for the planning of complex transmission systems. It also details the general process for financing, planning, and building transmission systems.

Renewable Energy Zones for the Africa Clean Energy Corridor

International Renewable Energy Agency (IRENA) Lawrence Berkeley National Laboratory (LBNL), 2015

This study identifies high-quality wind, solar PV, and concentrating solar power resources in African 21 countries to support the prioritization of areas for renewable energy  development through a multi-criteria planning process. Throughout the report, a focus on developing cross-border transmission potential exists.

Western Renewable Energy Zones-Phase 1 Report

Western Governors’ Association, 2009

The report identifies transmission bottlenecks constraining the transmission of energy from REZs to load centers in the Western United States, and a broad range of geographic exclusions restricting transmission system expansion. Readers can gain an understanding of resource identification, modeling, and discussion of transmission development from this case study.

Renewable Energy Transmission Initiative Phase 1A: Final Report

Black and Veatch for the California Renewable Energy Transmission Initiative (RETI), 2008

In planning to meet its renewable portfolio standard (RPS) mandates, California identified Competitive Renewable Energy Zones (CREZs) as a tool to aggregate renewable resource procurement in a cost-effective way. The state faced several bottlenecks on its transmission system and used phase 1 and 2 of this planning process to identify potential CREZ locations, and their impact upon grid stability. Readers can use this case study to understand how to factor in environmental considerations while planning a REZ.

Analysis of Transmission Alternatives for Competitive Renewable Energy Zones (CREZ) in Texas

Electric Reliability Council of Texas (ERCOT), 2006

This report details the transmission expansion planning portion of ERCOT’s CREZ planning processes. It describes the transmission constraints Texas faced  in the scale-up of renewables and the process of identifying necessary improvements to connect CREZ’s to load. Production cost modeling, steady-state, and dynamic stability analyses were used to study various transmission expansion solutions. The work identifies plans that represent the most cost-effective, reliable potential solutions to connecting REZs to load.

Regulatory and policy examples

Mexico’s Regulatory Engagement in Bulk Electric Power System Planning: An Overview of U.S. Practices and Tools

U.S. Department of Energy’s National Renewable Energy Laboratory (NREL), 2016

The transition in Mexico to a modern wholesale power market has placed new demands on how regulators evaluate and approve transmission expansion projects. Transmission projects in a modern wholesale market fulfill one of several needs, and utilities, regional transmission organizations, and regulatory authorities in the United States (U.S.) have encountered comparable challenges in their market transitions to ensure projects meeting each type of need can be built. This report opens a window to the experience in the U.S. and examines key practices in transmission planning and the regulator’s role in supporting a process that equitably meets identified needs.

Multi-State Decision-Making for Renewable Energy and Transmission: An Overview

David Hurlbut, 2013

This paper is the product of a multi-state symposium hosted by the National Renewable Energy Laboratory, in which participants were encouraged to imagine creative solutions to implement regional transmission system expansion planning. Participants of the symposium examined the Texas Competitive Renewable Energy Zones (CREZ) process to identify best practices, and ways to make the planning process faster, more cost-effective, and easier for multiple entities to cooperate.

Legislative Background to the Texas Competitive Renewable Energy Zones (CREZ) Process

Texas Utilities Code, Public Utility Regulatory Act, Section 39.904 Goal for Renewable Energy, 2005

The legislation that led to this act of the Texas Utility Code established the legal framework and vision for the CREZ process in the state. From this vision, readers can gain an understanding of how to craft legislation enabling a successful REZ process. Key clauses of note for readers include Sec. 39.904(a), which states the goals for generation capacity (MW) from RE technologies and Sec. 39.904(g), which pronounces the vision for CREZs in the state.

Mission Statement - California Renewable Energy Transmission Initiative (RETI)

RETI Coordinating Committee, 2008

In accordance with California’s Renewable Portfolio Standard mandating that 20% of electricity supply be sourced from renewables by 2010 (since updated to 50% by 2030), the California Department of Energy identified the REZ process as a tool to relieve transmission congestion and establish a dedicated integration platform for new renewable generation. This mission statement is valuable to other jurisdictions looking to establish REZ processes. It outlines  the step-by-step process that California followed to assess the resource potential for REZs, prioritize locations, and develop transmission plans.

Western Renewable Energy Zones (WREZ) Charter

Western Governors Association, 2008

To help achieve targets set in renewable portfolio standards, several western states in the United States (U.S.) identified REZs as an efficient way to pool load and high-quality resources to meet mandates across the region. Similar to conducting a REZ process across the borders of multiple countries, planning a REZ process across multiple U.S. states requires detailed study of regulatory and technical considerations. Readers can gain an understanding for these potential challenges and solutions from this presentation on the Western Governors Association’s experience.  

Webinars and Trainings

Transmission Planning for a High Renewable Energy Future: Lessons from the Texas Competitive Renewable Energy Zones (CREZ) Process

Greening the Grid, 2017

This webinar provides an overview of the Texas CREZ process, including the regulatory, procedural and technical considerations that were critical to its successful implementation in Texas. It also introduces the REZ process developed as part of the REZ Toolkit developed through a partnership between the U.S. Agency for International Development and the National Renewable Energy Laboratory. It intends to guide other power systems in adapting elements of the CREZ approach to their own power system planning processes.

Implementing Renewable Energy Zones for Integrated Transmission and Generation Planning

Greening the Grid, 2015

In many countries, integrating significant renewable energy  to the grid requires new transmission to access the best wind and solar resources and accommodate generation from large projects. The REZ approach provides a policy framework for planning new transmission to encourage utility-scale renewable energy development in areas that have the highest likelihood of being cost effective.

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