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FERC Approves New Transmission Development Approach

Feb 26, 2009 - SustainableBusiness.com News

Two transmission companies owned by TransCanada (NYSE: TRP) have proposed a new model for developing much needed electricity transmission in the U.S.

Chinook Power Transmission, LLC and Zephyr Power Transmission, LLC have agreed to provide half of the capacity on their proposed new transmission lines to wind developers. The agreement is expected to help finance the transmission lines and convince utilities that the project is viable, while still leaving half of the transmission line capacity available for other power generators.

The approach attempts to overcome a financing dilemma faced by independent companies wanting to build new transmission lines. Under current federal rules, they must open all access to that transmission line to a competitive bidding process, but they need to make significant investments prior to reaching that point.

In other words, they need to attract investors before they have a single customer. They also face a chicken-and-egg dilemma: power generators won't support a transmission line unless a utility says it needs the line to supply its customers, and utilities won't support a transmission line unless there is a power generator backing it up.

On February 19, the Federal Energy Regulatory Commission (FERC) approved the new approach, allowing the two projects to go forward.

FERC noted that it needs to show greater flexibility for such "merchant" power line projects, because the project developers assume all the market risks, and unlike electric utilities, they have no set pool of customers from which they can recover their project costs.

The two projects include a 1,100-mile transmission line running from Medicine Bow, Wyoming, to just south of Las Vegas, Nevada, and a 1,000-mile transmission line that runs from Harlowtown, Montana, to the same ending point in Nevada.

Each transmission line will have a capacity of 3,000 megawatts (MW), which means that each line has an agreement with a wind power developer that plans to build 1,500 MW of wind power by the time the lines are completed in 2014. For comparison, at the end of 2008, Montana had only 272 MW of wind power capacity, while Wyoming had 676 MW of wind capacity.

The companies did not name the wind power developers, although several wind developers reportedly were in favor of the proposal.

The proposed transmission lines are significant for a number of technical reasons, as well, according to the Energy Efficiency and Renewable Energy (EERE) division of the Department of Energy. They will be the first transmission lines to ship large amounts of wind power from windy northern states to distant customers in the Southwest.

To achieve this feat without losing too much energy, the lines will be high-voltage direct-current (HVDC) lines, operating at voltages of 500 kilovolts. Such HVDC lines can carry 3,000 MW of power on a single string of towers, while multiple towers would be needed for traditional lines using alternating current.

According to TransCanada, each transmission line will cost about $3 billion, even though they follow the same path from Boise, Idaho, through Nevada. The construction of such "green power superhighways" is advocated in a white paper that was released on February 17 by AWEA and the Solar Energy Industries Association.