Assessing the Economic Value of Transmission in Alberta's Restructured Electricity Market

Electricity Journal

Volumn 25, Issue 3, 2012, Pages 68-80

  Woo, C K ^a   Liu, Hao ^b   Kahrl, Fredrich ^c   Schlag, Nick ^d   Moore, Jack ^e   Olson, Arne ^f  

^a UNIVERSITY OF CALIFORNIA   (United States)

^b ZHEJIANG UNIVERSITY   (China)

^c UNIVERSITY OF CALIFORNIA   (United States)

^d STANFORD UNIVERSITY   (United States)

^e Stanford University   (United States)

^f UNIVERSITY OF PENNSYLVANIA   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 84860612144     PISSN: 10406190     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.tej.2012.03.003     Document Type: Article

References (26)

1. Fereidoon P. Sioshansi and Wolfgang Pfaffenberger, Eds., ELECTRICITY MARKET REFORM: AN INTERNATIONAL PERSPECTIVE (Elsevier, 2006); Chi-Keung Woo, Debra Lloyd and Asher Tishler, Electricity Market Reform Failures: UK, Norway, Alberta and California, 31 ENERGY POLICY 1103-1115 (2003); Chi-Keung Woo, Larry C.H. Chow and Noam Lior, Eds., ELECTRICITY MARKET REFORM AND DEREGULATION, 31 ENERGY 745-1114 (2006).
2. Chi-Keung Woo, Michael King, Asher Tishler and Larry C.H. Chow, Costs of Electricity Deregulation, 31 ENERGY 747-768 (2006).
3. Shijie Deng and Shmuel S. Oren, Electricity Derivatives and Risk Management, 31 ENERGY 940-953 (2006); Chi-Keung Woo, Ira Horowitz, Brian Horii and Rouslan I. Karimov, The Efficient Frontier for Spot and Forward Purchases: An Application to Electricity, 55 J. OPERATIONAL RES. SOC. 1130-1136 (2004)
4. Chi-Keung Woo, Ira Horowitz, Arne Olson, Brian Horii and Carmen Baskette, Efficient Frontiers for Electricity Procurement by An LDC with Multiple Purchase Options, 34 OMEGA 70-80 (2006).
5. Ashwani Kumar, S.C. Srivastava and S.N. Singh, Congestion Management in Competitive Power Market: A Bibliographical Survey, 76 ELECTRIC POWER SYS. RES. 153-164 (2005); Steven Stoft, POWER SYSTEM ECONOMICS (IEEE, 2002); Cameron Lusztig, Peter Feldberg, Ren Orans and Arne Olson, A Survey of Transmission Tariffs in North America, 31 ENERGY 1017-1039 (2006).
6. Felix F. Wu, F.L. Zheng and F.S. Wen, Transmission Investment and Expansion Planning in A Restructured Electricity Market, 31 ENERGY 954-966 (2006).
7. PJM, PJM Regional Transmission Planning Process (2011), at http://www.pjm.com/media/documents/manuals/archive/m14b/ARCHIVED%20m14b% 20v19.ashx; WarrenLasher, Transmission Planning in the ERCOT Interconnection (2011), at: http://www.ercot.com/content/news/presentations/2011/ERCOT% 20Transmission%20Planning%20NARUC%2011-14-11.pdf; Howard Tarler, Reliability Needs Assessment (RNA) Overview (2010), at http://www.nyiso.com/public/webdocs/services/planning/reliability-assess ments/Reliability-Forum-H-Tarler-100410.pdf; ISO/RTO Planning Committee, ISO/RTO Electric System Planning Current Practices, Expansion Plans, and Planning Issues(2006), at http://www.ieso.ca/imoweb/pubs/ircp/iso-rto/iso-rtoelectric-system-plann ing.pdf.
8. WarrenLasher, Transmission Planning in the ERCOT Interconnection (2011), at: http://www.ercot.com/content/news/presentations/2011/ERCOT%20Transmissio n%20Planning%20NARUC%2011-14-11.pdf
9. Howard Tarler, Reliability Needs Assessment (RNA) Overview (2010), at http://www.nyiso.com/public/webdocs/services/planning/reliability_assess ments/Reliability_Forum_H_Tarler_100410.pdf; ISO/RTO Planning Committee, ISO/RTO Electric System Planning Current Practices, Expansion Plans, and Planning Issues(2006), at http://www.ieso.ca/imoweb/pubs/ircp/iso-rto/iso-rtoelectric-system-plann ing.pdf.
10. ISO/RTO Planning Committee, ISO/RTO Electric System Planning Current Practices, Expansion Plans, and Planning Issues(2006), at http://www.ieso.ca/imoweb/pubs/ircp/iso-rto/iso-rtoelectric-system-plann ing.pdf.
11. AESO, Draft 2011 Long-Term Transmission Plan (Alberta Electric System Operator, 2011), at http://www.aeso.ca/transmission/22021.html; AESO, Draft 2011 Long-Term Transmission Plan Appendices (Alberta Electric System Operator, 2011), at http://www.aeso.ca/transmission/22021.html.
12. Government of Alberta, Investing in our Economy: North-South Transmission Reinforcement (Government of Alberta, 2012), at http://www.energy.gov.ab.ca/Electricity/pdfs/InvestCTRCresp.pdf.
13. EDC Associates, 2010 Alberta Electric Industry Study (EDC Associates, 2011), at http://www.edcassociates.com/Alberta_Annual_Study(TOC).pdf.
14. ''We did this by assuming that if the two HVDC lines are built, dispatch will be unconstrained. If the two HVDC lines are not built, then dispatch of generation in the north might be constrained by limits on the north-south transmission line. We compared the difference in the cost of generation between the HVDC and no HVDC cases to determine the advantage of adding the two HVDC lines. If this advantage is less than the cost of installing the two HVDC lines, then the generation-only solution is least costly.'' Jeffery Church and John MacCormack, Evidence submitted to Alberta Utilities Commission, Application No. 1607067, Proceeding ID 1045, Western Alberta Transmission Line Application (The Wilson Law Office, 2011) at 3.
15. AESO, Alberta Wholesale Market Price Cap (Alberta Electric System Operator, 2009), at http://www.aeso.ca/downloads/2009-06-25_Price_Cap_Discussion_Paper_-_Fin al.pdf.
16. Chi-Keung Woo, Michael King, Asher Tishler and Larry C.H. Chow, supra note 2 at 775.
17. MSA, Quarterly Report: July-Sept. 2011 (Market Surveillance Administrator, 2011) at 7, at http://albertamsa.ca/uploads/pdf/Archive/2011/MSA%20Q3-11%20Report%20113 011.pdf.
18. Johannes P. Pfeifenberger and Kathleen Spees, Evaluation of Market Fundamentals and Challenges to Long-Term System Adequacy in Alberta's Electricity Market (Brattle Group, 2011), at http://www.brattle.org/_documents/UploadLibrary/Upload943.pdf.
19. Vincent Rious, Phillipe Dessante and Jean-Michel Glachant, Anticipation for Efficient Electricity Transmission Network Investments, PROCEEDINGS OF FIRST INT'L. SCIENTIFIC CONFERENCE ON ''BUILDING NETWORKS FOR A BRIGHTER FUTURE'' (2008), at http://hal-supelec.archives-ouvertes.fr/docs/00/33/92/54/PDF/anticipatio n_trans_inv.pdf.
20. Carmen Baskette, Brian Horii, Eli Kollman and Snuller Price, Avoided Cost Estimation and Post-Reform Funding Allocation for California's Energy Efficiency Programs, 31 ENERGY 1084-1099 (2006).
21. Alberta Energy Resources Conservation Board (ERCB), Alberta's Energy Reserves 2008 and Supply/Demand Outlook 2009-2018 (2009), at http://www.ercb.ca/docs/products/STs/st98-2009.pdf.
22. These estimates are shown in 2010 dollars, even though the simulation results are for the year 2020, due to the WECC's convention of using 2010 dollars in its production simulation database. The U.S. dollar values in the WECC database have been converted from U.S. to Canadian dollars. The results in Table 5 show that the marginal impact of adding a first line is substantially larger than the impact of adding the second line, reflecting the law of diminishing returns.
23. As an additional check of the results in Table 6, we estimate customer benefits in Case 1 without the MCP scaling in Step 6 of the Appendix. At the average MCP/MEC ratio of 2.10, the estimated customer benefit of the one-line expansion transmission in Case 1 is $197M in 2020, higher than the estimated revenue requirement of $157M. The estimated customer benefit of the twoline expansion is $205M in 2020, less than the estimated revenue requirement of $344M.
24. Even if the shortage cost function is linear in shortage size, the findings described below remain valid.
25. An obvious example of lower economic growth is that less transmission expansion would reduce direct and indirect employment and spending. Moreover, generation development may be discouraged by the lack of fair access to transmission capacity required by new generation. Finally, higher electricity prices may hamper Alberta's GDP growth.
26. For a similar case in point, see Chi-Keung Woo, Arne Olson and Ren Orans, Benchmarking the Price Reasonableness of An Electricity Tolling Agreement, 17(5) ELEC. J. 65-75 (2004).