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Transmission Investment

Transmission Investment. James Bushnell University of California Energy Institute. Outline. The WIRES blue-ribbon panel http://www.ksg.harvard.edu/hepg/Papers/Rapp_5-07_v4.pdf Framing the issue of cost allocation A hypothetical regional decision-making process

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Transmission Investment

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  1. Transmission Investment James Bushnell University of California Energy Institute

  2. Outline • The WIRES blue-ribbon panel • http://www.ksg.harvard.edu/hepg/Papers/Rapp_5-07_v4.pdf • Framing the issue of cost allocation • A hypothetical regional decision-making process • Issues with evaluating transmission projects

  3. The Oregonian, 24 August 2003, after C. Taylor

  4. Transmission Cost Allocation:2 Extreme Views “Beneficiaries Pay” (participant funding) - Projects benefits can be accurately and quantitatively determined. Project costs should be assigned in accordance with these measured benefits. “Electron Super-Highway” - Transmission is a public good. Part of a national infrastructure that will promote growth and trade in ways that are impossible to predict and measure. Project costs should be “socialized” We shouldn’t even bother trying to measure benefits, its impossible A relevant question: Who makes the decision about what to build and how ?

  5. A Utopian vision?A Hypothetical Transmission Investment Process Joint plans covering large regions (I.e NERC regions or sub-regions) Maybe RTOs, maybe new Federally created institutions Periodic planning cycle (5-7 years) Many projects reviewed A Regional model evaluates total aggregate benefits of projects More on this later A short-list is developed with an eye toward Total net benefits Balancing regional benefits (qualitatively)

  6. Transmission Investment Process(continued) Institution would have a credible governing structure (balanced and independent) Bundles of projects would be voted up or down Costs of approved projects would be socialized at either regional or sub-regional level Regional distribution linked to voltage level Part of a Federal transmission tariff applied to load Bundles intended to balance interests Rejected projects could be “self-financed” by firms or regions Lower “technical” thresholds applied for allowing these voluntary “participant funded” As part of the next cycle, distribution of benefits from past projects would be evaluated and costs potentially redistributed

  7. Modelling vs. Predicting The TEAM methodology: strengths and weaknesses No such thing as a “reliability” upgrade Place a value on consumption - then its economics What to measure “total social welfare” What it is What it is not What to consider Generation and transmission planning: which comes first? Measuring Benefits

  8. Upgrade to Load Pocket $100 $50 1 GWh 10 GWh

  9. Transfers swamp benefits 1,000 MWh (1 GWh) Transfers from Sellers to Buyers from 1000 MW line $ $ Generation cost savings from addition of 1000 MW of Transmission = $50,000 $100 $50 1 GWh 1 GWh 10 GWh Q Q

  10. Congestion Costs are Transfers 900 MWh (1 GWh) Congestion Costs = 900 x 50 = $45,000 Cost savings from addition 100+ MW of Transmission = $5,000 $ $ $100 Difference in LMPs with 900 MW line $50 .9 GW 0.1 GW 10 GW Q Q

  11. Thank You

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