Monday, January 30, 2012

[PAPER] MISO MVPs: A Hidden Opportunity for Michigan's Rate Payers and Economy

Editors' Note: Commonwealth's Transmission Mapping Solution was used by Mr. Miller to acquire the information needed to create the map that is the central figure in the presentation.  For more information about   Transmission Mapping for Network Analysis, please click here or view the product list.

Despite FERC’s ruling to the contrary[1], the conventional wisdom in Michigan is that MISO’s Multi-Value Projects (MVP) scheme for paying for transmission projects is a financial loser for Michigan.

See for example:

Because Michigan is composed of two peninsulas, the thinking is that there isn’t any reason that MVP’s will be built in Michigan.  While this thinking maybe right, let’s examine a concept that might turn this equation on its head.  Before we do, let’s review some of the conditions that create the opportunity for the concept.

For background, here are some key issues:

Geography: While Michigan is composed of peninsulas, we are not Florida.  The Detroit and St. Clair rivers are not the Atlantic Ocean and the Sault River is not the North Sea.  The Straits of Mackinac are negotiable and even Lake Michigan isn’t the Caribbean.

Connection with the regional Independent System Operator MISO: With the shift of members to PJM, Michigan no longer has any significant direct ties with other MISO members.  It might only be a matter of time before Lower Peninsula Michigan entities join the crowd and join PJM without a game changer to reinvigorate the relationship.

MISO Market Area[2]

MISO Reliability Coordination Area[3]

Potential Resources: Michigan has vast amounts of potential renewable energy, mostly wind.  Using the highly successful Ludington Pump Storage plant as an example, Michigan’s lakeshore has the potential for cheap energy storage with proven technology.  If Michigan becomes a hotbed of battery activity, the experience with storage could morph easily into other forms of storage.  Michigan has some natural gas and gas storage and good connections to the natural gas pipeline network making modern natural gas fired generators attractive.  Although some will certainly disagree about the merits of nuclear power, Michigan is seismically stable, free of hurricanes and typhoons, and there has never been a tsunami on Lake Huron. While some may argue that the proximity to its vast fresh water resources is a risk for nuclear power, this risk seems manageable absent the probability of a catastrophic geological event.  Finally, Michigan is in close proximity to Canada and its vast resources of hydro power and, to a lesser extent, natural gas and oil.

Power Supply Challenges: The coal generation in Michigan is old.  Those plants that are not killed by new environmental regulations risk simply dying a natural death from old age.  Michigan’s fate could be worse if this and other aging generation is kept alive by enormous investments in environmental controls and maintaining electric reliability requires Michigan to be at the terminus of massive MVP transmission projects through Illinois, Indiana, and beyond.

Electric Reliability: While efforts are being made to insure bulk power electric reliability, the reality is that these efforts have not yet resulted in infrastructure improvements in the form of transmission improvements that substantially change the structure.  Consequently, the next Northeast blackout is going to look pretty much like the last two with system separation occurring somewhere in Michigan, east in Ontario, or east along lines through Ohio, Pennsylvania, and western New York.  Provided AEP’s network of 765 kV lines does not become overloaded with power flowing from “PJM West” to the original parts of PJM and NYISO, the cascading blackout will stop north of this 765 kV back bone.

With these facts held in mind, our concept is that Michigan should be a Mecca for major transmission projects with the MVP designation.  Specifically, these projects would be major transmission lines crossing the Upper Peninsula and major transmission lines, similar to the 765 kV projects that ITC once proposed, built between Chicago and Detroit.  

The proposed MVP in the Lower Peninsula would originate at the 765 kV Dumont substation or at the Cook Power plant that is served by a radial extension of the 765 kV network.  Following mostly existing right-of-ways, it would go north to Kenowa (or Vegennes) and turn east to pass Thetford and end at Scott (Lambton).  A segment south from Thetford to Marysville or South Canton might also be added.

On the west, extensions to Collins or Plano could be added to meet up with new transmission supporting renewable generation in the Northern Plains.  On the east, extension to Longwood would add a tie to the Canadian 500 kV system.

The proposed MVP in the Upper Peninsula would consist of segments from western Wisconsin (or Minnesota) to Sault Saint Marie, from Arnold to Saint Ignace, from Saint Ignace to Sault Saint Marie, and from Saint Ignace and the Straights to Livingston.  Construction of this could be at 345 kV, 500 kV, 765 kV, direct current.  The project in the east could be extended to the Hamner substation to tie into the Canadian 500 kV.  The key idea is to build massive transmission to take renewable energy generation from Minnesota and the Dakotas and ship it to the Midwest and beyond.  The path from these regions and the Midwest and New York and beyond is shorter than the path around the south end of Lake Michigan and it avoids the heavy congestion around the south end of Lake Michigan.

Perhaps the most radical feature of this connection is a new, international connection at the Sault, where no substantial connection currently exists.  Controlling the flows in a precisely regulated way may be desirable and necessary at the connection points to Canada. To do so requires modern back-to-back converters like the one currently being installed in New Jersey to service a new connection to New York.

Here are some rough estimates of segment lengths that are probably biased on the low side because they may not include enough length to account for routing compromises.

Length (miles)
Stone Lake – Hanmer
9 Mile – St Ignace
Gardner Park – St. Ignace
St. Ignace – Livingston
Dumont – Thetford
Thetford - Lambton
Lambton –Longwood
Thetford – South Canton

Concept Benefits
While no thorough study of all the elements of this concept have been made, aside from directing more MVPs to Michigan, it has some immediate, obvious potential benefits, in that it:

  • Provides a transmission backbone to import and export power into and through Michigan. Ideally this would help lead to a self-sufficient Michigan and perhaps increase the likelihood that Michigan might become a net generation exporter, both to the west to Chicago and to the east to NYISO and PJM.  Ties to Canada would allow better resource management with opportunities for optimizing the use of Canadian hydro versus renewable energy resources in Michigan.  The concept provides an alternative path and exploits existing transmission resource for renewable electric generation originating from the Upper Midwest to New York and PJM.  This concept should be advantageous compared to alternatives because it avoids both transmission congestion and corridor congestion south of Lake Michigan.
  • Increases the regional system reliability. The plan addresses local reliability problems associated with importing power into southwest Michigan and local problems in the Upper Peninsula.  It also has the potential for addressing super regional problems such as the loop flows around Lake Erie and underlying problems that would reduce the probability of another “northeast” blackout.
  • The concept restores physical ties and strengthens virtual ties to MISO.  This should have a variety of advantages, including making operations easier and reducing or eliminating difficulties associated with constructing a reasonable market, including impacts on LMP calculations.  If Michigan eventually goes to PJM, the infrastructure will retain or have enhanced value.

Michigan Support for the Concept
Provided this concept has merit, other than promoting the idea so that it is studied and understood, the concept of building MVP transmission in Michigan should stand on its own when compared to other methods of addressing the regions transmission needs.  That said, here some thoughts on how Michigan can enhance the chances of obtaining MISO MVPs.

  • Create a regulatory climate that removes barriers to long linear projects while protecting the legitimate interests of stakeholders.  Uniform statewide rules with respect to acquiring right-of-way are important.  The State could review its land holdings to see if any are appropriate for this activity.  Michigan already has a leg up, because its transmission is owned by strongly-favored independent transmission owners.  While both are unique, either is, or would be, a great proponent of these projects.
  • Exercise Michigan’s long standing skills as a border state and its knowledge of international projects with Canada.  Canadian “buy in” would go a long way to add value to these projects.  This is not trivial, because the relationship between MISO and the Ontario Independent System operator is not robust, at least not in the planning activity.
  • Generation drives transmission, so Michigan should make it as easy as reasonably possible to build wind, natural gas, and pumped storage generation.  Michigan is a net importer of electric energy and fuel to produce the electric energy that is generated in Michigan.  Although it is not an issue for wind-generated energy, water is often a key component of thermal generation projects.  We should be sure that Michigan’s advantage is not negated by national rules that are appropriate for water usage from sources such as the Colorado River and regions like the Southwest, but irrelevant to the water conditions in Michigan.  Provided the generation is economically competitive in Michigan and for export, Michigan’s economy would be greatly enhanced by being self-sufficient, or even a net provider of electric power.
  • Continue to look for opportunities to create new storage technologies, particularly those associated with the automotive industry.  Michigan needs to be smart and shouldn’t chase technology for technology’s sake, but if the economic case can be made, the link should be exploited. For example, because battery packs have useful life after they are no longer useful in an automotive application, their remaining capabilities might be exploited in fixed plants providing storage for the grid.  This could result in a valuable link in the economic and environmental life cycle of automotive battery packs.
In conclusion, MISO MVPs may be bad policy for Michigan, but we have outlined a concept that can and should be explored that would result in MVP dollars being spent in Michigan on alternatives that are potentially superior to those proposed or that are in the planning stages.

©2012 Commonwealth Associates, Inc. and Stephen S. Miller, P.E.

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