Speakers at FERC’s technical conference on offshore wind transmission Tuesday repeatedly invoked CAISO’s Tehachapi Wind Resource Area and Texas’ Competitive Renewable Energy Zones (CREZ) as models for developing the infrastructure needed to deliver remote wind to load centers. But they also acknowledged that both of those projects were limited to single-state grid operators, which simplified political and cost allocation issues.

While no one was willing to predict PJM’s 13-state footprint or ISO-NE’s six states would be able to replicate Texas’ and California’s successes, they said there are lessons to be gleaned, nonetheless.

Abe Silverman, general counsel for the New Jersey Board of Public Utilities, cited CREZ and Tehachapi as examples of the “bold vision” he said is needed for New Jersey and other East Coast states to meet their targets of almost 19 GW of OSW by 2035.

The Brattle Group’s Johannes Pfeifenberger cited CREZ and Tehachapi as a counter example to ISO-NE’s inability to capitalize on Maine’s strong onshore wind.

“Northern Maine has thousands of megawatts of low-cost onshore wind, and none of it is getting developed under the generator interconnection process because the transmission solutions necessary to interconnect that wind is too large for individual generators to pay for,” he said. “The solution to that is regional planning.”

Former FERC Chairman Jon Wellinghoff, now a consultant, said CREZ and Tehachapi are evidence that Brattle’s proposed planned mesh network (PMN) is superior to the generator lead line model. “Both projects had multiple wind developers who agreed and understood that the PMN transmission infrastructure would be built and was the most cost-effective way to get their wind energy to market,” he said. (See related story, FERC Pushed to Change Tx Rules for OSW.)

Tehachapi

In a white paper released Monday, the Business Network for Offshore Wind cited Tehachapi as a model for solving the “chicken-and-egg problem associated with the risk of building transmission to serve OSW generation.” (See OSW Group Seeks Changes on Tx Planning, Cost Allocation.)

Located near Los Angeles, Tehachapi is the largest of the six wind resource areas in California, responsible for 3,282 MW of the state’s 5,644 MW of operational wind capacity in 2016, according to the state Energy Commission. Although the project was a trunkline designed mostly to carry wind power, it also serves solar and storage and has multiple interconnections to the CAISO grid, allowing it to address local transmission congestion and reliability concerns.

In 2007, FERC approved CAISO’s proposal to broadly allocate the initial cost of the trunkline to ratepayers, with generators later paying back some of the cost and ratepayers absorbing the risk of under-subscription. FERC required that the project serve remote generation, be designated by the state as serving an important “energy resource area,” meet a minimum threshold of interest from interconnecting generators and be approved by the ISO’s planning process. “An offshore transmission project should be able to meet those criteria,” the Business Network said.

The project, 250 circuit miles, cost about $2.1 billion. Segments 1 to 3A were completed in 2009. Segments 4 to 11 were completed in late 2016, increasing the project’s capacity to 4,500 MW.

CREZ

Former ERCOT Independent Market Monitor Beth Garza, now a senior fellow on electricity policy for R Street Institute, gave a detailed description of the development of CREZ. She noted that ERCOT has charged all load for all transmission since the wholesale generation market was opened to competition in the mid-1990s.

“One of the foundations that I believe led to the process being a success was a well established and well understood transmission cost allocation mechanism,” she said. “The arguments over the allocation of costs were simply not an issue during the development of the CREZ plan.”

Garza said the Texas Legislature authorized the project when it expanded its renewable portfolio standard because of frequent curtailments for the state’s first wave of wind generation.

The legislation required the delivery of renewable energy from CREZ in a manner “most beneficial and cost effective to customers.” In considering certificates of convenience and necessity for transmission lines, the bill did not require the Public Utility Commission to consider adequacy of the existing grid or the need for additional service. “This was the key aspect allowing a future-looking, enabling transmission plan to be developed,” Garza said.

She also noted that the legislation did not define where the zones were or how much energy should be enabled, leaving that for the commission and stakeholders to decide. The commission ended up with five zones in West Texas and selected a target of 18.5 GW from among four potential scenarios ranging from 12 to 24.4 GW.

In 2009, the commission used a competitive process to select more than a dozen entities, including incumbent utilities and newly created transmission providers, to build the transmission under cost-of-service rates of return.

Generators had to make deposits of $10,000 to $15,000/MW to demonstrate their financial commitment. “During the five-, six-, seven-year process of actually defining the plan … wind generation developers could see, ‘This is happening.’ And more and more wind developers came into the queue,” Garza said. “One of the phrases that we use frequently as a prelude to CREZ [was], ‘If you build it, they will come,’” in reference to the film “Field of Dreams.”

By early 2014, 3,600 circuit miles of transmission had been constructed. “The resulting plan enabled an almost tripling of wind capacity and energy at a time when wind was providing about 3% of [the state’s] total generation requirement,” Garza said. Although the project cost $6.9 billion, it also reduced electricity costs by $1.7 billion annually, according to Brattle.

Garza noted that two of the five CREZ zones are in the Texas Panhandle, which is part of SPP, not ERCOT. “I see that it’s very similar to what my friends and colleagues on the East Coast are trying to do and unlocking this vast resource off the coast,” she said.

Texas now has more than 30 GW of wind, more than all countries except four, according to the American Wind Energy Association. “Certainly, a fair bit of that is because CREZ was put in,” said Theodore Paradise, senior vice president for transmission strategy for Anbaric Development Partners.

Multi-Value Projects

While Tehachapi and CREZ were built by single-state grid operators, several speakers also noted MISO’s success in winning approval of its Multi-Value Projects.

MVPs allowed MISO to finance $5.2 billion in transmission upgrades in 10 states through its centralized transmission planning process after its interconnection queue was swamped by requests from wind projects. It began with a plan to minimize total transmission and generation costs by accessing lower-cost wind resources.

“One of MISO’s most important innovations was simultaneously accounting for … the value of transmission for meeting economics, reliability and public policy (renewable interconnection to meet state RPS requirements) needs,” the Business Network said. “MISO made sure to spread planned transmission projects across the entire MISO footprint to ensure that all zones received projects and had a strong benefit-to-cost ratio, ensuring their support for the overall portfolio. All Multi-Value Projects planned through this process received broad cost allocation to all MISO ratepayers.”

Differences

FERC Commissioner Richard Glick asked the third panel of the technical conference whether there were aspects of OSW that were clearly not applicable to the CREZ and Tehachapi examples.

Eric Wilkinson, energy policy analyst for North America at Ørsted, said the risk allocation should be different from onshore because upgrades and outages at sea tend to take much longer than onshore. “Having those things more clearly locked up and defined before a shared system like that gets up and running is going to be critical,” Wilkinson said.

Silverman agreed, saying, “I don’t necessarily think it’s a FERC role, but there is a huge difference in the risk. When you have a misalignment of onshore generation and transmission … when you translate that to the offshore side, we’re talking about such a huge amount of money being invested, and the losses can add up very quickly, so you really need to hammer home on this allocation of commercial risk.”

Paradise said one of the big lessons learned from CREZ, Tehachapi and Europe’s OSW development is that “the barriers we encounter are much more a case of what sentences are in tariffs, what words are on pages … than physics problems. The second thing is we see that transmission is the great enabler. In Europe, we now see subsidy-free solicitations for offshore wind because the transmission is there and has made it competitive on the actual cost of energy.”

Al McBride, ISO-NE director of transmission services and resource qualification, said New England has two key takeaways from Tehachapi. “One was the technical piece, which is identifying the solution,” he said. “But the more difficult part is cost allocation. … I think what we’re hearing … from the states is certainly interest in what would our Tehachapi be, and which should we build?”

In a separate panel, Anne Marie McShea of Ocean Winds North America, cited CREZ to identify the keys to a successful “transmission first” model. But she said the East Coast would need to compress CREZ’s “very long planning horizon.”

“The overall time frame from legislation through to commissioning took nine years,” she said. “A nine-year planning and construction horizon would push an operational offshore wind transmission backbone to 2030. This planning horizon would likely need to be compressed and then carefully managed in order to align with the next round of states’ offshore wind solicitations.”

The BPU’s Silverman also cited CREZ as evidence of the need for cost controls, saying its cost ran to $6.9 billion, well above the original $4.7 billion budget. Part of the increase resulted from the redrawing of power lines to minimize disruptions, which added more than 600 miles of lines to the more direct routes originally envisioned.

“There is clearly a role for competition to reduce costs and prevent transfer of risk onto captive consumers,” Silverman said.