Wednesday, January 23, 2019

Public Policy Tx Project Wins Key NYISO Endorsement

By Michael Kuser

RENSSELAER, N.Y. — NYISO’s Business Issues Committee on Tuesday endorsed a public policy transmission planning report’s recommendation to build NextEra Energy’s proposed Empire State Line in western New York.

NYISO PSC TXU Corp. out-of-cycle project

NextEra Empire State Line transmission project recommended by NYISO for western New York | NYISO

The line was one of 10 transmission projects evaluated to relieve constraints in the region. Independent consultant Substation Engineering Co. (SECo) estimated the project would take 40 to 49 months to build and cost about $181 million. NYISO set an in-service date of June 2022, basing the schedule on SECo’s estimates.

Dawei Fan, NYISO supervisor of public policy and interregional planning presented the report, which detailed the grid operator’s methodology in ranking more than $3 billion in proposed projects for efficiency, operability and cost-effectiveness.

The report represents NYISO’s inaugural evaluation of transmission needs stemming from public policy requirements. The ISO kicked off the process in August 2014 by seeking stakeholder input on policy-driven requirements for the system. In July 2015, the New York Public Service Commission issued an order identifying a need in western New York. (See NYISO Identifies 10 Public Policy Tx Projects.)

Lessons Learned

Several market participants raised concerns that NYISO had not provided sufficient methodology background and detail on the evaluation. Some also questioned the emissions data used in the study.

Fan said “the NYISO considered emissions in the western New York evaluation based on RGGI [Regional Greenhouse Gas Initiative] carbon price forecasts instead of social cost of carbon,” which led one participant to suggest that the PSC needs to define upcoming public policy needs.

“The worst thing we could do is dispatch on one price of carbon and then turn around and redefine the emissions cost using a different price. That is the path of stupidity,” said Mark Younger of Hudson Energy Economics.

David Clarke of the Long Island Power Authority said he would like to see detailed analytics such as the breakdown of production cost by zone, so that LIPA can determine “who will benefit” from the recommended transmission project.

NYISO officials spoke of eventually holding a session on “lessons learned” in the grid operator’s first try.

“Speaking of lessons learned, any process that takes three and a half years is broken,” said Howard Fromer, director of market policy for PSEG Power New York. He added that leaving unresolved issues that have an important effect on the market has a “chilling effect on the market.”

Most Efficient

NYISO planners have found the Empire State Line project to be the most cost-effective solution of all proposals for the region. A substation proposed for Dysinger would become western New York’s new 345-kV hub — connecting seven 345-kV lines — and help reduce the transmission distance between Niagara and Rochester.

A proposed phase angle regulator (PAR) on the Dysinger–East Stolle Road 345-kV line would provide additional operational flexibility to the system. The project still demonstrates significant benefits even when the PAR is bypassed, according to the evaluation.

NYISO cited the project’s independent cost estimate and cost-per-megawatt ratio as among the lowest of all proposals, while its production cost saving over the cost ratio is the highest across all scenarios. The evaluation found no critical risks for the line regarding siting, equipment procurement, real estate acquisition, construction or scheduling.

Monitor Approval

Pallas LeeVanSchaick of Potomac Economics, NYISO’s Independent Market Monitor, joined by phone to give a presentation showing how the Monitor found the recommended project to be “economic under a variety of conditions.”

LeeVanSchaick said NYISO identified qualitative factors not fully reflected in the quantified benefits that further support selection of the Empire State Line. While the Monitor found the ISO’s methodologies to be sound, it did point out several enhancements to consider in future public policy transmission evaluations, including:

  • Incorporating additional priced and unpriced benefits of new transmission projects into a single benefit/cost metric;
  • Factoring non-capital costs and life-cycle capital costs into the benefit/cost metric;
  • Developing tariff provisions allowing developers to take on the risk of project cost overruns;
  • Modeling entry and exit decisions for generators in a manner consistent with the expected competitive market outcomes;
  • Refining assumptions for future operation of key plants in New York based on latest available information;
  • Modeling variability resulting from loop flows around Lake Erie in production cost simulations;
  • Considering transmission outages and other unforeseen factors in estimating production cost savings; and
  • Enhancing the quality of natural gas and emission allowance price forecasts.

The committee recommended that the Board of Directors approve the project. If the Management Committee also recommends approval this month, the report will be delivered to the board in October.

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