Transmission Projects In The West Stymied By Lack Of Investors

November 3, 2009—UAE Monthly Energy Update

A key transmission pathway connecting Wyoming-borne wind energy to markets in the North-west and Desert Southwest has yet to attract the interest of wind developers.
PacifiCorp's Energy Gateway Project initially envisioned a 3,000-mile "hub and spoke" system that would gather renewable energy from rural areas of eastern Wyoming and feed it to load centers in the West.

The Gateway West project would terminate in Boise, ID, while the Gateway South
line would run to Salt Lake City, Utah, and on to southern Nevada.
But the $6-billion project has yet to enlist a power developer or third-party equity investor willing to help with the financing.

PacifiCorp is still planning to develop the line as a 500-KV AC transmission line capable of carrying 1,500 MW that will meet only its customers' needs. The company has partnered with Idaho Power to develop the Gateway West segment of the line, but that segment will also only be developed to meet Idaho Power's and PacifiCorp's native loads.

Shortly after being announced in May 2007, merchant developers flocked to the project as 20,000 MW jumped into Gateway's queue. But those requests vanished when it was time to pay for access to the line.

Pat Reiten, president of Pacific Power, told Energy Prospects West that PacifiCorp's "process wasn't that much different from Bonneville's Open Season."

“We're disappointed that we were unable to close any of those deals and secure firm sup-port," Reiten said. "We even tried to get third-party equity investors involved."

The issues with the Gateway Project raise questions about how "long-haul" transmission projects in the West will be financed, and if they can be "upsized" to handle future growth.

Reiten said there are only two ways to solve the problem: State regulators could take on more risk or federal financial backstopping could guarantee funds temporarily until an investor signs on. It’s unlikely states will take on more risk on behalf of retail customers and PacifiCorp’s proposal for financial investment at the federal level hasn’t yet made it into any energy policy legislation.

Reiten said PacifiCorp’s policy is to “go in once and go in big” to capture financial and energy efficiencies at the large scale.

The Energy Gateway project is divided into eight segments. The Gateway Central segment, which runs from Populus, Idaho, to Terminal, Utah, is currently under construction.

PacifiCorp and Idaho Power are continuing development of Phase One of the project, which will only meet their customers' needs. Phase Two remains in the planning stages, and would "upsize" the capacity of the line to accommodate merchant projects.

Reiten said that at some point, the company will "cross a point of no return where it can't accommodate Phase Two of the project."

But other long-haul transmission projects in the West that call for developing Wyoming's vast wind potential and moving it to markets in the West are facing similar problems, said Kip Sikes, manager of transmission policy and planning at Idaho Power and also the chairman of the planning committee of the Northern Tier Transmission Group.

Currently, there are four transmission projects that call for linking Wyoming to the Desert Southwest -- High Plains Express, Overland Intertie, TransWest Express and Zephyr Line.
“No one is willing to commit big dollars right now because they may guess wrong," Sikes said. "Transmission projects need really long lead times and no one is committing to transmission projects, and that is a problem.

Another issue that may hamstring efforts to develop wind development and trans-mission projects in Montana and Wyoming is the robust menu of renewable energy avail-able to California utilities and utilities in the Desert Southwest.

Plus, the Pacific Northwest still has plenty of homegrown wind to develop.
California has access to potentially large amounts of solar resources, from within its borders and from its neighbors in Arizona and Nevada, as well as wind and hydro re-sources in British Columbia.


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California, however, is stymied by its own in-state problems that involve permitting, clean air rules, the expected loss of a major amount of older generation that uses “once-thru cooling” and legislative limitations on solar development.

Utilities may acquire local, less expensive renewable resources first, Sikes said, but at some point those resources will be spoken for and interest will turn to renewables imported from other states.

But it may take more than the $5.9 billion in funding that the Department of Energy has made available for transmission projects, as part of the ARRA stimulus package, to get long-haul transmission projects built.

It's the classic chicken or the egg problem, Sikes said.