Power lines in Denver, Colorado.

HVDC Can Connect Low-Cost Wind To Demand Centers For 2 Cents Per Kilowatt-Hour

Originally published on Greentech Media, August 26 2015

Clean Line Energy believes it can develop long-distance high-voltage direct current (HVDC) transmission lines that will inexpensively move gigawatts of cheap wind (and solar) power — and still allow competitive pricing at the end of the line.

There are wind projects in the Midwest that generate power at 1.5 cents to 3 cents per kilowatt-hour. (That equates to 3 cents to 4.5 cents without the Production Tax Credit.) Yet while these regions might actually be curtailing wind at times and are limited by transmission capacity, other regional grids are hungry for low-cost power or renewable power. Demand is being driven by renewable portfolio standards, the Clean Power Plan, and the retirement of 50 gigawatts’ worth of coal power.

The problem is getting that cheap wind power to where it’s needed.

The founder and president of Clean Line Energy, Michael Skelly, wants to connect low-cost wind resources to major demand points.

He believes that transmission is the key ingredient to getting more renewable energy on-line. “That’s why we started Clean Line,” Skelly said during a webcast hosted by Julien Dumoulin-Smith of UBS Securities equity research. Dumoulin-Smith called the concept “wind by wire.”

Skelly said, “We believe that an independent [company] is suited for the job,” suggesting that most utilities are mandated to meet local needs and are not thinking of the challenge of interstate transmission or providing “the development capital required to get a project like this going.”

The founder of the aspiring merchant-model transmission company said that bigger blades, taller towers and lighter materials mean the central part of the country provides a “deep supply base for the resources we want to tap.” He notes that there are developers active in the region and what they need is “access to markets.”

“We believe our product will be a valuable addition to the grid in the Southeast,” said Skelly.

AC ϟ DC

Despite the dominance of alternating current (AC) on national grids, direct current (DC) is stilla more efficient way to move power over long distances — with about half the line losses and less infrastructure than a comparable AC system.

Skelly’s firm suggests that DC, unlike AC, “allows complete control of power flow and prevents cascading outages.” A Clean Line ±600 kilovolt DC bipole transmission line will have a 3,000 megawatt to 4,000 megawatt capacity.

As Jeff St. John has reported, China is by far the biggest consumer of HVDC technology, spending billions and building tens of thousands of kilometers of new 330-kilovolts-and-up transmission lines. According to earlier reports, HVDC could make up 40 percent of the country’s 300 gigawatts’ worth of new transmission capacity.

Clean Line notes, “The last long-distance HVDC transmission line in the U.S was completed in 1989.”

According to market analysts, there is strong demand for HVDC transmission. Siemens reports on its website, “In the last 40 years, HVDC transmission links with a total capacity of 100 gigawatts [have been deployed.] Another 250 gigawatts will be added in this decade alone.”

An HVDC line requires a converter station on each end; one at the windward end, where the AC voltage of the conventional power grid is converted into DC and one at the delivery end, where the DC voltage is converted back into AC. HVDC equipment vendors include ABB, Siemens, Alstom, AMSC and Schweitzer Engineering Laboratories. Converter stations represent about a third of the total project cost, according to Skelly.

2 cents per kilowatt-hour to get to market

“It will cost producers about 2 cents per kilowatt-hour to get to market,” and that’s an “all-in delivered cost,” according to the company founder.

Skelly suggests that the best business model for a transmission build-out is the “merchant model,” where Clean Line would contract with large wind producers looking to get to market. The energy suppliers would buy capacity from Clean Line — similar to the way the gas pipeline industry works, according to the Clean Line founder.

Typically, most transmission is built through a cost allocation process — PJM or MISO would get together with various utilities and PUCs and cost would be spread among all users of the grid. Skelly notes, “Because we don’t have an inter-regional cost allocation process, we depend on a participant-funded merchant model.”

One of the “biggest parts of our job,” according to Skelly is to get regulatory approval for the 200-foot-wide, 750 mile-long route. He said “having been at this for six years — we are working our way through different regulatory processes” and working with the PUC or federal transmission siting authority. He notes that the routing process requires tremendous levels of stakeholder approval.

One of the big challenges in handling this much power, said Skelly, is the interconnect process “that requires a lot of studies” to make sure these lines don’t cause issues on the rest of the grid. “We spend a lot of time looking at wind integration,” said Skelly. Most high-penetration renewable scenariosemploy HVDC.

Potential offtakers for the delivered power include utilities in the Western U.S., Southeastern U.S., and PJM.

Skelly is confident that wind power can be delivered 750 miles from the source at a cost of under 6 cents per kilowatt-hour without the PTC — making it cheaper than fossil fuels or solar.

Source: Lazard

Skelly said it can take “years for things to unfold” in the space, adding, “The cost of capital for that is reasonably high because it’s a really risky business.” But once a project is built or contracted, “then there’s a tremendous amount of low-cost capital. That’s the piece of the value chain investors prefer to focus on.”

Clean Line is backed by National Grid, Ziff Brothers Investments and Bluescape Resources.

GTM just reported on the recently released Department of Energy/Lawrence Berkeley National Laboratory’s 2014 Wind Technologies Market Report, which sees the wind industry facing policy and supply chain challenges — but projects that the trajectories of capacity growth, blade-size growth and falling prices for wind will continue. (Here’s a link to the slide deck summary in PDF.) Large rotor machines are being used at both low- and high-wind-speed sites. Turbine scaling is boosting wind project performance, even as project costs continue to drop. Annual wind capacity additions rebounded in 2014, with 4,854 megawatts of new capacity — and there’s a great deal of evidence pointing toward a strong 2015 and 2016 to come.

Skelly emphasizes that the transmission development process requires “patience and tenacity” but adds that each of his projects could bring 4 gigawatts of wind to market that previously could not get there due to lack of transmission.

August 9, 2013 - Trask Bradbury (on nacelle) and Pete Johnson of Gemini Rope Access Solutions, inspect the blades of a 3MW Alstom wind turbine by repelling down the blades.  The turbine is undergoing testing at NREL's National Wind Technology Center (NWTC) in Boulder, Colorado.  (Photo by Dennis Schroeder / NREL)

Wind Energy Is Having a Railroad Moment

This article was originally published in SLATE and written by Daniel Gross. 

One of the raps on big renewable energy projects, such as solar plants and wind farms, is that they rely on federal subsidies and tax credits to get off the ground. That’s obvious. Here’s something less obvious: Taxpayers may have subsidized the boom in emissions-free energy, but that’s triggered a whole lot of unsubsidized private investment in turn. Someone has to pay to build the infrastructure that conveys the power from the empty places where it’s produced to the populated places where it’s consumed.

This is particularly evident in wind energy. Developers needs the federal production tax credit—2.3 cents for every kilowatt-hour produced by a wind farm for 10 years after its construction—to justify the nine-figure investments to plant clusters of turbines in the plains. But just as oil needs pipelines and coal needs railroads, wind power needs transmission lines to reach cities. A report by the Edison Electric Institute, a trade group for investor-owned utilities, highlighting some $47.9 billion worth of transmission lines in the works through 2025, found that about $22.1 billion in funds will be spent on transmission projects aimed at integrating renewable energy into the grid.

And there could be much more to come. In Houston, the global capital of the fossil fuel industry, a startup, Clean Line Energy, is aiming to replicate the feats of 19th-century railroad barons, erecting audacious, expensive tracks that will turn farmland and fallow space into economically useful terrain. The company wants to spend about $10 billion in private capital to wire the plains with direct current electricity wire. The names of its proposed lines evoke the age of the iron horse: There’s the Rock Island Clean Line, which would ferry juice 500 miles from Iowa to Illinois; the Grain Belt Express, traversing 780 miles from Kansas to points east; and the Plains & Eastern, which would convey power from the windy Oklahoma panhandle to Memphis, Tennessee. (Here’s a map of Clean Line’s proposedprojects.) Farther to the west, billionaire Philip Anschutz is plotting the TransWest Express, a 730-mile line from Wyoming to Las Vegas. That effort, along with Clean Line’s Plains & Eastern—both of which could get federal approval to proceed this year—“may be the two most ambitious transmission lines ever built in this country,” says Michael Skelly, president of Clean Line Energy. (The Pacific Intertie, which connects Oregon hydropower to Southern California, is actually longer than both of these proposed lines.)

Skelly has some experience tilting at windmills. He was chief development officer of Horizon Wind Energy, a Texas-based development firm bought by  Goldman Sachs in 2005. (In 2008, in another quixotic quest, he ran for Congress in Texas’ deep-red 7thdistrict as a Democrat and lost.) The wind industry boomed in Texas in part because the state, which has its own grid, pushed through a plan that enabled the construction of massive wind farms in the western and northern parts of the state, encouraging about $6 billion in new transmission lines to bring the power to population centers.

Outside of Texas, however, the electricity grid is highly balkanized. Utilities in Oklahoma aren’t particularly interested in figuring out how to convey wind power from the Oklahoma panhandle (where it could be produced in massive quantities) to Atlanta (where it would be consumed in massive quantities). And the federal government has long since gotten out of the business of backing big interstate power highways. (The last major electricity interstate highway it supported was the Pacific Intertie, completed in 1970.) That means a large chunk of America’s wind resources remains stranded.

In 2009, Skelly helped found Clean Line, which has raised more than $100 million in capital from investors including National Grid. The idea: build a series of long-haul transmission lines—400-, 500-, 700-miles long—and rent capacity to wind developers so they can send their power to market. (Rule of thumb: It costs about .3 cents to send a kilowatt-hour of power 100 miles.)

It sounds like a simple business model. But as pipeline builders have found (hello, Keystone XL!), building energy infrastructure that crosses several state lines requires negotiating a maze of state regulators, federal authorities, and private landowners. And for a host of reasons—economic, political, regulatory, environmental—people aren’t always psyched about big projects coming through their proverbial backyards. For example, while Indiana and Kansas have given approval to the Grain Belt Express, which would connect Dodge City, Kansas, to southern Indiana, Missouri has said no. (In certain circumstances, transmission developers can appeal such denials to the federal government, which Clean Line has done.) “A wise person said that anything worth doing takes a decade,” said Skelly. “And we are going to prove them right. We haven’t done this before in this country. We haven’t built four-state transmission lines.”

Skelly is confident that Clean Line can raise the $10 billion needed to build its five proposed lines and that construction could start as early as 2017 if approvals start to come through.

Clean Line’s ambitions highlight the complexities of the arguments surrounding energy subsidies. Yes, Clean Line’s customers—developers of wind plants—rely on subsidies. And those subsidies cost real money. According to the Energy Information Administration wind accounted for 4.4 percent of U.S. electricity production in 2014, or about 180 billion kilowatt-hours. Assuming every one of those kilowatt-hours is eligible for the 2.3 cents per kilowatt-hour (and they’re not—wind farms more than 10 years old can’t get the credit, for example), the production tax credit would amount to a maximum of about $4.2 billion year.

The American Wind Energy Association argues that every form of energy production is subsidized to a degree and that the U.S. is getting a lot in return for whatever subsidy wind receives. The burgeoning wind industry has accounted for some $100 billion of investment since 2008 (a period in which the U.S. suffered a big shortfall in investment), created tens of thousands of permanent jobs, and stimulated the creation of a domestic manufacturing sector. It also funnels $195 million a year in lease payments to farmers, ranchers, and other landowners.

But as Clean Line’s ambitious plans show, the wind boom has also inspired people and businesses to do something they didn’t do much before 2008—think big and funnel private capital into infrastructure projects. And when private firms erect new platforms that encourage other private companies to invest and build, that’s a form of economic stimulus worthy of a few lofty railroad metaphors.