An Electric 'Game Changer' Gets FERC Scrutiny

Dec 23, 2009 - Peter Behr - ClimatWire - NY Times

A proposal to move large amounts of wind and solar power out of the Southwest by linking the three separate North American electricity grids with state-of-the-art switching terminals and superconducting cables is now in hands of federal regulators.

Tres Amigas LLC has petitioned the Federal Energy Regulatory Commission for two key rulings that it says will determine whether the potentially pathbreaking project goes forward. One decision would allow Tres Amigas to charge generators competitive rates rather than cost-based charges to move power over a triangular network of high-voltage direct-current lines it plans to build near Clovis, N.M., 1 mile from the Texas border.

Terminals at each point of the triangle would be access points into the three separately synchronized grids -- the Eastern Interconnection east of the Rocky Mountains, the Western Electricity Coordinating Council (WECC) west of the Rockies, and the Electric Reliability Council of Texas (ERCOT), the statewide grid that Texas maintains to prevent federal regulation of its utility industry.

"That region of the country has 80 gigawatts of renewable energy potential. It's massive," said Phillip Harris, architect of the Tres Amigas plan. "And this nation needs that to meet all the climate issues, environmental issues and energy needs." (A gigawatt equals 1,000 megawatts, or roughly the output of a large nuclear power plant.)

Harris, who led the expansion of the PJM Interconnection from its mid-Atlantic roots into the Midwest until his resignation two years ago, has spent that hiatus planning this new venture. "What I've done, I've engineered a solution to get the three large North American interconnections to move power in and amongst themselves in a credible way."

6-way street for renewable power

The three terminals would receive alternating-current power from transmission companies in Texas, New Mexico and Oklahoma, and convert it to direct-current flows using solid-state voltage source converters. The direct current would move between the three terminals to carry out any of six possible transactions: Power could flow into or out of Texas, for instance by way of the two interconnections, or it could move between the interconnections directly.

The use of direct current and voltage converters will overcome the current barrier to power transfers between Texas and the interconnections, each of which is operating out of sync electrically with the other, a condition that would destroy equipment if an alternating-current connection were made today.

The Tres Amigas converting switches can stream power into the three regions at the right frequency, Harris said. Moreover, the terminals will be capable of controlling the supply of "reactive" power over the alternating-current connections on short notice, a crucial factor in maintaining stability of long-distance transmissions of often-fluctuating wind power, Harris said.

"We provide a reliability anchor using brand-new technology that makes this [installation] look like a big generator in the middle of nowhere," said Tres Amigas attorney David Raskin, an attorney with Steptoe & Johnson in Washington, D.C.

Harris said in an interview that he purposely did not seek Energy Department stimulus grants for the new technology and proclaimed confidence that the project can be privately financed through debt and equity investments.

The initial cost could begin at $300 million and rise to $1 billion as the station's capacity expands, he said. Initially, it will have the capacity to move 5 gigawatts of electricity, with a top potential of 30 gigawatts. "We are going to build it in components, like a space station," Harris said.

The amigos behind 'Amigas'

The co-owners of Tres Amigas are Ziad Alaywan, former head of market and grid operations for the California Independent System Operator, who now heads the Z-Global consulting firm; Alt Energy LLC, an equity fund, and American Superconductor Corp., which provides the DC transmission cable technology.

The project's business plan is grounded in the often sharply diverging prices for electricity in each of the three grids, the project's application to FERC says. It cites preliminary study showing price differences of more than $50 per megawatt-hour (5 cents per kilowatt-hour) occurring over 2,000 hours in 2008 between Texas and one of California's major electricity hubs.

Transmission providers can use the Tres Amigas connection to buy the cheaper power in one grid for sale in a higher-priced region, and Tres Amigas will profit by moving the energy, the firm's FERC filing says.

FERC's approval of Tres Amigas' flexible pricing proposal is essential, says Raskin. "To maximize the value of this facility, we need to have a combination of long-term and short-term pricing authority. We are pushing FERC's precedents."

The developers have also asked FERC for a second ruling disclaiming jurisdiction over transmission providers that tie into the Tres Amigas lines and in effect, to maintain Texas' jurisdictional independence. "Clearly, if we don't the jurisdiction disclaimer, I can't imagine how we get support for this in Texas," Raskin says.

Echoing the state's Alamo heritage and a tenacious attachment to its independence, Texas' largest utilities cut their power line connections with other states in 1935, after passage of the Federal Power Act in the New Deal, to keep Washington from asserting jurisdiction over their operations. (Texas had no state regulation of utilities before the 1970s, notes Judge Richard Cudahy of the 7th U.S. Circuit Court of Appeals).

Electric arbitrage, not an easy game

In one famous showdown, a Texas utility -- Central and Southwest Corp. -- did create a transmission link between its divisions in Texas and Oklahoma to preserve its status as an interstate electric power holding company. At night on May 4, 1976, a technician opened a switch at a CSW substation sending power surreptitiously from Vernon, Texas to Altus, Okla., according to Cudahy's account of the "midnight connection."

Since Texas' other major utilities were linked to CSW, their power was also flowing in interstate commerce. Several hours later, Texas utilities were informed of these events, and two of the largest responded in outrage by severing their transmission ties to CSW, at some risk to the state's entire grid.

The Tres Amigas petition to FERC says that because energy is converted from an AC wave to a DC electronic pulse and then back into an AC wave synchronized with the receiving grid, the electrons in Texas are not "free flowing" into New Mexico or Oklahoma, preserving Texas' separation.

The project will also require the approval of state commissions in Texas, New Mexico and Oklahoma, said Raskin, because transmission line owners will have to run new lines through these states to the Tres Amigas terminals to make connections to the three grids.

New Mexico political leaders have saluted the project. Gov. Bill Richardson (D) said in a statement, "New Mexico is proud to be chosen as the site for this unique renewable energy market hub." Sen. Jeff Bingaman (D-N.M.), who chairs the Senate Energy and Natural Resources Committee, added, "By tying the nation's three power grids together, the Tres Amigas station will catalyze the adoption of renewable power."

Sorting out winners and losers

The Texas Public Utility Commission has just begun to consider the project, a spokesman said.

Both Texas and adjoining Eastern Interconnection states that form the Southwest Power Pool are embarked on unprecedented transmission construction projects to bring thousands of megawatts of new wind power to their customers -- and in SPP's case, to move wind power through its area to the Southeast. Tres Amigas will offer more outlets for these regions' wind power, Harris says.

But it may also threaten the business plans of some wind power and transmission developers by creating competition that could lower prices and profits. An official of one Texas energy company, who did not speak for attribution, said, "We look at it and say, 'Where's the money to support this huge a project? Which group of customers are going to pay for it?' You're going to have winners and losers in the wind area. It's not clear who wants this enough to pay for it."

"This project links the wind-rich areas" in the Southwest, said another longtime energy expert in Texas. If New Mexico, Texas, Oklahoma and Kansas are all generating more wind power they can use at times, why would they want to buy more power from each other? the expert asked. "It's a great technical idea. But in terms of markets, it doesn't make any sense."

Harris acknowledged there is political risk in what he called the "status quo conundrum. In the changing electric industry, anything that will have an apparent economic disadvantage to you currently, you're going to oppose. It doesn't matter if it's good or bad for the nation. If it affects you negatively in the short run, you're going to oppose it. Tres Amigas is a game changer, but it's overwhelmingly positive for almost everyone. As people look at it, they'll see that."