Grid enhancing technologies – the ‘shared savings’ option for the US

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A ‘shared savings’ incentive scheme proposed to advance grid enhancing technologies in the US appears to be gathering momentum.

The proposal from the Working for Advanced Transmission Technologies (WATT) Coalition and the industry trade association Advanced Energy Economy was the focus of a workshop by the Federal Energy Regulatory Commission (FERC) last week.

Feedback from the event from Rob Gramlich, Executive Director of the WATT Coalition, is that there was broad support for the value of the technologies from the industry and while the proposal raised few challenges, there were ideas for tweaks in its implementation.

Moreover, no alternatives were or have been suggested in the over two years since the proposal was first developed.

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“FERC staff wanted something specific, we gave them something specific and they have something to work with. I’m feeling pretty good about the likelihood of our proposal going forward.”

‘Grid enhancing technologies’ is a catch-all term to encompass advanced technologies primarily for the transmission system including power flow control, dynamic line rating and topology optimisation that can boost capacity and reduce congestion without the need for more costly upgrades.

As such, they are potentially key for the integration of increased renewable capacity.

While the technologies are being implemented in various parts of the world, e.g. by National Grid in UK and TransGrid in Australia, they have been little adopted in the US.

The WATT Coalition quotes estimated benefits with their implementation across the US of more than $5 billion annually in congestion and lower cost renewable generation savings and 90Mt of averted CO2.

The installation cost of $2.7 billion could be recovered in six months.

The WATT Coalition and Advanced Energy Economy argue that the current ‘return on equity’ business model in the US does not incentivise grid enhancing technologies, whereas the shared saving model would return a portion of the cost savings created by the investment to the asset owner.

Specifically the proposal from the two organisations is that the focus should be on small projects (<$2.5 million) that provide quantifiable congestion reduction benefits. A shared savings rate of 25% is proposed, with the total capped at $10 million.

Projects also should have a minimum cost-benefit ratio of 4:1.

For larger projects (>$2.5 million) a competitive process is suggested in which the developers who propose the project also propose the percentage savings share.

The next steps are in the hands of FERC and depending on the attention to the initiative a rulemaking could emerge in a matter of weeks.

Meanwhile in other initiatives underway in the US, the Efficient Grid Interconnection Act, which was introduced in June with its intent to reduce renewable generation and storage interconnection delays, is still with the Representatives House Committee on Energy and Commerce.