Michigan regulators have open cases considering whether to grant certificates of public necessity and convenience that would allow the Michigan portions of two interstate transmission lines to be built. CUB has tried to spread the word about how these transmission projects will lead to cost savings for consumers, and new evidence is surfacing that the economic benefits of the projects will be even higher than has been anticipated so far.
For background on what these projects are and the larger Midcontinent Independent System Operator (MISO) Long-Range Transmission Planning (LRTP) process of which they are a part, see two previous op-eds from CUB: one in the Detroit News by CUB co-founder John Liskey and one in the Detroit Free Press by CUB Executive Director Amy Bandyk and Michigan Energy Innovation Business Council Sustainable Business Associate Natalie Lyijynen.
CUB and the Sierra Club recently sponsored expert witness testimony filed with the Michigan Public Service Commission (MPSC) in the two cases involving the lines: U-21471, regarding the line proposed between the Oneida Substation in Eaton County and Nelson Road Substation in Gratiot County, and U-21472, regarding the line proposed between the Indiana/Michigan state border at Gilead Township in Branch County and the new Helix Substation in Calhoun County.
This testimony, written by 5 Lakes Energy Managing Partner Douglas Jester, assesses the overall net benefits of the lines according to MISO estimates, categorizes these benefits and gives us reason to think these estimates are actually on the low end of the true gains consumers will see from the construction of this new transmission capacity.
The lines are part of Tranche 1 of MISO’s LRTP, a set of planned transmission lines across the Midwest that are the first stage in a buildout that MISO’s long-range planning has found is necessary to keep the flow of electricity stable and reliable in the massive portion of the country MISO serves. On Dec. 12, MISO’s board of directors approved the next stage of LRTP, Tranche 2.1.
MISO estimates that Tranche 1, as a whole, will deliver $23.2 billion to $52.2 billion in net benefits. To determine Michigan’s share of those benefits, Jester looked at MISO’s estimates for Zone 7, the zone that includes most of the Lower Peninsula of Michigan. For Zone 7, the net benefits are estimated to be between $2.2 billion and $3.4 billion.
There are several sources of these savings over costs:
- Avoided cost of local resource investment: The biggest chunk of the benefits comes from avoided cost of local resource investment. What that means is that MISO looked at the costs of building new resources (ie, sources of power, such as wind farms) with and without the new proposed transmission capacity. The costs are substantially lower with the new capacity because developers of new projects can “[take] advantage of better locations and reduced interconnection costs when the overall transmission network has greater capacity,” Jester said.
- Congestion and fuel savings: “When the capacity of the transmission system is increased, and transmission constraints are relaxed, MISO is able to match supply to demand using power supplies that are less expensive to operate, primarily through reduced fuel usage or fuel costs,” Jester said.
- Avoided transmission investment: if these lines are not built, then other transmission capacity may need to be built elsewhere at higher cost.
- Resource adequacy savings: Without the Tranche 1 portfolio, MISO Zone 7 will eventually not have the amount of power available to satisfy MISO’s resource adequacy requirements, which dictate how much power MISO thinks is needed so that there will be enough to always meet peak demand in a region. The Michigan portion of the Tranche 1 portfolio produces savings by allowing Zone 7 to meet its resource adequacy requirements in a way that is cheaper than alternatives.
- Avoided risk of load shedding: If there is not enough power to meet demand, MISO may have to engage in load shedding and limit the flow of power to some places, so some businesses and homes may lose power in this scenario. MISO estimates that the new lines will reduce the chances of any load shedding occurring.
- Decarbonization: The construction of the lines will enable the development of new renewable energy resources that will help reduce the amount of emissions from power generation on the grid. This decarbonization effect produces savings measured by the social cost of emitting carbon dioxide.
All of these types of benefits produce the overall expected net savings. But, Jester points out, “MISO’s analysis was largely completed in 2022. Events and additional information since then suggest that MISO’s projection of benefits may be low.”
Two of the most important new events are, first, the passage of the Inflation Reduction Act (IRA), the federal bill that, among other things, extended new tax credits that make it cheaper to build renewable energy resources, and second, a new energy law passed in Michigan at the end of 2023 that strengthened standards for the amount of renewable energy Michigan utilities must use and allowed increased use of renewable energy from MISO outside of Michigan to meet those standards.
These developments, had MISO had the chance to include them in their estimates, would have likely amplified the estimates of net benefits from Tranche 1. The IRA has made renewable energy more valuable, and the state law has made it easier for Michigan utilities to take advantage of transmission lines and the electricity they deliver to comply with renewable energy standards. That means that if new transmission capacity is not built, utilities will have a tougher (and more expensive) time complying with the standards.
The MPSC will be considering these transmission line cases well into next year.