THE BRATTLE GROUP

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U.S. DOE (2014), Office of Electricity Delivery and Energy Reliability, National Electric Transmission Congestion Study—Draft for Public Comment, August 2014, online at http://www.energy.gov/oe/downloads/national-electric-transmission-congestion-study-draftpublic-comment-august-2014 U.S. DOE (2015), Wind Vision: A New Era for Wind Power in the United States, DOE/GO-102015- 4640, March 2015, online at http://energy.gov/eere/wind/wind-vision Van Der Weijde, A.H., Hobbs, B.F. (2012). The Economics of Planning Electricity Transmission to Accommodate Renewables: Using Two-Stage Optimisation to Evaluate Flexibility and the Cost of Disregarding Uncertainty, Energy Economics, 34(5). 2089-2101. (Van Der Weijde and Hobbs, 2012) Wald, Matthew L. (2013), “Nuclear Power Plant in Limbo Decides to Close, The New York Times, June 7, 2013, online at http://www.nytimes.com/2013/06/08/business/san-onofre-nuclear-plantin-california-toclose.html?ref=energy-environment&_r=0 Wilkinson, Angela and Roland Kupers (2013), “Living in the Futures,” Harvard Business Review, May 2013, online at http://hbr.org/2013/05/living-in-thefutures/ar/1 48 | brattle.com
Appendix A: Case Study of Transmission Project to Mitigate the Risk of Large Increases in Societal and Customer Costs Traditional planning approaches would have rejected the PVD2 transmission investment despite the fact that the CAISO’s more comprehensive analysis shows it offered overall costs savings in excess of the project costs including significant risk mitigation benefits. The CAISO’s 2004 analysis is instructive because it quantified project-related societal benefits and customer costs for: (1) a range of benefits beyond production costs; and (2) a range of possible future outcomes, including challenging market conditions. 52 These two aspects of the CAISO analysis showed significantly more value for the project than traditional transmission planning analyses that are focused only on production cost savings under normal system conditions. The analysis also assessed the projected impact of different levels of competition and major “contingencies,” such as long-term generation outages. Comparing Transmission Costs with “Base Case” and More Comprehensive Benefits The CAISO analysis of PVD2 showed that the proposed transmission investment offered a reduction of 2013 “base case” power production costs of only $55 million per year while the costs were estimated at $71 million per year. Thus, with the investment made, the system was projected to incur about $71 million in annualized transmission costs while saving $55 million in production costs. Most economic transmission planning processes that focus solely on such base-case benefit and cost comparisons would have rejected the transmission project because the quantified benefits do not appear to justify the project’s costs. Even if there were an intuitive recognition that transmission projects provide many more benefits than base-case production cost savings, most economic transmission planning approaches leave out these additional benefits because they seem uncertain, difficult-to-quantify, or both. The CAISO analysis of PVD2 went beyond a base-case production cost analysis to identify a much broader range of transmission-related benefits and estimated the value associated with them more 52 For example, the total “production costs” of generating power were estimated with and without the proposed transmission investment for 17 scenarios of different combinations of load growth, gas prices, hydro generation. The analysis also assessed the projected impact of different levels of competition and major “contingencies,” such as major long-term generation outages. A-1 | brattle.com
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THE BRATTLE GROUP Johannes Pfeifenb
Page 3 and 4:
WIRES Preface Purpose of This Repor
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promote low-carbon strategies. 4 Be
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een called “anticipatory transmis
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Toward More Effective Transmission
Page 11 and 12: Table of Contents Executive Summary
Page 13 and 14: From this perspective, today’s pl
Page 15 and 16: I. Introduction In 2013, WIRES publ
Page 17 and 18: The remainder of this report is org
Page 19 and 20: account only those expected costs a
Page 21 and 22: is clear that utilities have made s
Page 23 and 24: III. The High Costs and Risks of In
Page 25 and 26: A. INSUFFICIENT SYSTEM FLEXIBILITY
Page 27 and 28: project were rejected in a planning
Page 29 and 30: As the PVD2 analysis further shows,
Page 31 and 32: other words, building the project w
Page 33 and 34: industry) 21 and has already been e
Page 35 and 36: $12 million. 26 This focus on relia
Page 37 and 38: C. INEFFICIENCIES OF CURRENT PLANNI
Page 39 and 40: planning regions. So far, we find t
Page 41 and 42: interregional transmission capabili
Page 43 and 44: These studies thus suggest that at
Page 45 and 46: generation the estimated benefit of
Page 47 and 48: enefit metrics that are even narrow
Page 49 and 50: investment costs, reduced costs of
Page 51 and 52: long-term flexibility benefits and
Page 53 and 54: actively encourage and support such
Page 55 and 56: List of Acronyms BPS Bulk Power Sys
Page 57 and 58: Bibliography American Transmission
Page 59 and 60: Federal Energy Regulatory Commissio
Page 61: Pfeifenberger, J., K. Spees, K. Car
Page 65 and 66: Figure A‐1 Benefits and Costs of
Page 67 and 68: Figure A-2 also documents the fact
Page 69 and 70: Figure A‐3 Range of Projected Soc
Page 71 and 72: Appendix B: Addressing Uncertaintie
Page 73 and 74: The simulation of short-term uncert
Page 75 and 76: transmission issues and solutions a
Page 77 and 78: Expansion Plan (RTEP) criteria; and
Page 79 and 80: Requiring projects to pass the join
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