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Major Eastern Transmission Lines Promise NE Supply Diversity

Dec 11, 2006 NGI's Power Market Today

Whether fully recognized or not, electric transmission has become an ever-more valuable strategic resource, and the only key remaining question is who develops and pays for it, according to a preview provided Power Market Today Thursday of the Massachusetts-based consulting firm Energy Security Analysis Inc.'s (ESAI) study focused on the East, "The New Transmission Vision." The full report will be published in January.

ESAI's analysis sees at least four major transmission projects coming to fruition in the Northeast United States and Eastern Canada. It counts them as almost sure things, although ESAI concedes it is still undetermined what organizations will build which projects, spanning Ontario and Quebec-to-Labrador; New Hampshire-to-Quebec; New York City/Long Island-to-PJM; and finally, PJM's western interconnections.

"Taken together, these initiatives provide substantial promise of portfolio diversity to the Northeast's urban markets," the draft executive summary said. "The alternatives to natural gas include: (1) thousands of megawatts of large-scale hydro capacity from Canada, thousands of megawatts of new wind capacity, and finally thousands of megawatts of coal-fired power."

The latter is somewhat problematic, given the increased pressures for the American power industry to begin to fully address global warning/GHG emissions tests.

ESAI's summary report stated clearly that the "table has been set for new transmission" with a combination of the Federal Energy Regulatory Commission's various transmission-focused orders, starting with Order 888 up to this summer's 2006 transmission incentives, and upgraded eminent domain powers granted in the 2005 Energy Policy Act (EPAct).

"Exactly how this will evolve, and what impacts these projects have on energy and capacity prices, congestion in urban areas, and the value of generation assets" is spelled out in the new report, although ESAI drew short of laying out the whole document prematurely.

Conclusions are fairly clear, according to the ESAI summary:

  • There will be impacts on natural gas and liquefied natural gas (LNG) from large-scale transmission additions.
  • Transmission, more than ever, is becoming the "enabler of competitive wholesale power markets," as seen in the capacity values in urban load pockets.
  • New transmission projects, with their price tags in the hundreds of millions of dollar range and higher, promise to create good opportunities for utilities and independent transmission developers, along with project finance firms.

"We're in the midst of a remarkable and historic period of change in the electricity markets of the United States and Canada," said Paul Flemming, ESAI director for power and gas services. "Suddenly, transmission is a growth industry."

ESAI (Energy Security Analysts, Inc., Wakefield, MA) regularly analyzes North American power markets, and it will deal with a list of issues regarding Eastern transmission projects that could be transferred to applicability elsewhere, including the West.

The impact of the 2005 EPAct, proactive (vs. reactive) transmission development, declining generation surpluses, LNG implications, and regulated transmission solutions to fit deregulated markets all are covered by the latest study.

This report and others will be featured at ESAI's next "Transmission Development Collaborative Executive Roundtable" in Boston in April, an ESAI spokesperson said.

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