Grid deal could help wind power 

Scheduling wind to blow when it’s needed to spin turbines and produce electricity is beyond human ability.

Building transmission lines to move wind power out of South Dakota to markets that can use it remains almost as large an impediment to developing the state’s potential wind industry.

A transmission fee anomaly is a smaller hurdle. But a couple of big power industry players might be coming close to clearing that one.

The Western Area Power Administration and Midwest Independent System Operator are negotiating to replace an agreement that expires in February and in effect creates a seam along the South Dakota-Minnesota border where wind-generated electricity moving from South Dakota east is charged twice for using the transmission grid, once by WAPA and again by MISO.

The so-called pancake rate of WAPA and MISO charges adds $10 per megawatt hour, an increase of as much as 25 percent in the cost of moving electricity across the WAPA-MISO boundary, according to a South Dakota Energy Infrastructure Authority report.

“In the mind of the (SDEIA), it’s a huge issue,” says Mike Held, executive director of the South Dakota Farm Bureau and an SDEIA board member. “The pancaking of rates just makes the prospect of wind energy that has to go from WAPA to MISO uneconomical to consumers.”

Resolving the seam problem would go a long way toward making a compelling case for building new transmission lines, Held says.

“It’s like an artificial barrier,” he says of the seam. “It reduces the opportunity significantly to build transmission east. In our estimation, that’s where the majority of our wind needs to go to find a market.”

Joe DeVito, of Renewable Energy Systems Americas, one of the major installers of wind generating facilities nationwide, agrees that any arrangement “WAPA and MISO can have to eliminate rules inhibiting the flows of wind power are welcome.”

WAPA essentially oversees the grid that carries power produced in the Dakotas and Western states. MISO has corresponding responsibility for a large part of the Midwest east of South Dakota. Their ability to reduce or eliminate the seam is complicated by the fact they use different criteria for figuring transmission charges.

“If WAPA joined MISO and adopted the MISO tariff structure, the pancake rate issue would go away,” according to an SDEIA Wind Power Report released in 2007. “But WAPA customers would see a rate increase because of the transmission-tariff change.”

A whopping increase of about $40 million to $50 million, according to Tom Christensen, manager of transmission rates for Basin Electric Power Cooperative, a part of the WAPA system. “That would not be unrealistic,” he says.

The huge rate hike would occur because WAPA sets a flat rate for transmitting power. In the power industry, it is called a postage stamp rate. Like a postage stamp that pays for a letter to move across town or across the country, WAPA’s flat rate is good for moving power throughout the system.

MISO, though, bases only 20 percent of its transmission charge on a flat rate. The remaining 80 percent is based on what it costs to deliver power to a destination. Users are charged by where they are on the grid.

Because the WAPA grid serves a sparser population spread out over many more miles, the cost of delivery is greater than in the MISO grid, where a denser population can be reached by much shorter transmission lines. Also, because much of MISO’s grid is older than WAPA’s, more of the cost of building MISO transmission lines has already been amortized than in the corresponding WAPA system.

The proportional rate structure, called a license plate, is analogous to an auto owner who acquires plates in a cheaper state having the same right to drive all over the country as someone from a state where plates cost twice as much. Following the analogy, if MISO and WAPA combined, MISO would be the cheap state, WAPA the expensive one.

“Our intent is not to bring our transmission system into the MISO system but maybe to work more towards a means to better coordinate the congestion-management process,” Christensen says.

“Probably the big issue is building more transmission. Just joining WAPA and MISO probably doesn’t change the physics of the system.”

By Peter Harriman

Argus Leader

28 January 2008