Transmission month: two more ideas to quickly boost the transmission grid

Greetings, faithful Volts readers! Welcome back to the Transmission Week that never ends.

The news these last few days has been filled with talk about electricity grids. Texas is suffering from an unprecedented cold snap that has left more than four million people without power for days. It’s a terrible situation. There’s a lot to say about it, what can and can’t be learned, and perhaps I’ll get to it next week.

But you didn’t sign up for a breaking-news email, you signed up for Volts! So today brings what I believe what I believe will be my last big transmission post, though I may do a wrap-up after this. Thank you for traveling with me on this longer-than-expected journey.

Today, we’re going to look at a couple of final ideas to make the transmission grid work better, short of building new lines — a remainder bin of grid-enhancing technologies, if you will.

Idea #1: Using energy storage as a transmission asset

At least since the Energy Policy Act of 2005, the US government has acknowledged that energy storage technologies can be used to ease grid congestion and increase the reliability and flexibility of energy transmission. In recent years, there has been increasing interest in “storage as a transmission asset” (SATA), which refers to energy storage installations that are treated as transmission assets — meaning utilities can “rate base” them and receive a guaranteed rate of return plus any tariffs or incentives for transmission assets.

Basically, it means allowing some storage to be treated — legally, financially, and operationally — like a piece of the transmission system.

SATA projects — sometimes known as “virtual power lines” — offer a range of benefits to regional energy grids.

When a line is congested, it can offload some power to storage. At times of lower congestion, stored power can be injected to maintain high line utilization. Storage can thus relieve congestion and make the grid more reliable. It is much cheaper and quicker to deploy than new transmission, its footprint is much smaller, and it faces a much less onerous regulatory process. It is extremely modular and scalable, which means it can start small and be scaled up precisely to need, and even relocated as grid needs change.

Congestion on a power line often causes “inefficient dispatch,” meaning grid operators must ask generators on one side of the line to curtail their output and generators on the other side of the line to ramp theirs up, even if that isn’t the most cost-effective option. Storage on either side of the line can help reduce inefficient dispatch.

Another key service storage can provide is to free up unused line capacity. A grid capacity standard called “N-1” holds that the grid must maintain safe operation if a “contingency event” takes out one of the lines. This means all lines must maintain some reserve capacity to absorb energy in the event of an N-1 situation.

But storage can serve that purpose — rapidly injecting energy into, or absorbing energy from, the grid in the case of a contingency event — even better than power lines. Adding SATA projects can free up some of that reserve line capacity to carry more power.

As with most things transmission, Europe is way ahead of the US on this. Most notably, Germany is developing 1,300 MW worth of SATA in a project known as Netzbooster (grid booster) to free up line capacity otherwise reserved for an N-1 contingency. (Germany has notorious congestion between the wind-heavy north and load centers in the south.)

The US has nothing at the GW scale like that, but a few RTOs are moving forward. In August 2020, FERC approved MISO’s proposal for the rules and processes by which it would integrate storage into its planning and project selection.

One twist: FERC has indicated that it is “permissible as a matter of policy” in the US for a storage project to be “dual use,” to serve as a transmission asset and receive fixed returns and simultaneously to participate in wholesale energy markets and receive market returns.

This move has drawn some criticism, since it seems to blur the canonical separation between energy market participants and the “wires companies” that are supposed to offer them non-discriminatory access to the grid. If a wires company owns a storage asset that is drawing market returns, it has every reason to give that asset privileged grid access.

FERC has said dual use is subject to the following four principles:

* must be cost-competitive with transmission,

* must avoid double recovery for providing the same service,

* cannot suppress market bids, and

* cannot jeopardize ISO/RTO independence.

It’s not entirely clear how dual use storage could, in practice, avoid bumping up against those principles. So far as I know, none of the big RTOs/ISOs has yet hashed out exactly how to make the dual-use thing work. (Here’s an issue paper in which California ISO wrestles with the problem.)

There are reasons to remain skeptical of SATA projects. Batteries are still relatively expensive compared to other types of assets. “Many areas of congestion are better served by a new power plant, fuel cell, or demand response asset than a big single-purpose battery,” says Cody Hill, who analyzes and deploys storage projects for LS Power.

The California ISO has been skeptical too. It reported in 2018: “Over the past several years, the ISO has studied 27 battery storage proposals and one pumped hydro storage proposal as potential transmission assets. To date only two proposals have resulted in storage projects moving forward, both in the most recent 2017-2018 Transmission Plan.”

But utilities are allowed to rate-base SATA projects — receive a guaranteed rate of return on them — and they love rate-basing stuff, whether it’s cost-effective or not. They make money by spending money. (See: Texas utility Oncor’s $5.2 billion SATA proposal, which was never approved. I wonder if grid regulators regret that in light of current news!)

“A company that gets a SATA project approved gets a guaranteed profit on every dollar spent,” says Hill, “so utilities have an obvious incentive to get lots of these projects approved and put into the rate base, and not much of an incentive to keep the costs down.”

Hill warns that utilities are working in regulatory proceedings “to guarantee that they will have a monopoly on new SATA projects going forward” — sheltering them from competition under FERC Order 1000, the same way they’ve been sheltering transmission lines from competition (see this post for mo