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May 2002National Transmission Grid StudyiNational Transmission Grid Study PJM New York and New England alone could save consumers about 500 million annufactors such as impacts on reliability that r ID: 896519

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1 National Transmission Grid Study May 200
National Transmission Grid Study May 2002 National Transmission Grid Studyi National Transmission Grid Study PJM, New York, and New England) alone could save consumers about $500 million annu-factors, such as impacts on reliability, that result from bottlenecks.Much work is needed to address transmission bottlenecks and modernize our nationstransmission systems. As a percentage of total energy use, electricity use is gro

2 wing.reflects the transformation of our
wing.reflects the transformation of our economy to an increasingly sophisticated, information-basedImagine an interstate highway system without storage depots or warehouses, where traffic congestion would mean not just a loss of time in delivering a commodity, but a loss of theThis report outlines 51 recommendations that will help ensure a robust and reliable trans-mission grid for the 21st century. The following are six ge

3 neral recommendations:regional wholesale
neral recommendations:regional wholesale markets. In 1970, electricity accounted for 8 percent of total U.S. energy use. In 2000, electricity accounted for 16 percent of total U.S. energy use. Source: Energy Information Administration. Annual Energy Outlook 2002 1 Our National Transmission System Today and TomorrowOur National Transmission Systemoday and TomorrowElectricity is a cornerstone on which the economy and the dail

4 y livesstored, so it must be produced at
y livesstored, so it must be produced at the same instant it is consumed. Fig. 1.1power systems: the Eastern and WesternThe electricity transmission system is one of20th century. It is an extensive system of interconnected networks in which high-voltagepower lines transport electricity from genera- Our National Transmission System Today and Tomorrowmarket forces, involving a number of new mar-duces electricity and where it

5 will be consumed.Since 1996, the transmi
will be consumed.Since 1996, the transmission system has beendeveloping merchant power plants. From 1996has resulted in the need for an expanded tricity generated is now exchanged on the U.S. Energy Information Administration. 2000. The Restructuring of the Electric Power Industry: A Capsule of Issues and EventsCapacity margin is the ratio of generating capacity to electricity demand. Excess generating capacity is needed to

6 ensure reliacan shift rapidly (e.g., in
ensure reliacan shift rapidly (e.g., in response to weather) and total generation capacity is not available at all times (e.g., because of unexpected equipment failure).Reliability Assessment, 2001-2010However, the recent contraction of our capital markets, and the announced delay in the construction of many new power plants, w 1998200020022004200620082010 19982000 Fig. 1.2Capacity Marginsover Time After many years of de

7 cline, the ratio of generating capacity
cline, the ratio of generating capacity to electricity demand has begun and, accordingto NERC forecasts, will continue to increase. This increase means that there will be adequate generationSource: NERC. 2001. Reliability Assessment, 2001-2010.Download from http://www.nerc.com National Transmission Grid Study 19751980-$117 million/year198519901995 Fig. 1.4generation from elsewhere in the region.NERC also reports that in

8 vestment in newinvestment in new generat
vestment in newinvestment in new generation and growth tricity grid. Some felt the electricity system wasof such great importance that it had to be man-aged by the federal government; others werewary of centralized federal decision making and For additional background, see the Issue Paper, by F. Alvarado and S. Oren. Toward the Transmission System of Tomorrow 1 National Transmission Grid Study 2 The National Interest in

9 Relieving Transmission Bottlenecks DOE
Relieving Transmission Bottlenecks DOEs model does not consider congestion within single control areas such as ERCOT. Transmission bottlenecks affect national interests by increasing theRelieving transmission bottlenecks is a regional issue. DOE will workin partnership with FERC, states, regions, and local communities tomodel (see text box), DOE determined the loca-receive from regional electricity markets. has compar

10 ed it to those recently identified byimp
ed it to those recently identified byimpacts on national interests. More work andadditional public input are required to developsion bottlenecks on national interests, includingto address them are regional in nature. When on the impacts of transmission on regional elec- the East, 50 are used to their maximum capacityfrom Minnesota to Wisconsin, the Midwest intoNational Transmission Grid Study Policy Office Electricity M

11 odeling System (POEMS)DOE estimated the
odeling System (POEMS)DOE estimated the benefits of interregional wholesale power markets using the Policy Office ElectricityModeling System (POEMS).POEMS is a full-scale national energy model designed specifically to examine theimpacts of electricity industry restructuring.The model includes significant economic,regional,and temporaldetail that is needed to analyze the economics of interregional trade.POEMS aggregates indi

12 vidual transmission lines to create a ne
vidual transmission lines to create a network of transmission paths that connect 69 subregions.The model represents the transmission system as a highway systemÑa series of paths betweenegions with a fixed amount of transmission capacity along each path.Trades are executed among the modelÕssubregions based on the relative costs of generation in each subregion as well as the costs of executing eachtrade.A more detailed descri

13 ption of the model and its use in this s
ption of the model and its use in this study is provided in Appendix A.POEMS is an important tool for assessing the economic consequences of electricity trade and identifyingmajor transmission bottlenecks.However,it does not explicitly represent the physical flows of electricity overpaths in response to the combined effects of all other flows on the system.Also,because it is national inscope,the model does not consider trad

14 e within subregions.or the National Tran
e within subregions.or the National Transmission Grid Study,POEMS was used to study:¥ Transmission bottlenecks as evidenced by the costs of transmission congestion among subregions ¥ The benefits of regional electricity markets today¥ The benefits of regional electricity markets that would be enabled by eliminating rate pancaking.Results from the first two analyses are presented in this section;results from the third analys

15 is are presentedin Section 3,ÒRelieving
is are presentedin Section 3,ÒRelieving Transmission Bottlenecks by Completing the Transition to Competitive RegionalWholesale Electricity Markets.ÓIn many regions, when electricity must be transmitted over multiple transmission systems, users must pay each owner/operator a fee for use of its transmission system. This is generally referred to as rate pancaking. As noted previously, POEMS generally does not represent individ

16 ual transmission lines. Thus, the result
ual transmission lines. Thus, the results presented in this studthat there is congestion on any particular transmission line but rather that there is congestion along transmission paths or co The National Interest in Relieving Transmission Bottlenecksin the region.out of the region. Although TVA is largelyexempt from FERC regulation, it voluntarily tem. However, TVA and various suppliers in equal and open access to the tran

17 smission systems in this region.region,
smission systems in this region.region, including: uncertainty in transmission In 1999,the Texas Public Utility Commission completed a study evaluating the most economical,reliable,and efficient means to interconnect the transmission facilities in the Electric Reliability Council of Texas(ERCOT) with those in the Southwest Power Pool within the Eastern Interconnection.The study deter-mined the costs and reliability concerns

18 associated with a hypothetical scenario
associated with a hypothetical scenario of six inter-ties.It also dis-cussed the state and federal jurisdictional issues that would need to be addressed.The final report,whiledetailed,was not able to draw a firm conclusion regarding the desirability of greater interconnection.The study found that total costs for the interconnection facilities alone would be between $300 and $350million in 1997 dollars.It also identified ad

19 ditional costs,which are difficult to qu
ditional costs,which are difficult to quantify,that would beimposed upon utilities and generators based on operating characteristics of the combined grid.Since the study was completed,between 10,000 and 20,000 megawatts of new generation have been broughton line in Texas,new transmission lines have been completed,and the retail market has opened.With reserve margins as high as 31 percent in ERCOT,generators may begin a rene

20 wed push for the open-ing of additional
wed push for the open-ing of additional markets for their power.It may be time to conduct a new study that evaluates alternatives,including additional AC interconnections,new DC interconnections,as well as expansion of existing ties.Feasibility Investigation for AC Interconnection between ERCOT and SPP/SERC. When prices spike an additional $50 per MWhbid their marginal operating cost) duringtional $100 per MWh during these

21 periods,up to more than $700 million for
periods,up to more than $700 million for a handful offrom trade within New England are not reflect-ed in the analysis. ISO New England estimatesthe costs of congestion in New England arenot specifically represented in POEMS. TheNational Transmission Grid Study Federal Energy Regulatory Commission. 2001. Electric Transmission Constraint Study. Division of Market Development. Download fromAlthough DOEs analysis and FERCs

22 analysis are not strictly comparable be
analysis are not strictly comparable because of differences in the methods used, their findiconsistent. FERCs analysis is based on actual market prices and does not reflect price changes that would occur on both sides transmission link if additional electricity could be traded. As a result, FERCs estimates are likely to be somewhat higher thaISO New England. 2001. 2001 Regional Transmission Expansion PlanCalifornia Indep

23 endent System Operator. 2001. Testimony
endent System Operator. 2001. Testimony of Armando J. Perez, Stephen Thomas Greenleaf, and Keith Casey. ConditionalApplication of Pacific Gas and Electric Company for a Certificate of Public Convenience and Necessity Authorizing the Construct. California Public Utilities Commission. Download from http://www.caiso.com. On December 19,2001,FERC presented findings from an analysis of transmission con-straints in the U.S.FERC s

24 taff identified 16constraints (see map)
taff identified 16constraints (see map) across the nation char-acterized by either:¥ A large number of Transmission LoadRelief (TLR) events (instances when mar-et sales cannot be executed because oftransmission constraints,which forcesoperators to use more expensive localenergy rather than less expensive import-ed energy),or ¥ High price differentials across an interface(where the delivered energy price inside an area is h

25 igher than the price of energyat the sam
igher than the price of energyat the same moment outside that area).FERC estimated the economic cost of trans-mission congestion during the months of Junethrough August 2000 and 2001 using actualdata on the number of hours during which a specific transmission interface was con-strained,the amount of energy that was redis-patched in each congestion event,and thecosts of imported and replacement energy in The National Interes

26 t in Relieving Transmission Bottlenecks
t in Relieving Transmission Bottlenecks The blackout in the western states on August 10,1996,was a complex and dramatic reminder of theimportance our modern society places on reliable electricity service.Ultimately,power was interruptedto approximately 7.5 million customers,for periods ranging from a few minutes to about nine hours.Immediate costs to the regionÕs economy were estimated at $2 billion.The August 10 outages we

27 re caused by multiple transmission line
re caused by multiple transmission line failures over a period of several hours.A single transmission line failure is a contingency that is routinely considered in reliability planning.However,the failure of several lines,combined with the dayÕs pattern of operation,caused the system tobecome unstable (which had not been anticipated by reliability planners),causing automatic controls toopen the California-Oregon Intertie,a

28 major link between the northern (Pacific
major link between the northern (Pacific Northwest) and southern(California) portions of the western system.Opening the Intertie produced a power surge from theacific Northwest through the eastern portion of the grid toward Arizona and southern California,caus-ing many lines to disconnect automatically and eventually fracturing the western grid into four separateelectrical Òislands.Ó Within each island,large blocks of cust

29 omers lost power when their electricityd
omers lost power when their electricitydemands suddenly exceeded available local generation.The situation was worst in the southern islandwhere automatic controls disconnected over 90 generators to prevent them from being further damaged.Some of the larger units were out of service for several days.Review of Recent Reliability Issues and System EventsDownload from http://www.eren.doe.gov/der/transmission Successfully ad

30 dressing transmission operations and sys
dressing transmission operations and system reliability, as well astransmission alternatives. In other words,removing bottlenecks is not simply a matter ties. Because the system is a network, reduc-ing congestion in one part of the system maythe system from year to year and in responseto weather and other seasonal factors.In addition, solving the problem of Canada. Many scheduled power transactionsbefore reaching loads in t

31 he U.S. This is aparticular problem at p
he U.S. This is aparticular problem at points in the upperMidwest where the transmission systems ofcapability to increase economic trade de-on the additional amount of electricity that The National Interest in Relieving Transmission BottlenecksDOE, through a rulemaking, will determine how to identify and designate transmission bottle-DOE will further develop the analytic tools and methods needed for comprehensive analysis t

32 oIn an open public process, DOE will ass
oIn an open public process, DOE will assess the nations electricity system every two years to DOE believes that the federal govern-recommendations in the following sections federal government must stand ready to takeinadequate. Toward this end, DOE has an 3 Relieving Transmission Bottlenecksby Completing the Transition Our nations transmission systems must be modernized to ensuretheir continued reliability and facilitate

33 fair and efficient regionalwholesale el
fair and efficient regionalwholesale electricity markets that lower costs to consumers. Toachieve these goals, we must complete the transition to a restruc-tured industry. establishing regional transmission organizationssystem. The economic rewards from improvingthe transmission system must be greater thanthe rewards from maintaining the status quo orresult, in part, from the incomplete transitionthe electricity system tod

34 ay. Lack of clarity insystem is too impo
ay. Lack of clarity insystem is too important to leave in an extend- Establishing Regional TransmissionOrganizations FERC Order 2000 was a major milestone in themust, at a minimum, demonstrate: Relieving Transmission Bottlenecks by Completing the Transition to Competitive Regional Wholesale Electricity Markets Relieving Transmission Bottlenecks by Completing the Transition to Competitive Regional Wholesale Electricity Marke

35 tsmust be clear and rapidly adopted. The
tsmust be clear and rapidly adopted. They mustsupply and demand sides of markets, inter-necks in their regions. ransmission fees have a substantial impact on electricity trade and congestion.In many regions,users ust pay each utility a separate fee for use of its transmission system.This is generally referred to as Òratepancaking.Ó Pancaked transmission rates create economic distortions in bulk-power markets by preventings

36 ome trades that would be profitable if n
ome trades that would be profitable if not for the multiple transmission fees involved.One of the benefits oflarge RTOs would be the elimination of pancaked transmission rates.DOE used POEMS to analyze a scenario that eliminates rate pancaking and instead uses a single access chargeto ship power anywhere within an RTO.Five RTOs were assumed for this scenario:¥ Northeast (composed of PJM Interconnection,New York ISO,and ISO

37 New England);¥ Midwest;¥ Texas (ERCOT);a
New England);¥ Midwest;¥ Texas (ERCOT);and¥ West (Western Systems Coordinating Council or WSCC).Not surprisingly,both electricity trade and transmission congestion betweenegions increase dramatically when transmission fees are structured as a singleaccess charge.This is a reflection of the increased business activity that wouldlead to more efficient markets but also to increased loading of interregional transmission facilit

38 ies.The totalolume of electricity traded
ies.The totalolume of electricity traded across regions increases by nearly 20 percent annually,and the average number ofcongested paths doubles.The economic impacts of eliminating rate pancaking are even more dramatic.The benefits to consumers frommore efficient trade are more than $1 billion per year.This analysis is not an estimate of the benefits of RTOs, nor does it represent DOEs position on appropriate geographic bo

39 undaries for RTOs.This analysis only ill
undaries for RTOs.This analysis only illustrates the importance of transmission fees in shaping trade and congestion patterns. Eliminating pancaked rates is onlyone of the expected benefits of RTOs. See Section 4, Relieving Transmission Bottlenecks Through Better Operations,Ž for specific recommendations to improve transmisSee Section 5, Relieving Transmission Bottlenecks Through Effective Investments,Ž for specific recom

40 mendations on how RTOs sho National Tran
mendations on how RTOs sho National Transmission Grid Study ed by the economic and legal environmentinwhich it operates. In addition, many states andthe federal government have laws that hindertional monitoring and dispatch concepts. DOEbusiness models can be fully evaluated andate the performance of RTOs in meeting func-tional requirements. DOE can also help bymation should be made publicly available.support regional mar

41 kets involves many See Section 5, Relie
kets involves many See Section 5, Relieving Transmission Bottlenecks Through Effective Investments,Ž for additional discussion of advanced transmand specific recommendations. Current Status of RTO ApplicationsNameAlliance RTOCalifornia ISOERCOTGridFlorida TranscoTransConnectSeTrans GridAmericanTransmissionTRANSLinkTransmissionDeniedISO operationalUnder discussionRTO proposed, now merging withMidwest ISOOperational ITC. App

42 roved under Midwest RTOProposed ITC unde
roved under Midwest RTOProposed ITC under Midwest RTOStatus Source: Federal Energy Regulatory Commission, as of January 30, 2002. Table 3.1 National Transmission Grid Study Establishment of RTOs is an important stepfor transmission system operations andThe current ways in which owners profit from existing and new transmis-DOE, with industry, will assess current system monitoring and control technologies that sup-DOE will

43 work with FERC and stakeholders to devel
work with FERC and stakeholders to develop objective standards for evaluating theperformance of RTOs and will collect the information necessary for this assessment.DOE will work with the Energy Information Administration (EIA), FERC, National GovernorsNational Association of State Energy Officials (NASEO), industry, and consumer representativessystem should be collected at the federal level and under what circumstances the

44 se dataDOE will review federal laws that
se dataDOE will review federal laws that may prevent PMAs from full participation in RTOs, directthem to participate in the creation of RTOs, and take actions to facilitate their joining RTOs. Increasing Regulatory Certainty and Focus For additional background on this discussion, see the Issue Paper, Alternative Business Models for Transmission System InvestmOperations,Ž by S. Oren, G. Gross, and F. Alvarado. RECOMMENDATI

45 ONS National Transmission Grid Study F
ONS National Transmission Grid Study Finally, it may be appropriate to considerinvestments address important regional ornational interests. competition. In addressing wholesale compe-tion of the transmission system would sup-trol of them to an independent entity.Independent System Operators (ISOs),FERC in recent years to operate transmissionneeds. A major challenge to investment andinnovation when control and ownership

46 ofa financial linkage between those who
ofa financial linkage between those who benefitfrom the investment (the public) and thosewho finance it (the owners). Today in the U.S.,systems: California, New England, PJM, Newrecommended earlier, if we are to succeed inTexas is building transmission in part because the states utility commission regulates both the ISO and the transmission-ownin Relieving Transmission Bottlenecks by Completing the Transition to Competitiv

47 e Regional Wholesale Electricity Markets
e Regional Wholesale Electricity Marketsassets from vertically integrated firms towholly independent firms that have no gener-works. Loop flow, in partic-and transmission, is anzontal consolidation of transmission assets, as reflected in the formation of independentassets of many individual transmission-owningthe transmission market, has relied on a tech-nological solution to the problem of loop flow.Flexible AC transmissio

48 n system (FACTS) devices can control flo
n system (FACTS) devices can control flows over transmission lines; however, these devices are expensivelimited application to date. See Section 5, Ensuring the Timely Introduction of Advanced Technologies,Ž and the Issue Paper, Transmission TechnologiesŽ by J. Hauer, T. Overbye, J. Dagle, and S. Widergren. National Transmission Grid Study Neptunes proposed Regional ElectricTransmission System in the Northeast),the pro

49 blem of loop flow. A merchant transmissi
blem of loop flow. A merchant transmission project is oneket-based rates. Although merchantsion systems, we do not know to what extentprojects financed in this manner can meet regarded as a natural monopoly. And it seemsclear that when private investment in transmis-sion can be undertaken in ways that avoid the Relieving Transmission Bottlenecks by Completing the Transition to Competitive Regional Wholesale Electricity Mark

50 etsDOE will work with NGA, regional gove
etsDOE will work with NGA, regional governors associations, NARUC, and other appropriatesion investments in proportion to the improvements they provide to the system. DOE will research and identify performance metrics and evaluate designs for performance-based regulation. ratepayers and that provide overall system benefits should be encouraged. mission companies. RECOMMENDATIONS 4 For additional background on

51 this discussion, see the Issue Paper, T
this discussion, see the Issue Paper, Transmission System Operation and Interconnection,Ž by F. Alvarado and S. Oren. tem has always been paramount. The primaryobjective of reliable transmission system opera-scale blackouts. In extreme situations, tempo-parts of the system in order to maintain theCurrent rules and operational procedureswere smaller in volume, involved fewer partici-consideration either to the commercial va

52 lue reliable transmission system that su
lue reliable transmission system that supportsfair and efficient competitive regional whole-there is an even greater need than in theto reliability management and real time Through Better Operations National Transmission Grid Study market forces in managing transmission system operations efficiently and fairly isnals may, by itself, alleviate the need forSeveral aspects of transmission opera-generation in congested areas

53 as opposed tolocation in areas with no c
as opposed tolocation in areas with no congestion. Thus,are recovered from all transmission users onHere, we focus on examples where applica-essential to ensure reliability when transmis-sion lines are in danger of being overloaded,the economic losses associated with thesechoose which transactions to curtail in res- Pricing Transmission Services to ReflectTrue Costs Uplift charges are charges paid by all users; these charge

54 s represent costs that are difficult to
s represent costs that are difficult to apportion to particular markeregulators allocate evenly among all users in order to achieve other policy objectives. In cases where uplift charges must be used to recover costs,however, performance-based regulations (discussed in Section 3) that provide incentives to minimize these charges and improve operational effi-For additional background on this discussion, see the Issue Paper,

55 Transmission System Operation and Inter
Transmission System Operation and Interconnection,Ž by F. AS. Oren. cent efficient; losses, which result from the heat-delivering 100 MWs of electricity to an end pointrequires that more than 100 MWs be put intosystem losses are sometimes included in upliftcharges borne equally by all transmission sys-tem users, which leads to inefficient use of theare often located far from loads (such as windenergy) and conventional gene

56 ration, which is RECOMMENDATION There is
ration, which is RECOMMENDATION There is a need to develop methods for test-penalties„to prevent market abuses. FERC has National Transmission Grid Study Allowing the demand sideŽ of regional whole-sale electricity markets to interact with thesupply sideŽ is a critical missing element insystem operating principle that all customerdemand must be served at any cost is the keycustomers to curtail or displace load from th

57 eirlocal utility in response to system c
eirlocal utility in response to system conditions.how customers would voluntarily reduce elec-tricity loads, conduct pilot programs, assessthe impacts of these programs on wholesalecustomer participation in the market.not be easy. Flexible programs will be required ic purposes as a new source ofwilling to reduce their loads in responseMany customers will require substantialtime. However, other programs, such respond to real

58 -time prices.pation in voluntary load-re
-time prices.pation in voluntary load-reduction programsprograms. DOE can also stimulate the devel-opment and dissemination of successfulapproaches and technologies. Advancedmeters must be deployed that allow cus-tomers to receive signals in real time (e.g., The New York Independent System Operator (NYISO) operated two demand-esponse programs in 2001:the Emergency Demand Reduction Program and theDay-Ahead Demand Reduction P

59 rogram.Both are examples of the types of
rogram.Both are examples of the types of pro-grams needed to enable voluntary customer load reduction in wholesale markets or the purposes of enhancing system reliability and increasing market efficiency.The Emergency Demand Reduction Program is a ÒcallÓ-type program (i.e.,customers agree in advanceto curtail load when called to do so by NYISO) but is voluntary in that there are no penalties for choos-ing not to curtail whe

60 n called,so payment is based on a partic
n called,so payment is based on a participantÕs performance in each hour of a cur-tailment event.In summer 2001,the program was operated four times because of shortages in operatingeserves.On average,the program delivered 450 MW,which is a significant share of the 1,800 MW oper-ating reserve that NYISO maintains.The Day-Ahead Demand Reduction Program is a ÒquoteÓ-type program (i.e..customers are given anopportunity to offer

61 load reductions to the wholesale market
load reductions to the wholesale market).In summer 2001,the program operatedduring July and August and achieved modest load reductions.Efforts are under way to improve thedesign and operation of the program for summer 2002. National Transmission Grid Study important, the system reliability rules and prac-and control procedures must be reviewed andredefined from a technology-neutral point ofview, without compromising syst

62 em reliability.Second, new communication
em reliability.Second, new communication and control tech-must be developed and implemented. DOE candards that save consumers money. Today,cy programs in view of their potential benefitsto the electricity system as well as their directbenefits to customers in the form of lower elec- CaliforniaÕs experiences during the electricity crisis in summer 2001 offer important lessonsabout peak demand reduction.According to theCalifo

63 rnia Energy Commission,Californians used
rnia Energy Commission,Californians used8.9% less electricity during peak hours in 2001compared to 2000 when adjusted for growth andeather (see http://www.energy.ca.gov/).These are very large savings compared with whatalmost all observers at the time expected and historical behavior patterns.In other words,demand-reducing programs performed very well,and these reductions were of great importanceduring the crisis.However,alt

64 hough an estimated30 percent of these sa
hough an estimated30 percent of these savings related to investmentin more efficient end-use devices and on-site gen-eration will likely persist,the remaining reductionsare the result of changes in behavior and opera-tions that may not continue now that the crisisppears to have passed.California spent a largesum of (one-time) funds strongly encouraging con-sumers to reduce energy use.Many consumersdid so for reasons includi

65 ng:the desire to be goodcitizens,concern
ng:the desire to be goodcitizens,concerns about high electricity bills,andthe prospect of receiving a 20 percent electricitybill rebate if they achieved 20 percent savings.Thus,although demand reduction can play animportant role in relieving transmission bottle-necks,the crisis situation to which Californiansesponded in summer of 2001 is not a desirablemodel for future efforts.The crisis in Californiawas very expensive.The

66 goal should be to avoidsuch crises,in Ca
goal should be to avoidsuch crises,in California and elsewhere.Long-term demand reduction programs,enhancementof the transmission system,and the new suppliesare all essential to achieving this goal. Relieving Transmission Bottlenecks Through Better Operations46Ensuring Mandatory Compliance withReliability Rules analysis that uses real-time data instead of theconservative proxies used in a static analysisin ATC that would re

67 sult from a more precisethe market on a
sult from a more precisethe market on a nonfirm basis. The overalla reduction in transmission congestion, andRecent advancements in measurement,communication, and analysis tools now makedynamic analysis a possibility.In some cases,analysis to a dynamic analysis may be the DOE will work with industry to demonstrate and document cost-effective uses of dynamic trans- The 1990s witnessed an increase in thewhile operating in com

68 petitive business envi-ronments that pro
petitive business envi-ronments that provide few if any economicA description of tools, such as the Wide Area Measurement System (WAMS), that would support more precise determinations of the of the transmission system can be found in Section 5, Relieving Transmission Bottlenecks Through Effective Investments.Ž See aAdvanced Transmission Technologies,Ž by J. Hauer, T. Overbye, J. Dagle, and S. Widergren.For additional back

69 ground on this discussion, see the Issue
ground on this discussion, see the Issue Paper, Reliability Management and Oversight,Ž by B. Kirby and E. H National Transmission Grid Study lic interest in electricity system reliability. longer rely on the historic system of voluntaryfirms in todays marketplace.There is wide-mandatory system based on contractual agree-certain commercial transactions, as explainedrequired in view of their economic implications.variatio

70 ns in transmission system designs and bu
ns in transmission system designs and build upon the knowledge of local trans-mission system operators in open rule-settingconsumers should be explicitly accounted mum, the penalties for violating reliability rules Summary of Major Electricity ReliabilityEvents in North AmericaNortheast blackout: November 9…10, 1965New York City blackout: July 13…14, 1977- July 2, 1996„cascading outage Minnesota-Wisconsin near missŽ: June

71 11…12, 1997 Source: J. Hauer and J. Dagl
11…12, 1997 Source: J. Hauer and J. Dagle. 1999. Review of Recent Reliability Issues andSystem Events. Download from http://www.eren.doe.gov/der/transmission Reliability Assessment, 2001-2010 National Transmission Grid Study For additional background on this discussion, see the Issue Paper, Transmission Siting and Permitting,Ž by D. Meyer and R. Sed Accelerating the Siting and Permitting ofNeeded Transmission Facilities

72 5There have been significant delays duri
5There have been significant delays during thesiting and permitting process for many large,40These processes have emerged as significantState and federal regulators must workwith states and regions to ensure that trans-part of these processes, the federal govern-ment has a special responsibility to ensureFederal regulators should actively supportand defer to these state and regional siting Relieving Transmission Bottlenecks

73 Through Effective Investments en years
Through Effective Investments en years after it was first proposed,a major transmission project by American Electric Power(AEP) in West Virginia and Virginia is still about a year from final approval.The following chronol-y documents the delays resulting from state regulatorsÕ efforts to take account of local andother concerns,and from lack of coordination among the principal parties.1991ÑAEP submits a proposal for a 765-k

74 V transmission line to Virginia,West Vir
V transmission line to Virginia,West Virginia,the U.S.est Service,the National Park Service,and the U.S.Army Corps of Engineers with the goalsof maintaining reliability in southern West Virginia and southwestern Virginia and reducing therisks of a cascading outage that could affect many states in the eastern U.S.1992Ð1994ÑExtensive hearings are held in Virginia and West Virginia,many in potentially affected localities.1996Ñ

75 The Forest Service issues a draft enviro
The Forest Service issues a draft environmental impact statement which recommendsthat the line not be constructed as proposed because it will cross sensitive public lands.1997ÑAEP proposes,to the regulatory commissions in the two states,a longer alternate oute that would cross less sensitive areas than the initial route.1998ÑThe West Virginia Public Service Commission approves its portion of the alternateoute.Later in 1998Ñ

76 AEP agrees to a request from the Virgini
AEP agrees to a request from the Virginia Corporation Commission that theutility conduct a detailed study of a second alternate route.After AEP completes its review,itees that the second route is acceptable although this route would not allow as much marginr future load growth as had been available with the first alternate route.2001ÑThe Virginia Corporation Commission approves the second route,chiefly because thisoute woul

77 d have fewer adverse environmental and s
d have fewer adverse environmental and social impacts than the previous routes.Late 2001ÑThe West Virginia Public Service Commission must review and approve the newestoute even though the West Virginia portion of that route differs very little from the one thecommission approved in June 1998.In addition,because the newest route would also crossabout 11 miles of national forest in an area not studied in the Forest ServiceÕs

78 1996 draft envi-onmental impact statemen
1996 draft envi-onmental impact statement,the Forest Service must conduct a supplementary analysis beforedeciding whether to grant a permit for construction.Source: D. Meyer and R. Sedano. 2002. Relieving Transmission Bottlenecks Through Effective Investments A promising example of a regional institution that could be used to address regional transmissionsiting issues on a cooperative basis is the Western StatesÕ Committee

79 for Regional Electric PowerCooperation
for Regional Electric PowerCooperation (CREPC).CREPC was created jointly in 1984 by the Western Interstate EnergyBoard,which acts as the energy arm of the Western GovernorsÕ Association,and the WesternConference of Public Service Commissioners.CREPC has representatives from the regulatorycommissions and energy and facility-siting agencies in the 11 states and two Canadian provincesin the Western Interconnection.Through CRE

80 PC,the western states have begun negotia
PC,the western states have begun negotiations todevelop a common interstate transmission siting protocol;June 2002 is the target date for publi-Source: Western Interstate Energy Board. http://www.westgov.org/wieb/crepnew2.htm Relieving Transmission Bottlenecks Through Effective InvestmentsThese lines will allow delivery of the leastthat are needed to significantly advancenational interests must not be delayed.Rules and regu

81 lations that will improve National Tran
lations that will improve National Transmission Grid Study National Transmission Grid Study gic reserveŽ of critical devices, such as transformers. Demonstration project underwayWidely used when overhead is notpractical, mostly in urban areas andJust entering commercial testing.More experience is needed to lowerCommercially available, withincreasing use.Demonstration lines have beenbuilt. Key challenge is cost and

82 Many standards already exist, butfurther
Many standards already exist, butfurther work is needed. Not expected to be competitive forat least 20 years except in very Ensuring the Timely Introduction ofAdvanced Technologies 5Table 5.1 TechnologyOverviewCommercial Status For additional background on this discussion, see the Issue Paper, Advanced Transmission Technologies,Ž by J. Hauer, T. OverbyJ. Dagle, and S. Widergren. sion technologies are available that coulden

83 hance reliability and dramatically incre
hance reliability and dramatically increase National Transmission Grid Study During the past decade,DOE and indus-try have pursued research on a promis-ing technology called high-temperaturesuperconductivity.Superconductivityers to a physical state of materials atof energy.Formerly thought to occuronly at very low temperatures,whichould not be practical in commercialpplications,superconductivity has beende-monstrated wit

84 h newer materials athigher temperatures.
h newer materials athigher temperatures.Commercial appli-cations of superconductivity that arenow being explored include more effi-cient motors,generators,transformers,and other electric equipment.or electricity transmission,superconductivity offers the promise of dramatically lowering the lossesassociated with long distance transmission of electricity.Electricity losses in transmission and distribu-tion systems exceed 10 p

85 ercent of total electricity generated.Re
ercent of total electricity generated.Reducing these losses would representhundred of millions of dollars in annual savings to the nationÕs electricity bill.DOE supports industry efforts to commercialize superconducting technologies through basic researchand testing that will speed its acceptance and use.In partnership with industry,DOE expects to assistindustry in rapidly moving these technologies into the marketplace.Seve

86 ral states,including Michigan,New York,a
ral states,including Michigan,New York,and Ohio,will soon see first-of-a-kind operational testingof superconducting generators,power lines,and transformers.These real-world experiences will lay theoundation for widespread use across the grid of this next-generation technology that provides highercapacity,greater reliability,and improved efficiency.Source: U.S. Department of Energy. http://www.eren.doe.gov/superconductivity/

87 At the beginning of 2002, the Southwire
At the beginning of 2002, the Southwire Company, in a 50/50 cost share withDOE, completed two years of the first operational test of superconducting cablessize. DOE has been a leader in developingHTS (see text box). Another approach totransmission. Relieving Transmission Bottlenecks Through Effective InvestmentsIt is also appropriate to consider non-transmission alternatives, such as controllable load and distributed gener

88 ation, as techgreater control of electri
ation, as techgreater control of electricity flows. See Section 4, Relieving Transmission Bottlenecks Through Better Operations.Ž Another class of technologies enables better control of the flow of electricity over42Another class of technologies wouldincrease the accuracy with which the limits ofadvanced measurements (see text box). Real-time monitoring of conductor temperaturesThese hardware technologies can providethe mu

89 scle for improved transmission systemele
scle for improved transmission systemelectricity.Encouraging the use of these new tech-nologies is essential to make better use of National Transmission Grid Study Wide Area Measurement Systems(WAMS) technology is based onobtaining high-resolution power-system measurements (e.g.,volt-e) from sensors that are dis-persed over wide areas of the grid,and synchronizing the datawith timing signals from Globalositioning System

90 (GPS) satellites.System operators curren
(GPS) satellites.System operators currently retrievearchived data to analyze grid distur-bances and improve system models;in the future,they will be able touse these data in real time to assessIn 1995,DOE launched the WAMSproject,in cooperation with Federalutilities and the private sector,todetermine the information needs ofthe emerging power system and todevelop technologies to meet theseneeds.A prototype WAMS networkwas i

91 nstalled,and software wasdeveloped to re
nstalled,and software wasdeveloped to record,archive,andetrieve data.The real-time information available from WAMS may allow operators to detect and mitigate a distur-bance before it can spread and enable greater utilization of the grid by operating it closer to its limitswhile maintaining reliability.The capacity that is freed up is available to move larger amounts ofpower over the grid in response to competitive market tr

92 ansactions.AMS demonstrated its value fo
ansactions.AMS demonstrated its value following the massive Western system blackouts on August 10,1996.Engineers began analyzing WAMS data within minutes of the blackout to reconstruct the sequence ofents that led to it and to initiate corrective actions to restore service.DOE is working with Federaland private utilities to transfer this technology to system operators nationwide.Additional hardwareand software enhancements

93 using state-of-the-art technologies are
using state-of-the-art technologies are needed to allow WAMS to realizeSource: U.S. Department of Energy. http://www.eren.doe.gov/der/transmission Relieving Transmission Bottlenecks Through Effective Investments Relieving Transmission Bottlenecks Through Effective Investments 5Recent concern about national securityissues has focused attention on the basicReliability has always taken intoaccount the impacts of weather and ra

94 n-eration„electricity generation closer
n-eration„electricity generation closer to the point of use (which would result in lessAs the U.S. moves forward with themodernization of its transmission systems, National Transmission Grid Study The Northeast Ice Storm of 1998„Lessons for Power System RecoveryNo reasonable set of precautions can entirely prevent widespread disruptions of electrical services.However,when such disruptions do occur,their impact can be gre

95 atly reduced if advance prepara-tions ha
atly reduced if advance prepara-tions have been made.Between January 5 and 10,1998,a series of exceptionally severe ice storms struck large areas with-in New York,New England,Ontario,Quebec,and the Maritime Provinces.The worst freezing rainser recorded in the region deposited ice up to three inches thick.Damage to transmission anddistribution facilities was severeÑmore than 770 transmission towers collapsed.The Northeast ic

96 e storm showed that the following types
e storm showed that the following types of resources should be part of advancepreparation for emergencies:¥ Comprehensive procedures for emergency management;¥ Stockpiles of reserve equipment for emergency management and repair of facilities;and¥ Procedures to ensure that adequate numbers of trained personnel can be mobilized.Source: Northeast Power Coordinating Council. 1998. January 1998 Ice Storm„Final Report. It should

97 be designed to prevent, detect, andmitig
be designed to prevent, detect, andmitigate threats to reliability.Unlike operational failures of the grid,which can usually be corrected within severalThere is great diversity of electricity sys-tem and equipment designs and parts. Ourof local utilities with little consideration for stan-dardization. Discussions within the industryWe have an unprecedented opportunity toaddress these issues. As RTOs begin the process 6 thro

98 ugh our electricity transmission system
ugh our electricity transmission system dictates that there willnational interests. Furthermore, DOE will develop the state-of-the- Differences in electricity prices promptedthe push for competition. Under monopoly Developing and implementing policies thatwill lead to needed beneficial investments in National Transmission Grid Study Download from http://vm1.hqadmin.doe.gov/seab/esrfinal.pdfDownload from http://www.pi.ene

99 rgy.gov/pilibrary.html understanding to
rgy.gov/pilibrary.html understanding to address electricity issuesThese partnerships, with the National RECOMMENDATION portion to the improvements they provide to the system. regulation. update and finalize its regulations. This will give greater certainty to public power authoritiesproviding open access to their transmission and distribution facilities. ers and that provide overall system benefits should be en

100 couraged. sion companies. Ridge
couraged. sion companies. Ridge National Laboratory (with at least a 50% industry cost share). TRADELEC’ Electricity Model 81National Transmission Grid StudyModel Description and Structural AssumptionsElectricity Demands and Load ShapesA unique aspect of POEMS is its representation of the load-duration curves with vertical rather than horizontal timeblocks. This approach ensures that trades among regions areDi

101 spatch and TradeTRADELEC’ is a netw
spatch and TradeTRADELEC’ is a network model of electricity dispatch,trade, capacity expansion, and pricing, as shown in Figure 1.roughly 150 power control areas in thedata in EIA filings and the North AmericanAvailability Data System data. TRADELEC’ incorporates finan-Representation of Generation PlantsThe plant input file to POEMS consists of virtually all exist-ing units in the U.S. Plants currently under const

102 ruction that are Figure 1: Components of
ruction that are Figure 1: Components of the TRADELEC’ Model simultaneity is maintained. Figure 2: Current TRADELEC’Regions. National Transmission Grid Study84Calculation of Economic Benefits of TradeThere are several ways to measure the economic benefits oftrade. Two measures have been adopted in this study. The firstA second measure of benefit is the impact on consumerprices. The change in wholesale prices can a

103 ffect consumerFor regions that have move
ffect consumerFor regions that have moved to full retail competition, consumer prices will, on average, follow wholesale prices. Thethose that have RTOs in the Base Case: PJM, New York, NewEngland, ERCOT, and California.The change in production costs and consumer costs foreach of the scenarios modeled in POEMS are given in Table 1. POEMS underestimates the savings to consumers fromwholesale electricity trade and the costs o

104 f congestion for RegionPJM„Pennsylvania,
f congestion for RegionPJM„Pennsylvania, New Jersey, MarylandNEPX„New EnglandReliability CoordinationAgreementMAIN„Mid-AmericaInterconnected NetworkMAPP„Mid-ContinentArea Power PoolSPP„Southwest PowerPoolERCOT„ElectricReliability Council ofTexasFRCC„FloridaElectric ReliabilityFlorida)WSCC/AZN„Arizona/New MexicoWSCC/CNV„CaliforniaPower PoolWSCC/RA„RockyMountain AreaBase CaseTransmissionFee Typepostage stamppostage stampposta

105 ge stamppancakedpancakedpancakedpostage
ge stamppancakedpancakedpancakedpostage stamppancakedpancakedpancakedpostage stamppancakedpancakedTransmissionFee RegionNortheastNortheastMidwestMidwestSoutheastSoutheastWestWestWestWest Table 1 National Transmission Grid Study86American Electric Power*American Electric Power*EnronFirst Energy CorpMichigan Electric Transmission CompanyMichigan Public Service Commission*ServiceXcel Energy ServicesList of Participants at DOE

106 National Transmission Grid Study Public
National Transmission Grid Study Public Workshops and Written Comments Received by DOEDetroit, MI Public Workshop September 24, 2001Atlanta, GA Public Workshop September 26, 20012M Design ConsultantsABBAlabama Public Service Commission*DynegyFlorida Public Service CommissionGeorgia Public Service CommissionGeorgia Transmission CorporationRETX*Rural Electric Service* National Transmission Grid Study88American Electric Po

107 werBandagCarolina Power & LightDynegyGeo
werBandagCarolina Power & LightDynegyGeorgia Public Service CommissionCommissionersNational Electrical ManufacturersAssociationNational Grid USANational Rural Electric CooperativesAssociationNew Jersey Division of the RatepayerAdvocatesNew York Independent System OperatorWritten Comments Received by DOE Distribution Network„Portion of an electric system that transportsŽ electricity from the bulk-power system to retail cust

108 omers, con-Electrical EnergyElectric Sys
omers, con-Electrical EnergyElectric System or Electric Power SystemEmergencyEnergy Clearing Priceederal Energy Regulatory Commission (FERC)Firm Power or Purchaseced OutageGenerating ReserveInstalled Capability Power PoolReactive PowerReal PowerReserveSecurity CoordinatorShort-Notice or Short-Term TransactionSpinning Reserve„Ancillary service that provides additional capacity from electricity generators that are on line, lo