The Brattle Group:
J. Michael Hagerty
The U.S. is at a critical juncture in transmission network planning. System vulnerabilities to severe weather are illuminating the need and opportunity for transmission to enable power sharing across and between regions. Existing transmission infrastructure, mostly constructed in the 1960s and 1970s, is nearing the end of its useful life, and decisions today about how this aging infrastructure is replaced will have long-lasting impacts on system costs and reliability. At the same time, public policy mandates, customer preferences, and the power generation mix necessary to address these needs are rapidly changing, causing a need for various types of transmission in different locations to maintain reliable and efficient service.
While the current transmission system and grid planning processes have functioned adequately in the past, they are failing to address these diverse 21st century needs. Current transmission planning processes routinely ignore realistic projections of the future resource mix, how the transmission system is utilized during severe weather events, and the economies of scale and scope that can reduce total costs. Today’s planning is overwhelmingly reactive and focused on addressing near-term needs and business-as-usual trends.
The large majority of current transmission investments are narrowly focused on network reliability and what is needed to connect the next group of generators in interconnection queues, ignoring the efficiencies that occur when simultaneously and proactively planning for multiple future needs and benefits across the system. Even if Planning Authorities look beyond reliability-driven needs, they typically compartmentalize transmission into individual planning efforts that separately examine reliability, economic, public policy, and generator- interconnection driven transmission projects—instead of conducting multi-value planning that optimizes investments across all reliability, economic, public policy, or generator interconnection needs. The current approaches also lack a proactive scenario-based outlook that explicitly recognizes long-term planning uncertainties.
Together, these deficiencies yield an inefficient patchwork of incremental transmission projects and they limit the planning processes’ ability to identify more cost-effective investments that meet both current and rapidly changing future system needs, address uncertainties, and reduce system-wide costs and risks. The inevitable outcome of such reactive and siloed planning is unreasonably high overall system costs and risks, which are ultimately passed on to electricity customers and can deter the development of low-cost generation resources.
Fortunately, there have been exceptions to the rule. Effective transmission planning efforts have proven repeatedly that proactive, multi-value, scenario-based planning delivers greater benefits to the entire electric system at lower overall costs and risks. These holistic transmission planning efforts have led to well-documented, highly beneficial transmission investments across the United States.
The available industry experience thus points to the following proven planning practices and core principles with which transmission planning can achieve reliable and efficient solutions capable of meeting the needs of the evolving 21st century power system at a lower total system cost:
Proactively plan for future generation and load by incorporating realistic projections of the anticipated generation mix, public policy mandates, load levels, and load profiles over the lifespan of the transmission investment.
Account for the full range of transmission projects’ benefits and use multi-value planning to comprehensively identify investments that cost-effectively address all categories of needs and benefits.
Address uncertainties and high-stress grid conditions explicitly through scenario-based planning that takes into account a broad range of plausible long-term futures as well as real-world system conditions, including challenging and extreme events.
Use comprehensive transmission network portfolios to address system needs and cost allocation more efficiently and less contentiously than a project-by-project approach.
Jointly plan across neighboring interregional systems to recognize regional interdependence, increase system resilience, and take full advantage of interregional scale economics and geographic diversification benefits.
As set forth in greater detail in the remainder of this report, these principles form the standard for efficient transmission planning that can maintain a reliable grid while more cost-effectively meeting all other transmission-related needs to avoid unreasonably high electricity costs. Policymakers and planners need to reform current transmission planning requirements to avoid unreasonably high system-wide costs that result from the current planning approaches, thereby enabling customers to pay just and reasonable rates by implementing these principles.